GERMAN COMPANY LAW
Companies are basically free to choose their preferred legal form in Germany. The law only provides for a choice of certain legal forms, for which specific prerequisites are stipulated. We have summarized the principal types of company, the distinction between them and the necessary steps to enter the company in the commercial register below.
Most common types of companies set up by foreign investors in Germany
| Type of company | Legal liability | Registered capital | Commercial license | Formalities | Comparable with US corporate form |
|---|---|---|---|---|---|
| Branch office | Parent company assumes liability | No | Yes | Very few | Branch Office |
| GmbH | Liability limited to the company's assets | 25,000 Euro | Yes | Few | Limited Liability Company |
| AG | Liability limited to the company's assets | 50,000 Euro | Yes | Yes many | Joint stock corporation |
Necessary steps to enter the company in the commercial register
| Steps | What you must do | Where you must go | What you must always submit | Tips and explanations |
|---|---|---|---|---|
| 1 | Commission a notary public | Notary public | Business plan (helpful, but not obligatory) | - Payment of the registered and share capital into a bank account must be notarized - Proof that the company name is clear and distinctive - Preparation of the articles of incorporation, powers of representation, resolutions and relevant declarations |
| 2 | Entry in the commercial register | District Court, commercial register | - Notarized articles of incorporation | - Entry in the commercial register or partnership register at the local district court - Photo-ID (passport) |
| 3 | Join a Chamber of Commerce | - Commercial register | Application for registration | - The application for registration is forwarded automatically to the Chamber of Commerce - The IHK will contact you directly once it has received a copy of the application from the commercial register - Chamber of Commerce (IHK) |
| 4 | Tax registration | Trade tax office AND local IRS office | ||
| 5 | Registration with the trade office | Trade office | In the case of branch offices of foreign companies, the following documentation is needed: - Power of representation in German - Notarized translation of the parent company's registration in its home country - Rental contract for commercial premises - Passport with residence permit, certificate of registration at a residential address | - Registration with the trade office is obligatory |
Guidelines for setting up a GmbH
| Steps | What you must do | Content | Where | Costs |
|---|---|---|---|---|
| 1 | Finalize the articles of incorporation | Articles of incorporation containing information about the registered office of the company, the company, the purpose of business, amount of registered capital (min. 25,000 euros) and shareholder structure (min. 100 euros per share) | Notary public | approx. 450 euros |
| 2 | Appoint the executive bodies | - A GmbH requires two bodies: Shareholders' meeting and Management Board - The managing director is personally liable up until registration of the company (Step 4 b) (so-called Vor-GmbH). | Notary public | N/A |
| 3 | Raise the share capital | - The shareholders must raise minimum registered capital - Or provide assets in kind (assets as property of the GmbH) | Notary public | Min. 25,000 euros |
| 4 a | Apply for entry in the commercial register | - Once the company agreement has been notarized, the company must be registered at the local district court. - Documents to be submitted: notarized articles of incorporation, legally valid document concerning the appointment of the managing director, list of founding parties | District court | approx. |
| 4 b | Entry in the commercial register | - The point in time at which the GmbH becomes a legal entity (liability of share capital) - Publication in the Federal Gazette (Bundesanzeiger) and a regional or national newspaper | District court | approx. 300 euros |
| 5 | Subsequently | - Tax return (Corporate income tax, trade tax, sales tax...) - Publication of the annual balance sheet - Specification of the organization of the company (company, registered office, managing directors, district court) | - Tax accountant - Local IRS office - Court of first instance via notary public | N/A N/A approx. 30 euros |