We advise foreign investors on how to register companies in Germany. This article gives you a quick overview about how a UG, GmbH or other company can be registered in Germany and what needs to be considered.

a) Sole proprietorship/ sole traders

A sole proprietorship is operated by a single natural person. This type is not a legal entity and therefore not a company but we mention it here as well to give you an overview.

The advantage is that the owner can make the decisions alone and is entitled to profits in full. Participation in a sole proprietorship is not possible. The foundation is inexpensive and - except for a possibly required business registration - informal possible. A minimum capital is not a prerequisite. A disadvantage is that the owner is liable with all his assets (i.e. including his private assets).

A registered merchant (Einzelkaufmann, e.K.) is a sole trader who conducts commercial trade (especially a business). The company must be entered in the commercial register. Nevertheless, the costs and formalities involved in setting up a company are relatively low. A minimum capital is not necessary. The sole trader has the sole power of decision and participations in the commercial enterprise are not possible, so that profits do not have to be shared. Here too, however, the disadvantage is that sole traders are liable with both their business and private assets. Sole traders are also obliged to keep accounts.

b) Partnership under civil law (GbR)

At least two natural persons are required to found a partnership under civil law (GbR). A certain form is not prescribed for the foundation and an entry in the commercial register does not take place. Also, no minimum capital is required. However, since all partners are jointly and severally liable for the business obligations, care should be taken to ensure that a trusting cooperation can take place. Due to the liability with private assets, it also seems reasonable that all parties involved have sufficient knowledge about the financial circumstances of the others. It often makes sense to set down individual regulations (rights and obligations) in writing in a partnership agreement.

c) GmbH

A limited liability company (GmbH) can have one or more shareholders (natural or legal persons). The prerequisite for the formation of a GmbH is the conclusion of a shareholders' agreement and the appointment of at least one managing director. The foundation documents are to be notarized and the GmbH is to be registered with the commercial register. The minimum share capital is EUR 25,000.00, whereby only EUR 12,500.00 must initially be paid in at the time of foundation. The advantage of a GmbH is that the liability of the shareholders is limited to the share capital. The partners are not liable with their private assets. Capital increases and the sale or acquisition of shares in the company are relatively easy. The formation of a GmbH can also make sense in terms of tax law. A disadvantage is that the foundation is connected with some effort due to the existing formalities. There are also statutory accounting and disclosure obligations.

You will find more information about GmbH company formation on our following page:

https://shop.liesegang-partner.com/incorporation-german-gmbh.html

d) Mini-GmbH or entrepreneurial company with limited liability (Unternehmergesellschaft (haftungsbeschränkt))

Only EUR 1.00 of share capital is required to found an "Unternehmergesellschaft (haftungsbeschränkt)" (short: UG (haftungsbeschränkt)), also called Mini-GmbH. The share capital must be paid up in full. Otherwise, the formation process is similar to that of the GmbH and the UG (haftungsbeschränkt) is very similar to a GmbH. The UG (haftungsbeschränkt) has a smaller share capital and some legal deviations, for example the obligation to form reserves. However, the formation costs are much lower, as a model protocol specified by the legislator can be used for the foundation. The UG (haftungsbeschränkt) can have one or more partners. The liability is limited to the available share capital, so that the partners are not liable with their private assets. Annually, 25% reserves must be formed at the UG (haftungsbeschränkt) until the share capital is 25,000.00 EUR and the UG (haftungsbeschränkt) can be converted into a GmbH. In addition, legal accounting and publication obligations must also be observed for the UG (haftungsbeschränkt).

You can find more information on the UG (haftungsbeschränkt) company formation here: 

https://shop.liesegang-partner.com/company-formation-ug-germany.html

As an alternative to a company foundation it would also be possible to take over an existing company. In this case, however, legal advice should be obtained with regard to the debt assumption that may take place.

How to register a GmbH or Mini GmbH / UG?

We have optimized the process to register a GmbH or or Mini GmbH / UG.

Click here to start your GmbH or UG company formation.

After mandating us, we first check the permissibility of the required company name by preliminary enquiries to the responsible court of registration and/or responsible chamber of commerce and industry. On request, we also check for conflicting brands, companies and domains.

Together with a notary, we then compile the founding documents on the basis of your information provided when commissioning us, which include the foundation certificate, the company articles of association, the list of partners and the Companies Register application. If the company foundation is to be carried out by an authorised representative or trustee, we also prepare the necessary authorisation or trustee contract for you. We agree all the drafts with you, and if necessary explain the contents and consequences of the relevant regulations.

If one of the partners is a foreign company, further documents are required for notarial certification. The Court of Registry requires confirmations that the foreign company and its representatives lawfully exist. Depending on the country of origin, you require officially certified copies, an endorsement and/or a certified translation. We will then tell you which requirements apply for your limited liability company.

The actual company foundation takes place when the foundation certificate of the limited liability company and the articles of association are notarially certified. The company exists from this moment, although only as a limited liability company under foundation (GmbH i.Gr.) until entry in the Companies Register. After certification, the limited liability company under foundation opens a business account, into which the partner or partners pay the capital investment assumed.

The Managing Director of the newly formed limited liability company usually takes part in the certification meeting, and at this point signs the application to the Companies Register. If the Managing Director is not present in person, he can also sign the application with another notary, or in a German embassy or consulate. The application to the Companies Register is submitted electronically to the court of registration by the notary as soon as the payment of the capital investment has been confirmed to the notary.

Finally, the court of registration checks the application to the Companies Register and the foundation documents submitted, and if there are no objections, enters the limited liability company in the Companies Register. The company suffix “under foundation” (i.Gr.) is omitted on entry.

According to our experience, it takes only 2 to 4 weeks from the commission until entry in the Companies Register.

FAQ Company Formation

1. Can I open a company without being a resident?

yes

2. If an address is essential, can I use my friends address who are living in Germany?

Yes

3. What are the documents required from myself?

Basically none.  

4. What are all the costs involved for a UG / GmbH?

There are several options available and the costs for a formation can be calculated with our order form.

5. How many types of tax will I have to pay?

Subject to tax is the company itself for corporate tax, trade tax and capital gains tax. The overall tax burden would be approximately 30 % depending on the seat of the company.

6. Are salaries deductible from any taxes?

Salaries are expenses which lower the profit and this profit is basis for the tax calculation.

7. As I will be conducting the Ecommerce platform outside of Germany, can I file my expenses from abroad?

The company is located in Germany and therefor responsible to file tax declarations in Germany. If the firm has to pay expenses they are deductible from the taxable income.

8. Will the tax authorities accept international invoices?

It is common that companies are involved in international business. Generally, also international invoices are expenses. From time to time the tax authorities will conduct an audit to check the accounting and if there are doubt regarding the invoices they might not be treated as deductible.

9. As I understand, once I get the license approved, I can open a bank account online?

There is generally not license required to do business in Germany except for some regulated topics (e.g. financial market, real estate agents etc.). A bank account is required during the company formation and the registration of the company already requires a bank account.

10. If I will start paying taxes will I be covered under social security and medical insurance?

You have to differentiate between the company’s tax obligations and the ones from you as an individual. As an individual you tax obligations depend on your place of residence. If this in more than one country double taxation agreements may apply. If you live in Germany and are employed as the managing director, you can pay social security and medical insurance. If you are the dominant shareholder you may opt out from social security.

11. How much do you charge to prepare all of the above?

The costs for company formations can be calculated with our order forms. The further costs for accounting, tax filings depend on the monthly transactions and turnover.

12. Can I register the company completely remotely?

Yes, we have options to notarize the company formation remotely and also to open a bank account with remote authorization.