Anyone who wants to open a shop/store or restaurant has a lot to plan and organize in advance. In addition to a business plan with the business idea and an investment plan, participation in a start-up seminar and a detailed consultation with a credit institution or financial advisor, for example, can also be useful. In any case, there are also numerous legal aspects to be considered.
Which legal steps should and partly have to be taken will be worked out in the following:
First, consideration should be given to how the business is to be conducted from a legal perspective. A business can be opened in Germany with the most diverse legal forms. The most common legal forms are: Sole proprietorship or sole trader or partnership under civil law (GbR) with several persons, GmbH or UG (haftungsbeschränkt).
a) Sole proprietorship/ sole traders
A sole proprietorship is operated by a single natural person. 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.
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 here for GmbH formation in Germany.
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) formation in Germany here.
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.
Company name/ brand
The name of the business and of the company is often decisive for success. In this context, it is important to consider the specifics of company law, which we have summarized on the following page: www.liesegang-partner.com/eshop/company-formation/legal-name.html. It is always advisable to clarify company law concerns in advance with the responsible Chamber of Industry and Commerce.
A distinction must be made between these and special features of trademark law. It is recommended to have a check made to see whether there are any conflicting trademarks, brands and domains. We will be happy to advise you in this context and carry out a corresponding trademark search for you: www.liesegang-partner.com/eshop/trademark/trademark-search.html
Depending on the nature of the business and the legal form, the following registrations with different authorities are possible
a) Commercial Register
The registration is mandatory for a registered merchant, a UG (haftungsbeschränkt) and a GmbH
b) Trade office
If a business is operated, you must register it with the trade office. If it was previously necessary to register at the commercial register, you must enclose an appropriate extract from the commercial register.
c) Chamber of Industry and Commerce
Membership in the Chamber of Industry and Commerce is mandatory.
d) Further chambers
In addition to the Chamber of Industry and Commerce, membership of other professional chambers (e.g. the Chamber of Crafts) may be required. The decisive factor is the business purpose.
e) professional and inter-branch organisations, trade associations
In addition, memberships in professional and industry associations and insurances at a trade association may be mandatory or useful.
f) Financial authority
In the case of corporations, the tax office automatically requests the company for tax registration. Sole proprietorships and sole traders must also register with the tax office. You will receive a questionnaire for the tax registration of the business enterprise.
g) Employment Agency
If employees are hired, the new business requires a company number from the employment agency. In addition, the employees must be registered with the respective health insurance company and social security contributions must be paid.
In some industries, an additional permit or concession is required, for example, for taxi drivers, restaurant operators or brokers.
Contractual and legal particularities
Anyone who opens a shop or store should also consider contractual things, like:
a) Non-competition, secondary employment
Is there possibly a ban on competition or secondary employment? In the case of an existing employment relationship or a participation in an already existing company, this would have to be examined more closely. Please contact us if you need assistance.
b) Drafting of contracts
Anyone who runs a business must necessarily conclude contracts with business partners, suppliers, employees and above all customers. The contracts in question are mainly contracts for work, service agreements, employment contracts and rental agreements, supply contracts and general terms and conditions of business for the services offered by the company.
Attention should be given to legal effectiveness and economic sense. Please also contact us here if we can be of assistance to you.
An important point is the issue of insurance. There are numerous possibilities to cover possible risks. From our point of view the insurances that come into consideration are:
- Liability insurance
- Business interruption insurance
- Insurance against burglary and theft, damage to electronics, fire, tap water and product liability
- Environmental liability insurance (e.g. for industrial and transport companies)
- Health insurance, accident insurance for work and leisure, disability and nursing care insurance
- Commercial legal expenses insurance
It is recommended to consult a tax advisor in advance in order to clarify which tax obligations exist and what has to be considered.
A partnership (especially a GbR or sole trader) is not itself subject to taxation, but only its partners. The partners are personally liable to tax. In contrast, a corporation (esp. GmbH or UG (haftungsbeschränkt)) is itself subject to taxation with its profits as a legal entity.
The following taxes, among others, come into consideration:
- Corporate tax (15 percent of the profit)
- Capital gains tax on profit distributions (25 percent (plus 5.5 percent solidarity surcharge))
- Trade tax (depending on the location of the shop)
- Solidarity surcharge (5.5 percent of corporation tax, capital gains tax and wage tax)
- Value added tax (19 percent or 7 percent of the net invoice amount)
Further information on tax obligation for company like GmbH or UG in Germany can be found here.
Special feature internet presence
If you are planning an internet presence, you will have to deal with the topic of data protection and mandatory data in the imprint. In addition, there are numerous information and instruction obligations which must be observed in the context of an online shop/platform or an online order. We will also be happy to help you at this point.
Further important regulations
From a legal point of view, there are other laws and regulations that you may have to observe. We have listed the most important ones in the following:
- Legal opening hours (depending on the federal state there are different regulations to be observed)
- Price indication in the sense of the Price Indication Regulation
- Parking space commitments
- Food legislation
- Obligation to provide sanitary facilities
Please contact us if you need more detailed information on one or the other position or if we can provide you with legal support in general when opening a company in Germany.