The procedure for opening a company in Germany represents a sequence of standard steps to ensure compliance with all legal requirements. The necessary actions include the preparation of Articles of Incorporation (AoI) and other required documents: specimens of signatures, copies of passports and specific forms provided by the office for company registration. All procedures connected with the signing of documents need to be notarized in Germany. For you to open company in Germany, you also require a registered office, a local bank account and the appointment of an accountant.
The different types of German companies
The German GmbH
The Gesellschaftmitbeschränkter Haftung or GmbH (Private Company with Limited Liability) can be established by a single investor. The minimum capital required is EUR 25 000. Both cash and other assets are acceptable (the asset value needs to be stated in the AoI). A specific feature is that the Private Limited Liability Company’s shares are not publicly transferable and cannot be registered for the stock exchange. The managing body of the company is the Shareholders General Meeting. The members of the General Meeting appoint a director to make day-to-day decisions regarding the company’s management.
The German UG
The Unternehmergesellschaft or UG (Limited) is considered to be a ‘’mini-GmbH’’. The main characteristic of the UG is the minimum capital deposit of EUR 1 (although EUR 1.000 is recommended), which makes the company type more flexible. The UG will convert into a GmbH after the first EUR 100.000 profit, of which 25% must be kept in capital reserve. Once the capital reserve reaches EUR 25.000, the UG can be converted.
The German Joint Stock Company
The Aktiengesellschaft or AG (Joint Stock Company – JSC) is commonly incorporated by large businesses as it offers many advantages and possibilities for an increase of the capital by registering shares for the Stock Exchange. The minimum required share capital is EUR 50 000. Each member is liable for their own contribution to the share capital, as in JSCs. A Management Board (MB) is established to take the management decisions. A Supervisory Board (SB), consisting of no less than three members, monitors regularly the actions of the MB. The accounting of Joint Stock Companies is checked by a legal auditor.
The German Sole Proprietorship
A Sole Proprietorship is the simplest German business setup. It is established by one individual and his/her personal assets are not protected in times of financial difficulties e.g. threat of bankruptcy.
The German General Partnership
The General Partnership (OffeneHandelsgesellschaft – OHG) does not require a particular amount of share capital, but its members’ liability is unlimited. The entity can be established by no less than two investors pursuing identical economic goals. All investors take managerial decisions and claim profit after taxation.
The German Limited Partnership
The Limited Partnership (Kommanditgesellschaft – KG) is established by two categories of partners. They can be either “silent” who contribute to the capital of the entity and their liability is limited to the value of the contribution or “general” partners who are not obliged to contribute to the company’s capital but hold unlimited liability with respect to its debts and are entitled to claim profits. The management decisions in the Limited Partnership are made by the general members without the participation of the silent ones.
The German Branches
Branches are a common method to enter the German market. A number of foreign investors make the decision to open German branches as a step of their business plan. In Germany, branches are not considered legal entities and their assets/liabilities are owned by the mother company.
Please, do not hesitate to contact our specialists in company incorporation in Germany, if you need more information on the benefits that the listed types of entities offer.
Procedure to open a company in Germany
All requirements and rules regarding the process of establishment of companies in Germany are provided in the Company Act.
The preliminary steps for opening a German company include verification of the authenticity of the company’s name at the Chamber of Commerce, notarization of the AoI and opening of a local bank account to deposit the initial or minimum required partnership capital.
The National Commercial Register must receive the following papers to proceed with registration: an application, notarized AoI, details on the structure of the Management Board, and a certificate for deposition of the required share capital. All these documents need to be submitted electronically. The Commercial Register finalizes the registration process using a central e-platform.
The next phase in the process to Open Company in Germany is to apply for a trading license at the Office of Business and Standards, to register at the Office of Statistics (that will provide a questionnaire for the business data of the company), the Chamber of Commerce and the Office of Labour. The latter issues an 8-digit number for the operation that needs to be reported to the Social Security Agency. After that, the entity has to apply at the Office of Health Insurance. The Taxation Office must receive a notification about the formation of the new entity in order to register it for corporate and value-added tax.
After the process of registration is complete, the company can start its commercial operations. Most registered companies need employees. They can benefit from the well-trained German workforce. Websites offering jobs and agencies for recruitment of personnel can provide assistance. They can help companies find the most suitable persons for the offered positions.
Overview of the German Economy
The national economy places high in the global context. In fact, it ranks fourth worldwide. This is why Germany attracts many international investors intending to open new companies. The country is actually among the most attractive destinations worldwide when it comes to foreign investments. Germany is also the second largest exporter worldwide. Its workforce brings significant benefits for international investors opening companies in the country since employees are important contributors to the development of the business. Germans consider stable employment relationships and good life quality as essential factors. Furthermore, the national system for social security is famous with its sound organization.
International investors willing to open company in Germany can contact our local incorporation team to get assistance throughout the process of German company formation.