Company registration in Germany

General information

Germany, as the strongest economy on the continent, offers unique opportunities for entrepreneurs.

In this article, you’ll learn how to establish a company in Germany and why it’s worth doing so. The process of registering a company is simpler than you might think, and the benefits of running a business in Germany are significant. Find out for whom a company in Germany would be a good solution.

Explore the world of German business and discover how to effectively grow your company in this stable and developed market.

Company registration in Germany: Why is it worth starting a company in Germany?

Germany is a member state of the European Union and a federal country composed of 16 federal states, known as Länder. Its strong economy and established position on the international stage make it a market considered safe for business development. How can you establish a GmbH (limited liability company) in Germany, and is it worth doing so?

Company registration in Germany: An overview

A GmbH, or Gesellschaft mit beschränkter Haftung, is the German equivalent of the Polish limited liability company (spółka z ograniczoną odpowiedzialnością). It is a capital company in which the liability of the shareholders is limited to the amount of its assets. It’s important to note that there are also other legal forms available on the German market.

Types of Companies in Germany:

• GmbH – limited liability company;
• AG – joint-stock company;
• KGaA – limited partnership with shares;
• KG – limited partnership;
• GbR – civil law partnership;
• OHG – general partnership;
• Partnerschaft – professional partnership.

Starting a company in Germany: Different paths

Establishing a company in Germany is one option, but there is also the possibility of starting a sole proprietorship, known as Gewerbe. Running this type of business is very similar to how it’s regulated in Poland.

Company registration in Germany: How to establish a GmbH (Limited Liability Company) in Germany?

With the creation of a GmbH, a legal entity is formed. This entity has its own rights and obligations, independent of its shareholders. A GmbH in Germany can sue and be sued. Furthermore, the company can own real estate and possess assets that are separate from those of its shareholders.

A GmbH in Germany can be established by a single person, resulting in what is known as a single-member limited liability company.

Company registration in Germany: A popular choice among foreigners

The GmbH is a popular form of business entity chosen by foreigners in Germany, including Poles. They can establish a new company or participate in an existing one as a member of the management board. Establishing a company in Germany offers many opportunities for business development in a stable market, as well as the potential for global expansion.

Company registration in Germany: GmbH company and shareholders’ liability

A GmbH is responsible for its obligations with all of its assets. The legal form of the entity indicates that the liability of its shareholders is limited. In the event of financial difficulties, such as a lack of liquidity, the shareholders are only liable up to the amount of their contributions. A GmbH in Germany guarantees that claims will not affect the private assets of the shareholders.

In practice, this means that once shareholders have contributed the amounts specified in the company agreement, they are not required to contribute additional personal funds in the event of the company’s insolvency. However, if they have not yet fulfilled their contribution obligations, they are only liable for the difference between the amount they agreed to contribute and the amount they have actually paid.

Company registration in Germany: GmbH Contract

For an open trading company (OHG) or a limited partnership (KG), there is no requirement for a written agreement to establish the company. However, setting up a GmbH (limited liability company) requires a visit to a notary.

To establish a GmbH in Germany, the following details must be included in the company agreement:

• Company name;
• Scope of business activities – listing the areas of operation;
• Company’s registered office;
• Amount of share capital;
• Amount of each shareholder’s contribution towards the share capital.

Company agreement for GmbH: Additional obligations and suspension of operations

The company agreement should also include any obligations of the shareholders to provide other contributions to the enterprise. Additionally, any suspension of business operations for a specified period requires a written form and an amendment to the agreement.

Company registration in Germany. GmbH and the minimum share capital requirement

Establishing a company in Germany not only involves providing specific information regarding the company name and registered office but also requires the contribution of share capital. The minimum statutory share capital that a GmbH in Germany must have is €25,000. The nominal value of the shares must be expressed in full amounts in euros. A single shareholder may hold more than one share.

Company registration in Germany. Types of contributions

According to German law, share capital can be contributed in either cash or non-cash (in-kind) form. Financial resources to cover the share capital of the company must be paid in at least one-quarter of the value of the contributions before the company is registered in the commercial register, but the amount must be no less than half of the statutory share capital, i.e., €12,500.

Shareholders are liable for any discrepancies related to these amounts, but only up to the value of their contributions.

Practical aspects of establishing a company in Germany

In practice, the establishment of a company in Germany occurs when the business bank account is opened, giving shareholders access to it. To prove the contribution of share capital, a bank statement can be submitted to the commercial court.

Company registration in Germany. Types of non-cash contributions

The second type of contribution is non-cash, which can include:

• Real estate;
• Movable property;
• Licenses;
• Software;
• Other assets.

Company registration in Germany. Requirements for Non-Cash contributions

There are two key conditions that must be met when making non-cash contributions. First, the contribution must always be made in full. Second, the value of the non-cash contribution must be documented in a report on the use of non-cash contributions during the establishment of the company.

If used items are contributed as part of the capital, the district court requires an expert’s appraisal to confirm the stated value of the contribution. For this reason, establishing a company in Germany is much simpler when contributions are made in cash, as it involves fewer complications.

When only part of the share capital consists of non-cash contributions, the rules for covering the share capital with cash and non-cash contributions converge. If you want to ensure that your GmbH has correctly made the required contributions, please contact us.

Company registration in Germany: Name and scope of business activities

The name of the company can be derived from the founders’ names, the business objectives, or any other word or combination of words. The regulator always requires that the company name be distinguishable from existing entities on the market. This is to prevent any attempts to impersonate well-known and recognizable brands.

Additionally, the company name must specify the legal form of the entity. The most commonly used abbreviation is GmbH, which stands for Gesellschaft mit beschränkter Haftung. An example of a company name could be “Diamant GmbH.”

Company registration in Germany: Naming restrictions and management

The name of a GmbH company in Germany cannot contain elements that could mislead others regarding the economic relationships relevant to the type of business being described.

It is not uncommon for entrepreneurs to consult the company’s name with the appropriate Chamber of Commerce or Industry. This helps verify whether a similar designation is already in use within the local town or municipality.

Company registration in Germany. Management

Shareholders appoint the company’s management board, which can include foreign nationals. A non-German member of the management board, if the business is primarily conducted from German territory, must have a permanent residence permit or a work permit.

Company registration in Germany: Board responsibilities and legal procedures

The management board represents the company in external relations. All board members are required to provide a written statement affirming that no circumstances exist that would prevent their appointment, such as a ban on conducting business or criminal acts committed in connection with insolvency. Additionally, members confirm that they have been informed about their unlimited obligation to provide information to the court.

Company registration in Germany – Notarial certification and registration

A GmbH in Germany cannot be established without a notarial deed. This formalizes the moment of the company’s establishment. The notary certifies the company’s creation and submits the application for the company’s entry into the commercial register. To prepare the company agreement and application, the assistance of a notary or lawyer is advisable, as it helps avoid errors.

Company registration in Germany: Notarial application and court registration

The notary sends the application to the district court, supplemented with the annexes specified in Article 8 of the GmbH Act (GmbH-Gesetz). If there are any doubts, the court may request an opinion from the relevant Chamber of Commerce or Industry. The court informs the applicant, either directly or through the notary, of any deficiencies or inconsistencies. Entrepreneurs are also given the opportunity to appeal.

If there are no reasons preventing the establishment of the company, the registration in the commercial register is completed. From this moment, the company legally exists and can change its status from “in formation” to an established GmbH.

It is important to note that before this registration is obtained, the regulations concerning a limited liability company only apply partially. In such a situation, there is no limitation of liability as in a fully formalized GmbH.

How to establish a company in Germany: Business registration process

The process of establishing a company typically takes about three to four weeks from the time the notary sends the documents to the district court. This period may be extended if issues requiring clarification arise during the proceedings. If the submitted information is complete, the competent court finalizes the registration within the expected timeframe.

Company registration in Germany: Registration obligations and business correspondence

It should be emphasized that a GmbH is subject to registration obligations like any other newly established business. This means that after the entry in the commercial register, the business registration is forwarded to the appropriate office.

The official forms used are enhanced with copies for subsequent registration stages, such as recording in the relevant professional association or with the tax office, which streamlines the entire process.

GmbH in Germany – Business correspondence requirements

The business correspondence of a GmbH, even in the form of emails or faxes, must include specific information. This includes the company name, legal form, registered office, the registration court of the company’s headquarters, the number under which it is registered, as well as information about all members of the management board, including their first and last names.

If the company has appointed a supervisory board, the first and last names of its members must also be listed.

Establishing companies in Germany

Germany, as our western neighbor, boasts the strongest economy on the Old Continent. The opportunities for development and expansion for a company in Germany are much greater than those available to entities in other countries. Germany is a respected trading partner on the international stage.

At the same time, Germany is known for its support of domestic entrepreneurs and the promotion of their businesses abroad. Developing a business in such a large market is a real challenge, but the benefits are numerous.

Company registration in Germany – FAQs

Thanks to the principle of economic freedom in Germany, anyone can start a business there. Establishing a company is not complicated, and the rules for registering and operating companies are similar to those in Poland.

Key decisions before establishing a company in Germany

Before establishing a company, each founder should make decisions on the following matters:

• Where the company will have its registered office
• What the company’s name will be
• What the company’s business activities will involve
• What the share capital will be and who will contribute to it, and in what proportions
• Who will manage the company and what their authority to represent the company will be

These points are required components of the company’s articles of association.

Company registration in Germany – the procedure

1. Drafting a Notarized Company Agreement
   • The company agreement must be notarized.
2. Depositing the Share Capital
   • The share capital must be deposited into the company’s bank account.
3. Filing the Company Registration
   • The company must be registered using the appropriate form (Gewerbeanzeige – Verordnung) at the local Office of Economic Affairs (Gewerbeamt) or the Regulatory Office (Ordnungsamt). For partnerships and corporations, the business must be entered into the Commercial Register (Handelsregister) at the District Court (Amtsgericht).
   • The Office of Economic Affairs is responsible for notifying the Tax Office (Finanzamt), the Professional Insurance Association (Berufsgenossenschaft), the Industrial Inspection Office, and the Chamber of Industry and Commerce or the Chamber of Crafts about the company’s registration.
   • Every business in Germany is required to belong to one of the above-mentioned chambers and to pay membership fees.
4. Permission to Operate
   • Acceptance of the business registration by the Office of Economic Affairs does not authorize the commencement of business operations. A permit, such as obtaining a Crafts Card (Handwerkskarte) or registration in the crafts register, is necessary.
   • Any licenses or permits must be obtained before registration with the Office of Economic Affairs.

Company registration in Germany: Registered office

• The company must have a registered address, with mail and phone forwarding services. It is also possible to have a physical office (prices vary based on needs).

Company registration in Germany: Share capital

• The minimum share capital is €25,000, of which at least 50% must be deposited into the company’s bank account during registration. This does not apply to a simplified GmbH, where the share capital is €1, but this requires allocating ¼ of annual profits to the capital until it reaches the minimum of €25,000.

Company registration in Germany: Shareholders

• There are no restrictions on the number of shareholders, but the company must have at least one shareholder. Foreign shareholders are permitted, but they must be reported if they hold more than 25% of the share capital.

Company registration in Germany: Timeline

• The company is typically established within 4 to 5 weeks from the submission of documents.

Company registration in Germany: Directors

• A supervisory board is mandatory only if the company employs more than 500 people. In other cases, shareholders have the freedom to appoint a supervisory board and define its functions, the number and qualifications of members, and the term of office in the company’s articles of association.

Company registration in Germany: Management

The company can have one or more managers. Board members do not need to be shareholders. Managers are elected by a resolution of the shareholders unless otherwise stated by the company agreement or law. The board members are authorized to represent the company externally.

Company registration in Germany. Taxes and finances

Company registration in Germany. Tax residency of the company

A business is considered a tax resident of Germany if it is registered in Germany or if it is managed and controlled from within the country. Companies pay income taxes on earnings derived both domestically and internationally.

Non-residents pay taxes only on income earned within Germany. This tax applies to business revenues, passive income, and capital gains.

Company registration in Germany. Corporate Income Tax (CIT) Rate

The base national CIT rate is 15%. In addition, there is a regional tax rate ranging from 14% to 17%, and a solidarity surcharge of 5.5% applied to the tax.

Thus, the final CIT rate ranges between 30% and 33%. Business-related expenses are deductible. Depreciation of movable fixed assets and intangible assets is calculated using the straight-line method.

Losses can be carried forward indefinitely and can be offset up to one year back. Losses can be offset without limit up to one million euros of profit; above this amount, they can be deducted only from 60% of profits (for carry-back, the maximum is one million euros).

Company registration in Germany. Double taxation

Germany is a party to many treaties that provide relief from double taxation for businesses.

Company registration in Germany. Anti-tax avoidance

Germany has implemented transfer pricing regulations, largely following the recommendations issued by the OECD. While there are no specific thin capitalization rules, there are regulations limiting interest deductions.

Passive income from companies resident in low-tax jurisdictions (tax rate less than 25%) or those without income tax is attributed to the German parent company if it holds at least 50% of the subsidiary’s shares, directly or indirectly.

International enterprises must prepare a country-by-country report on their activities in line with OECD guidelines.

Company registration in Germany. Accounting

The fiscal year lasts 12 months and may be shorter if it aligns with the calendar year. Tax returns must be filed electronically by May 31 of the following year.

Income tax prepayments are made quarterly in arrears. Consolidated financial statements are permissible, but each company must also submit its own separate financial statements. To qualify for consolidation, the parent company must hold at least 50% of the votes in the subsidiary.

Entities must establish a profit and loss-sharing agreement, which must remain in effect for at least five consecutive years (unless there are valid reasons for early termination). The statute of limitations is four years.

This period can be extended to five years in cases of negligence or fraud, and up to 10 years in cases of tax evasion. The statute of limitations begins at the end of the year in which the tax liability arose.

Company registration in Germany. Withholding taxes

• Dividends – The standard rate is 25% (26.375% including the solidarity surcharge), unless a tax treaty reduces it. Non-residents can apply for a 40% refund of the payment.
• Interest is generally not taxed, except in certain cases where the rate is 25% (26.375% including the solidarity surcharge), unless EU rules or tax treaties reduce it.
• Royalties paid to non-residents are taxed at a rate of 15% (15.825% including the solidarity surcharge), unless EU rules or tax treaties reduce it.

Company registration in Germany. Value Added Tax (VAT)

The standard VAT rate is 19% (reduced rates are 7% and 0%). All businesses are required to register for VAT. However, if the turnover in the previous year did not exceed €17,500 and is not expected to exceed €50,000 in the current year, the entrepreneur may be exempt from this obligation.

VAT returns and payments must be made electronically each quarter by the 10th day of the first month following the quarter. If the monthly VAT in the previous tax year exceeded €7,500, the entrepreneur is required to file returns monthly.

Company registration in Germany. Other taxes

• Property Tax is imposed by local authorities and is 0.35% of the property’s value, multiplied by the municipal coefficient. The rate depends on the state in which the property is located and ranges from 3.5% to 6.5% of the sale price or property value.
• Customs Duties are imposed on products originating outside the EU. Excise duties are levied on tobacco, alcohol, and alcoholic beverages (except wine), coffee, mineral oils, gas, coal, nuclear fuel, and electricity.
• Motor Vehicle Tax – The amount depends on the type of vehicle, weight, emissions, fuel type, and engine capacity.

Company registration in Germany – Local labor law

Company registration in Germany. Employee rights

Workplace regulations and conditions are governed by agreements with employees, collective labor agreements, or company agreements, as well as applicable laws.

Written employment contracts are not required, except in certain cases (e.g., fixed-term contracts, internships). However, many collective agreements require written contracts, so they are generally prepared in this form. At a minimum, employers must provide employees with a document containing essential information about their contract within one month of starting work.

Company agreements are written contracts between the employer and the works council, covering aspects such as contracts (preparation, content, and termination of employment contracts) or work-related issues (e.g., working hours, number of vacation days, pension systems). These agreements are binding on both the employer and employees (except for those in management positions).

If the individual employment contract contains more favorable conditions, those will apply. Company agreements do not cover wages or other employee matters regulated by collective agreements unless such provisions are advantageous to employees or allowed under collective agreements.

Collective labor agreements apply to all employers who are members of an employer association and to the benefit of all union members. Provisions binding on the employer also apply to employees who are not union members.

Non-binding provisions can be included in individual employment contracts. The government may decide to make certain provisions of an agreement universally applicable. Managers are usually not covered by collective agreements.

Labor law is not codified in a single comprehensive labor code. The main aspects of employment contracts are regulated by the Civil Code.

Company registration in Germany. Working Hours

Working hours are regulated by law. The standard workday is 8 hours, which can be extended to 10 hours if the average over six months or 24 weeks does not exceed 8 hours per day. Exceptions apply to senior executives and certain sectors such as healthcare, transportation, restaurants, and agriculture. Shift work is permitted, but there must be a minimum 11-hour break between shifts.

Overtime is generally compensated with a 25% surcharge, which can be higher. Employers can choose between higher overtime pay or additional time off. The minimum paid vacation for full-time employees is 24 days, though it is usually 25-30 days. All details regarding working hours are regulated by collective and company agreements.

Company registration in Germany. Wages

As of January 1, 2017, the minimum wage is €8.84 per hour. The law covers all employees, both German citizens and foreign nationals, and all employers regardless of location. The minimum wage does not apply to interns or during the first six months of employment for those who were previously long-term unemployed.

Company registration in Germany. Social Insurance

• Health Insurance: All residents of Germany must have health insurance. Employees with annual earnings up to €57,600 gross must be included in the public health insurance sector. Contributions amount to 14.6% of the monthly gross salary, shared equally between the employee and employer (7.3% each). Public insurers may charge additional monthly contributions, which are borne by the employee (up to 1.7% of gross monthly salary). Employees earning more than €57,600 gross annually can choose between public and private insurance. These employees may apply for a subsidy from the employer for health insurance, equivalent to 7.3% in the public sector or half of the private insurance premiums, up to a maximum of €317.55 per month.
• Nursing Care Insurance: For employees with children insured in the public sector, monthly contributions amount to 2.55% of the monthly gross salary (up to €4,350 per month). Employers and employees share the contributions equally (except in Saxony, where employees pay 1.775% and employers 0.775%).
• Accident Insurance: Accident insurance covers employees for work-related accidents or occupational diseases. It is fully paid by the employer based on the gross salary. The contribution is typically around 2% of the monthly gross salary but may vary depending on the industry sector and the risk category assigned to the business.
• Unemployment Insurance: All employees pay 3% of their monthly gross salary up to a salary of €6,350. Contributions are equally divided between the employer and the employee.
• Pension Insurance: The statutory pension contribution rate is 18.7% of the monthly gross salary up to a salary of €6,350, shared equally between the employer and the employee.

Company registration in Germany. Termination of Employment:

Employees in companies in Germany with more than 10 employees (excluding interns) cannot be dismissed without a specific reason. Notice periods vary depending on the length of employment.

During the probationary period of up to 6 months, dismissal with two weeks’ notice without a specific reason is possible. In other cases, the minimum notice period is four weeks, either by the 15th of the month or the end of the month. This period can be extended.

Members of the works council can only be dismissed under specific circumstances. Women cannot be dismissed during pregnancy or within 4 months after giving birth. Employers must inform the works council of planned dismissals.

The rules for companies with fewer than 10 employees are less stringent.

Company registration in Germany – other information