The basic procedures and regulations of starting a business in Germany does not differ much from that of many English speaking countries. There is no legal difference shown to foreigners when setting up companies in Germany and no restrictions on the repatriation of profits. German law distinguishes between limited, joint stock and other forms of partnerships, much like in many English-speaking countries.
There’s a huge choice of options facing any foreign investor considering company registration in Germany. For the cautious, there’s the choice of staring a German company with a one-person sales offices – one based within a serviced office. This means that if the business fails, it’s less of a financial disaster to recover from. For the more confident, the German company formation service makes it possible to start up whatever type of company you want in Germany, which could be as a sole trader or a partnership or corporation.
The main types of German company formation
- Limited liability corporation (GmbH)
- Stock corporation (AG)
- Partnerships
- Sole proprietor
- How do they differ?
The most common form of business enterprise in Germany is the GmbH company. The minimum share capital for a GmbH is 25,000 euros. It can have a minimum number of one shareholder and a minimum share capital of just 1 euro.
The AG company is the standard corporate form for large public companies and offers a minimum share capital of 50,000 euros. A minimum number of one shareholder is permissible. This type of company is subject to heavy regulation as a listed company.
A partnership company formation comes as either a general (oHG) or limited (KG) partnership with foreign investors opting for limited liability KG partnerships with a minimum of two partners, one of which can be a GmbH company. Small and family owned businesses use these widely in Germany.
The sole proprietor company is the simplest and least-regulated form of business entity registration. The sole trader has unlimited liability for all liabilities and debts. Profits are subject to German income tax at individual rates.
The first steps
Many foreign companies make a tentative step into Germany by opening another branch of an existing company. All that is needed to set up a German branch office is to register with the commercial register and local trade office. The parent company still handles full responsibility for the branch and all its legal and tax matters.
Recruiting a workforce in Germany
Germany is renowned for it’s expertise in technical training and specialist apprenticeships, which means there is no shortage of qualified staff in most areas, particularly the east and in the Ruhr. For specialist staff and senior management, it’s best to use an executive search agency.
Regulations for German company incorporation
Local businesses in Germany are heavily regulated, especially listed AG companies and whatever size of company, large and small, have to comply. Government bodies oversee banks and insurance offices while associations oversee and regulate most of the other industries.
It is wise to be careful with any issues relating to the company registration Germany by contacting a specialist firm who knows all the local advisers.
Financial incentives?
There are a wide range of financial incentive programs offered by the federal government, including loans and grants. Some areas of Germany offer capital investment grants of up to 50% to SMEs.
Local government incentives can also be given as beneficial tax rates but these are not generally available in the major cities. Germany has world-class international banking facilities.
Please note in most cases, a visit to Germany will be required as part of the German company incorporation process.