Chosing the right company structure is the first step of starting your German business
Make sure you opt for a German company form which does ideally meet your needs. Some of the central criteria for making the right choice are:
- do you need protection from personal liability?
- what business entity triggers the least costs and the least organisational hassle?
- do you plan to sell the business in the foreseeable future?
The most suitable form of organization for a mid-sized enterprise in Germany is the “Gesellschaft mit beschränkter Haftung” (in short: GmbH), a limited liability company which requires a minimum share capital of 25,000 Euros (however, only half of this amount must be paid in to start business). The reason for this quite high minimum capital requirement: The German legislator wants to prevent dubious and unsound entrepreneurs from using the GmbH, so the general public does not lose trust in this legal form. Thus, having to come up with at least 12,500 Euros in cash is meant as a “sobriety test”.
For very small start ups, there is an alternative company form, the so called “Unternehmergesellschaft mbH”, commonly referred to as “mini GmbH”. However, the mini GmbH is not taken quite seriously in the German business world and you will have a very hard time opening a German bank account for such a mini GmbH. So we cannot recommend going down that route.
Checklists and guidelines for establishing a German company
For English speaking clients we have prepared a guide which explains the necessary steps for establishing a GmbH in Germany: Guideline for the Formation of a German Limited Liability Company (GmbH). For an overview of German company forms see here.
Need help with the formation process?
If you wish to instruct us to assist with the establishment of a German company or ubsidiary, we will be happy to do so. In that case, the formation process as such will be structured and organised by ourselves, i.e. the German law firm Graf & Partners. We charge according to our terms, based on time spent. Depending on the complexity (e.g. the number of shareholders, whether the shareholders are natural persons or foreign companies, the nature of the business, company name conflicts, trademark issues etc.) the fees are usually between 1.500 Euros net in standard cases and 3,000 Euros net in more complex cases; plus, of course, disbursements for apostilles, notary fees, translations etc.
If you wish us to conduct a name check, i.e. an assessment whether the desired name for the company is already taken or whether there may arise problems with competitors who have similar names, we will be happy to conduct such a name and trademark search.
Please note that according to German law the minimum share capital requirement is 25,000 Euros and the shareholder(s) must pay in at least half of that amount right away, since the company will only be registered once at least 50% of the minimum share capital has been transferred onto the company bank account of the new company. So opening a bank account is quite inevitably part of the company formation process. Paying in the full capital requirement (instead of only half) has many advantages which I am happy to explain.
If the shareholder is not a natural person but an English company (i.e. a subsidiary situation), the German notary will need to be provided with certified and legalised (i.e. apostilled) copies of the following documents, because these documents will need to be sent to the German Company Register together with the deeds:
- certificate of incorporation
- articles of association
- memorandum of association
- certificate of good standing
If you are based in the UK, you can either use a UK notary to obtain this or apply directly, see here https://www.gov.uk/government/organisations/companies-house/about/about-our-services#certified-copies-and-certificates and here https://www.gov.uk/get-document-legalised
Note that the company must have a managing director who is either a national of a European Union country or has a German work permit. In case you wish us to provide someone who can act as director (Geschäftsführer) this is, in principle, possible, but please understand that this director has full access to the company account and can obligate the company. Also this person is liable towards the German authorities for any tax or social security obligations.
There is more to do than just setting up the German company itself
Please also consider that the formation as such is not the end of the story. The company needs to register with:
- the German Finanzamt, i.e. tax office, with regard to corporate tax, trade tax, wage tax (German PAYE) and VAT
- with the local trade authorities (Gewerbeanmeldung), for details see here
- the local chamber of commerce (Industrie- und Handelskammer, in short IHK), since membership with the IHK is mandatory under German law
- and more
All this needs to be done by the company director within the first few weeks after the company has been established. We provide further information about the German company tax issues and the additional registration duties in this post: Formation of a German Company and then what?
Finally, please be certain to comply with German trade and business regulations and customs. Because your competitors will be watching and will not be shy to shower you with cease and desist letters if you make mistakes. For details see here.
Still not discouraged? Good, then let’s start!
In case you decide to instruct our firm with setting up a German company for you, please complete the questionnaire: Company_Formation_Order_Form_English (PDF Download)
For more on German business and corporate law see these posts:
- How to read a German Company Register Extract
- Company Forms in Germany: An Overview
- Pitfalls of German Contract Law and German Company Regulations (Part 1)
- Pitfalls of German Contract Law (Part 2)
- 3 Ways to Expand Your Business to Germany
- Establish a German Limited Company (GmbH): FAQ and Checklist
- What is a GmbH? The German Limited Liability Company explained
- What is a German “Mini GmbH” or “Unternehmergesellschaft”
- Checklist: Formation of a German Company. And then what?
- Buying a German Company: A quick Checklist
- When Starting a German Business: Don’t Forget the Trade Register Notification
- 10 Things to do when starting a German Business
- German Labour Law: Beware of Fictitious Self-Employment
- Brexit as a Business Opportunity for British SME’s
- German Business and Corporate Law Firm for British and US Clients
More information on litigation and legal fees in Germany is available in the Expert Law Blog German Civil Procedure and in these posts:
- Making a Court Claim for Money in Germany: It’s actually quite easy
- Standard of Proof in German Civil Litigation
- German Litigation Experts explain Civil Procedure Rules
- A German Claimant can’t be his own Witness
- Compensation for a wrecked Car under the German Law of Torts
- Does German Law of Torts know the Egg Shell Skull Rule?
- How expensive is a German Lawsuit?
- Expert Reports on German Law
- Forensic Accountants for German Civil Lawsuits and Business Litigation
Experts on German-British and German-American Legal Matters
Since 2003, the German business and corporate law firm Graf Partners LLP specialises in British-German and US-German legal cases. Our German business and corporate lawyers are native speaker level fluent in English, have many years of practical experience with clients from Britiain and the USA and are part of a well established network of law, tax and accounting firms.
Managing partner Bernhard Schmeilzl was admitted as German Rechtsanwalt (attorney at law) to the Munich Bar in 2001 and specialises in international cases ever since, with a focus on German-American and German-English commercial, corporate and also probate cases. In addition to obtaining his German legal exams with distinction, he also graduated from the English University of Leicester where he obtained his Master of Laws degree in EU Commercial Law in 2003.
In 2014, Graf Partners LLP has set up the international litigation department GP Chambers which focuses on providing professional litigation services to British and US-American clients, both on a commercial and a private client level. The Graf Partners litigation lawyers regularly appear before German law Courts throughout the country and provide specialist legal advice, support and advocacy services in all commercial and civil law matters, ranging from contract disputes, corporate litigation and employment, to damage claims, divorces and contentious probate. If you wish us to advise or represent you in a German or cross border case, or if you need an expert report on German law, please call +49 941 463 7070.