Company formation in Germany

 GermanyGermany is renowned for its robust economy, strategic location, and efficient company formation procedures, making it an attractive destination for entrepreneurs worldwide. The process of establishing a company in Germany is streamlined and transparent, with a well-defined legal framework. One key advantage is the country’s stable and thriving economy, offering a strong market for various industries. Germany’s central location within Europe provides easy access to major markets, fostering international business relationships. The legal system promotes investor protection, ensuring a secure environment for businesses to operate.

Furthermore, Germany’s commitment to innovation and technology, along with its highly skilled workforce, enhances the competitiveness of companies established there. The country’s infrastructure, education system, and research facilities contribute to a favourable business ecosystem. Tax incentives and support programs for startups further sweeten the deal for entrepreneurs. Germany’s commitment to sustainability and green initiatives aligns with the global trend towards responsible business practices, attracting environmentally conscious businesses.

Germany offers a well-established and efficient company formation process, a stable and prosperous economy, strategic geographical advantages, a skilled workforce, and favourable business incentives, making it a highly beneficial choice for entrepreneurs looking to establish and grow their businesses.

Company registration by visit 5,000 EUR
Opening a company in Germany by a power of attorney 6,000 EUR

Open business in Germany

Corporate services in Germany

Advantages

Prestige and worldwide recognition of the jurisdiction

Transparent and reliable legal system

Germany is the 4th most innovative country in the world

The German market is more than 82 million people

Before diving into the incorporation process, it’s crucial to select the most suitable legal structure for the business. Germany provides various options, including Gesellschaft mit beschränkter Haftung (GmbH) for limited liability companies, Aktiengesellschaft (AG) for stock corporations, and others. The choice depends on factors like the size of the business, capital requirements, and liability preferences.

The next step involves choosing and reserving a unique company name. The selected name must comply with German naming conventions and be distinguishable from existing businesses. A name reservation ensures that the chosen name is available for registration.

Companies in Germany must prepare articles of association (Gesellschaftsvertrag), outlining the company’s purpose, structure, and internal regulations. These articles serve as the foundation for the company’s legal framework and are submitted during the registration process.

To facilitate business operations, a German bank account is essential. It is advisable to establish a relationship with a local bank early in the process, as the bank will issue a confirmation required for company registration.

Certain documents, such as the articles of association and the appointment of managing directors, may require notarization. Notarization adds a legal stamp to the documents, enhancing their authenticity and compliance with German law.

The Commercial Register (Handelsregister) is a central database containing information about businesses operating in Germany. Registration involves submitting the required documents to the local court, including the articles of association, proof of name reservation, and the bank confirmation.

For the official registration process, a notary must be appointed. The notary assists in verifying the identity of the company founders, notarizing required documents, and overseeing the registration process with the Commercial Register.

Following registration with the Commercial Register, the company must obtain a tax number from the tax office (Finanzamt). This is crucial for fulfilling tax obligations, including corporate income tax and value-added tax (VAT).

If the company plans to hire employees, registering with the social security system (Sozialversicherung) is necessary. This ensures compliance with German employment regulations.

Depending on the industry, some businesses may require specific licenses or permits. It’s essential to identify and obtain the necessary licenses from relevant authorities.

Germany’s robust economy and stable business environment make it an attractive destination for investors.

By incorporating in Germany, businesses gain access to the vast European Union (EU) market, enhancing opportunities for expansion.

Germany is renowned for its innovation and technological advancements, providing a fertile ground for businesses in various sectors.

The country boasts a highly skilled and educated workforce, contributing to business success.

Germany’s legal system is characterized by transparency and predictability, providing a secure foundation for business operations.

In conclusion, incorporating a company in Germany is a strategic move for those seeking to establish a foothold in the heart of Europe. By navigating the regulatory landscape with careful planning and adherence to legal requirements, businesses can position themselves for success in one of the world’s most influential economies.

Investors looking to establish a presence in Germany can choose from various legal structures, including corporations, partnerships, or branch offices. While the company registration process is generally straightforward, seeking professional guidance is advisable. German law recognizes four primary categories of corporations:

Gesellschaft mit beschränkter Haftung (GmbH) (Limited Liability Company):

This is the most common corporate form, requiring a minimum share capital of €25,000.

Shareholders are not personally liable for the company’s potential debts.

Aktiengesellschaft (AG) (Joint Stock Corporation):

AGs require a minimum share capital of €50,000, which may or may not be listed on stock exchanges.

While AGs enjoy a strong market reputation, they involve complex structures and administrative responsibilities.

Kommanditgesellschaft auf Aktien (KGaA) (Partnership Limited by Shares):

This is a stock corporation (AG) where general partners bear individual liability.

Combining aspects of both AG and partnership structures, KGaA allows for significant capital shares while fostering personal involvement and bonds between partners and the corporation.

Offene Handelsgesellschaft (OHG) (General Partnership):

OHG operates under a partnership agreement (Gesellschaftsvertrag), requiring shareholders to actively manage the business.

Unlike GmbH and AG, partners in OHG face unlimited liability.

Additional legal forms exist, blending characteristics from the main categories. Notably, the “Mini GmbH” deserves special mention. It represents a streamlined version of the GmbH, enabling companies to initiate operations with a capital as low as €1,00.

The corporate taxation framework in Germany is competitive and favorable for both local and foreign entrepreneurs, with an average tax rate hovering around 30%. Companies are liable for taxes on their worldwide profits. Notably, Germany has established bilateral investment treaties (BITs) and double taxation agreements with approximately 90 countries. Generally, German-resident corporations encounter two primary types of taxes:

This tax imposes a 15% burden on incomes, with an additional solidarity surcharge of 5.5%, bringing the effective rate to 15.825%.

Comprising a fixed rate of 3.5% and a municipal quotient, the trade tax varies based on the company’s location. Typically, urban settings have a higher trade tax than rural environments.

In response to the ongoing COVID-19 pandemic, the German government has implemented temporary tax measures to address the challenging situation. These interventions aim to enhance corporate liquidity and include measures such as a reduction in the value-added tax and an increase in the maximum loss carryback volume for 2020 and 2021 losses.

Registering a company in Germany provides numerous advantages, including a robust and stable economy, a specialized workforce, and membership in the European Union. Regulated United Europe serves as a reliable partner to help navigate the selection of the most suitable business options. Determining the appropriate corporate structure, managing the company registration process, and calculating corporate and trade taxes can be complex for those unfamiliar with the nuances. At Regulated United Europe, a team of experts is available to guide the process of opening a company in Germany and provide valuable advisory services

Germany

capital

Capital

population

Population

currency

Currency

gdp

GDP

Berlin 84,270,625 EUR $48,398

Key Points to Note:

  1. The advantages of conducting business in Germany encompass an innovative environment, English proficiency, a robust startup culture, straightforward communication, and excellent infrastructure.
  2. Challenges associated with business operations in Germany include intricate business establishment procedures, complex tax arrangements, bureaucratic hurdles, an unfamiliar cultural environment, and extensive employment protections.
  3. Global Professional Employer Organizations (Global PEOs) can assist in expanding businesses into Germany or hiring workers there.

Germany hosts Europe’s largest economy, ranking fourth globally in 2020, following the United States, Japan, and China, in terms of market size. This vast and diverse economy is supported by well-developed infrastructure, a skilled and educated workforce, a positive social environment, a strong Human Development Index (HDI), and a rich history of world-class research and innovation.

With Brexit fully implemented, Germany is likely to become an even more sought-after European business location.

However, amid these positive aspects, there are challenges for business owners aiming to enter the German market. Germany, being discerning, has intricate bureaucratic procedures and a legislative environment that make it one of the most challenging countries for non-EU businesses to establish operations in.

Benefits of Engaging in Business in Germany

When contemplating the advantages of conducting business in Germany, the list could go on endlessly. Here are a few standout benefits:

Commitment to Innovation. Germany is globally recognized as one of the most innovative countries, with a rich history of leveraging science and technology for economic benefit. Government support, including funding and incentives, contributes to fostering innovations, with a particular focus on emerging technologies like artificial intelligence.

Excellent English Proficiency. Germans exhibit excellent proficiency in both spoken and written English. This linguistic prowess facilitates effective communication, reducing cross-cultural risks of ambiguity and misunderstandings. While English skills are robust, making an effort to communicate in the local language is appreciated, reflecting former Chancellor Willy Brandt’s sentiment, “If I’m selling to you, I speak your language. If I’m buying, dann müssen Sie Deutsch sprechen!”

Strong Start-Up Business Culture. Germany boasts a dynamic start-up scene, with notable activity in cities like Berlin, Munich, and Hamburg. Berlin, in particular, has emerged as a leading tech hub in Europe over the past decade, showcasing diverse creativity and innovation in the tech sector.

Direct Style of Communication. German business professionals are known for their direct and efficient communication style. While this may appear straightforward, it reflects German efficiency, with workers focused, committed, and professional. This approach ensures dealings with highly skilled individuals committed to meeting objectives and deadlines.

Excellent Infrastructure. Germany’s infrastructure is globally regarded as top-notch. The country offers outstanding transportation and logistics, with a vast network of airports, heliports, railways, and well-maintained roadways. Access to high-speed Internet and advanced telephone systems positions Germany as an ideal location for international remote work, aligning with the digital transformation and the rise of remote working.

Significant Regulatory Oversight. As previously mentioned, every business entity operating in Germany is required to register with the pertinent local trade registry corresponding to its primary place of business. Unlike a central registry, there are distinct registrations for other towns or cities where the business holds significant interests, such as a secondary production line or regional headquarters.

Although the central government’s code of conduct for businesses is recommended rather than legally binding, companies deviating from it must disclose any such deviations when engaging in business transactions.

Beyond the extensive registration requirements and governmental corporate oversight, German laws governing consumer protection, employee rights, and product liability are both comprehensive and intricate. Often surpassing equivalent EU laws, German regulations, such as those concerning Works Councils, mandatory employee representative bodies, can pose challenges for businesses unfamiliar with the local landscape, leading to potential breaches of compliance requirements.

Robust Employment Protections. In the realm of regulatory oversight, Germany boasts some of the most robust employee protections globally. With a relatively high minimum wage and stringent rules surrounding employee dismissals, holiday pay, and sick leave, German employment regulations are stringent.

Unlike many countries with the existence of “zero-hours contracts,” German law mandates that all employees, whether in full-time, part-time, seasonal, temporary, or permanent positions, must be engaged under an employment contract. These contracts are typically detailed, including provisions for holidays and benefits. For instance, German employees are safeguarded from working shifts exceeding eight hours in a single day. If an employee chooses to work longer, they must receive compensatory time off during each four-week period to ensure the average daily working hours do not surpass the eight-hour limit.

How a PEO Can Facilitate Your Expansion Goals

Despite the challenges of entering the German market, companies can navigate them effectively with the right approach. For those finding it challenging to independently expand into Germany, establish a legal entity, and comply with the intricate regulatory framework, partnering with a professional employer organization (PEO) is a viable option.

PEOs in Germany often operate through employee leasing, holding an Arbeitnehmerüberlassung license, commonly known as an ‘AUG license.’

What is a PEO?

A PEO, or professional employer organization, provides co-employment or employer of record services to businesses aiming to expand into international markets. PEOs with global coverage, specifically those covering Europe, are known as global PEOs or Europe PEOs.

Leveraging their local expertise, PEOs handle human resources and administrative responsibilities associated with managing employees in different countries. This alleviates concerns for businesses expanding overseas, eliminating the need to establish a legal entity, ensuring compliance with local laws, and navigating the intricacies of local business culture—tasks effectively managed by the PEO on behalf of the business.

As a co-employer or employer of record, the PEO assumes responsibilities such as:

  1. Managing payroll to ensure timely and full payment to employees.
  2. Withholding and timely remittance of relevant payroll and income taxes.
  3. Making necessary deductions and contributions, such as healthcare or pension.
  4. Assisting in hiring local experts.
  5. Utilizing connections to identify top talent.
  6. Ensuring compliance with local laws, including minimum wage and paid leave.
  7. Drafting employment contracts and related paperwork.
Diana

“Germany has emerged as a promising hub for entrepreneurs and businesses in search of a dynamic environment conducive to growth and prosperity. If the idea of launching your business in Germany appeals to you, get in touch with me, and let’s collaboratively delve into your vision.”

Diana Nossenko

SENIOR ASSOCIATE

email2[email protected]

FREQUENTLY ASKED QUESTIONS

The time to open a company in Germany typically ranges from 1 to 4 weeks, considering preparation, document submission, and registration processes.

The main types of legal entities in Germany are:

  1. GmbH (Gesellschaft mit beschränkter Haftung): Limited Liability Company.
  2. AG (Aktiengesellschaft): Joint-Stock Company.
  3. UG (Unternehmergesellschaft): Entrepreneurial Company (similar to GmbH, but with lower capital requirements).
  4. OHG (Offene Handelsgesellschaft): General Partnership.
  5. KG (Kommanditgesellschaft): Limited Partnership.
  6. GmbH & Co. KG: A combination of a GmbH and a KG, offering limited liability and partnership benefits.

Each entity type has its own characteristics and is suitable for different business needs.

Yes, non-residents can register a company in Germany. The country welcomes foreign entrepreneurs, and there are no strict residency requirements for company registration. However, certain legal and administrative procedures must be followed, and it's advisable to seek professional advice to navigate the process effectively.

Corporate Income Tax (CIT): The standard corporate income tax rate is 15%. Additionally, a solidarity surcharge (Solidaritätszuschlag) of 5.5% is levied on the corporate income tax, resulting in an effective tax rate of 15.825%.

Trade Tax (Gewerbesteuer): The trade tax rate varies by municipality and is not uniform nationwide. The average trade tax rate is around 14-17%.

Registering a company in Germany offers numerous benefits. With a robust and stable economy, businesses can thrive in a strategically located country with easy access to major markets. Germany boasts a highly skilled workforce, fostering innovation and efficiency. The transparent legal system provides investor protection, ensuring a secure business environment. The nation's leadership in innovation and technology attracts companies in cutting-edge industries. Business ventures in Germany benefit from a global market network, while government support and various initiatives encourage entrepreneurship. The country's high quality of life, commitment to sustainability, and tax incentives further enhance its appeal for businesses seeking a favorable and prosperous environment.

RUE customer support team

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Milana

“Hi, if you are looking to start your project, or you still have some concerns, you can definitely reach out to me for comprehensive assistance. Contact me and let’s start your business venture.”

Sheyla

“Hello, I’m Sheyla, ready to help with your business ventures in Europe and beyond. Whether in international markets or exploring opportunities abroad, I offer guidance and support. Feel free to contact me!”

Sheyla
Diana

Diana

“Hello, my name is Diana and I specialise in assisting clients in many questions. Contact me and I will be able to provide you efficient support in your request.”

Polina

“Hello, my name is Polina. I will be happy to provide you with the necessary information to launch your project in the chosen jurisdiction – contact me for more information!”

Polina

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At the moment, the main services of our company are legal and compliance solutions for FinTech projects. Our offices are located in Vilnius, Prague, and Warsaw. The legal team can assist with legal analysis, project structuring, and legal regulation.

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