How to start a business in Germany - company formation, notary advice, accountants & VAT

Foreign investors have long realised the opportunities Germany has to offer. The country’s strong economic and political position and the fact it lays claim to one of the largest markets and economies in the EU, means entrepreneurs with an eye on creating a solid, stable business structure are frequently looking to Germany to set up business.

The German economy is largely built on small businesses and according to the German American Chamber of Commerce there are nearly 4 million companies throughout the country, with the majority of them either small or mid-sized.

If you are a foreign investor and you want to open a German company, you have a large spectrum of options: branch, UG or private limited liability company. Here at Euro Start we make it easy for you to create any German company of your choice, from a sole trader to a partnership.

What are the main types of business entities in Germany?

  • Simple structure for startups & private companies (UG)
  • Limited liability company (Gmbh)
  • Stock corporation (AG)
  • Partnership
  • Sole trader

What are the main features of a UG?

A law bringing significant changes for German limited liability companies (Gmbh) now makes it easier to provide share capital, and makes it simpler to divide, merge and transfer shares. It also allows a GmbH to locate its headquarters outside Germany (previously not permitted) and create more transparency with regard to share ownership.

Requirements for an UG:

  • The minimum share capital for an UG is €1.
  • A simple structure designed for private companies only. Until the GmbH minimum share capital of €25,000 is reached, 25% of profits must be placed into a new capital reserve account.
  • Liability is shifted from shareholders to the MD of a GmbH and UG
  • Minimum number of shareholders is one.
  • The minimum of a serviced virtual office with a German registered address is required 
  • Two separate fees must be paid to the Chamber of Commerce for the company formation in Germany

Requirements for a GmbH company

  • The minimum share capital for a GmbH is €25,000 (€12,500 to be paid up front)
  • The minimum number of shareholders and directors is one.
  • A physical office is required (a virtual office is unacceptable here) with an office lease contract. The VAT office may require a staffed, serviced office for non-resident owned companies.
  • Certain articles and applications need the notarisation of a German lawyer.
  • A solid business plan.
  • For a non-EU director additional requirements may apply.

What are the main features of an AG company?

'AG' is an abbreviation for the German word ‘Aktiengesellschaft’, which literally translates to 'corporation' in English. German companies that are publicly traded are designated by the letters 'AG' after the company name.

Requirements:

  • The minimum share capital for an AG is €50,000
  • The company form is needed in order to be listed at the stock exchange
  • The minimum number of directors is one
  • The minimum number for the non-executive board of directors is three
  • A physical office is required (a virtual office is unacceptable here)
  • Certain articles and applications need the notarisation of a German lawyer.
  • A solid business plan

What are the main features of a partnership?

  • Available either as a general or limited partnership
  • Foreign investors tend to prefer limited-liability KG partnerships
  • Minimum of two partners, one of which can be a GmbH company
  • Widely used in Germany for small and family-owned businesses

What are the main features of a sole proprietor company?

  • The simplest and least-regulated form of business entity
  • Registration required in the commercial register and local trade office
  • A sole trader has unlimited liability for all liabilities and debts
  • Profits are subject to German income tax at individual rates

If I have a company in another country, can I set up a branch in Germany?

You certainly can, and it’s a popular move for foreign companies that aren’t quite certain about their long-term commitment to Germany. All you need to do if you want to establish a German branch office is to register with the commercial register and the local trade office. Bear in mind however – the parent company retains full responsibility for the branch on all legal and tax matters. Look at our tax planning section to see how our panel of German tax specialists can help you navigate your way through Germany’s complex fiscal laws.

How easy is it to recruit staff in Germany?

Germany is famed for the excellence of its technical training, and apprenticeships are the norm in most industrial sectors. There is no shortage of qualified staff in most areas of Germany, particularly in the east of the country. Most companies advertise jobs at the local government-run employment exchange but for specialist staff and senior management, you would be better advised to use an executive search agency. Please contact us for information about our recruitment service.

What is the regulatory environment like?

German businesses are heavily regulated. This is particularly true in the case of listed AG companies but all German companies, large and small, have to comply with detailed requirements laid out by the authorities. Government bodies oversee the activities of financial institutions such as banks and insurance offices, while most other industries have associations that regulate what their members can and cannot do.

Financial incentives and banking facilities

The federal government offers a wide range of incentive programs, including loans and grants, depending on the nature of the company and its intended location. Some areas of Germany offer capital investment grants of up to 50% to SMEs. It is also worth noting that local government incentives may be offered in the form of beneficial tax rates but these are not generally available in the major cities. Germany has world-class international banking facilities and the first step in opening a German company should be to open a local bank account – we can arrange all your banking requirements for you.

For any further information about company formation in Germany - notary advice, accountants and VAT - please call us on 0033 (0)1 53 57 49 10 or email us from our contact page and we’ll be happy to help.

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