Company registration in Germany

We explain how to register a company in Germany and which legal aspects have to be considered when making business in Germany. Furthermore, you will find links and information about our öegal services to register a company and how our tax advisors ca help you regarding accounting and tax declarations including VAT. 

 

 

 

Which legal steps should and partly have to be taken will be worked out in the following:

Company types in Germany

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.

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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. More information can be found on our page about 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) here.

e) Ready made shelf companies (GmbH)

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.

We have also ready to operate shelf companies in form of a GmbH. This might be an option if you wish to start quickly. these companies are registered, the share capital has been deposited and they already have a bank account. Together with the purchase of the company you can appoint a new managing director, change the company name and the business purpose. Here more details about the purchase of a ready to operate GmbH shelf company.

 

Requirements for a company name

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. 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.

Basically you can almost freely choose the legal name for your company. However you have to be aware of the following requirements:

1. First of all the name has to be kind of unique on reasons to obviously warrant the discriminability the name from others.

That particularly means as far as there is already a company with the same or almost the same name within the district of your companies address you have to look for another name (or even address). You can personalize your company’s name if you choose a name referring to a particular person (yourself or another shareholder), item or place or you choose any kind of fantasy name.

2. Furthermore the name is not allowed to obviously mislead others regarding its shareholders or business purpose.

So for example you could not choose the name: X-Trading GmbH - if the company solely offers consulting services but no trading at all.

3. Eventually the company always has to carry its official abbreviation of its legal form.

With this abbreviation others could recognize the conditions on the kind of the liability of the company.

4. Besides you also should consider that your chosen name does not collide with any trademarks. We therefore recommend to check if there are any colliding trademarks, firms or domains.

 

Check for company name 

We can check if your fovourite company name is still available and also register your company name as a trademark in Germany and/or the whole EU.

Check our online form for trademark registration in Germany or trademark and company name search in Germany here. And here is our form for trademark registration in the EU.

Registration proceeding for companies

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.

Special permit for company registration

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.

Insurances

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

Taxation of individuals and companies like GmbH in Germany

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 with their personal income tax rate.

In contrast, a corporation (esp. GmbH or UG (haftungsbeschränkt)) is itself subject to taxation with its profits as a legal entity. The tax burden is approximately 31%.

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)

 

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
Liesegang & Partner mbB, Rechtsanwälte