Business Formation

Start your business life in Germany
April 26, 2017
Business Plan Development
November 17, 2018

According to German law, any person regardless of his nationality or place of residence can form a company/business in Germany for him/herself.  There is no particular law in Germany such as any minimum investment capital or the existence of a German shareholder in the company as the requirement for starting a business in Germany.

All international investors can choose among  different legal company forms in accordance to their business needs in Germany. From limited companies to partnership or branch offices are available in Germany. Anyways, there are clear steps for forming different types of company and we try here to explain them to you.

Wise Business Group can help you choose the best format for your business. Considering all your goals combined, such as your initial investment, number and nature of shareholders, the type and size of business, the liabilities of different shareholders, taxation and most importantly the city’s criteria for granting the residency to the investor the best business format should be selected.

There are even other types of business than companies which will be explained in this section.  The initial structure of all legal forms have been mentioned in the German law and there is no different condition for local and foreign investors.

Three main different legal forms in Germany are:

  1. companies with limited liabilities
  2. join stock company/public limited company/ corporation
  3. general partnership
  4. limited partnership
  5. limited partnership with a limited liability company as a partner
  6. entrepreneurial company
  7. branch

We hereby explain briefly each of them:

1. Gesellschaft mit beschränkter Haftung; Limited liability company;  GmbH is the most pervasive type of company format in Germany. The share capital of this type of company is 25,000 € which could be paid in half at time of foundation. The shareholders are not personally liable for the company’s debt except for the amount of the share capital. Other than that this is the GmbH which is responsible for the company’s debts.

the company shares cannot be quoted on stock exchanged but could be transferred through notary. The foundation also should be notarized as a contract between the company and its shareholders. In order for your company to legally exist, it needs to be entered in the commercial register which will normally done after the notary approves the deposit of the share capital in the company’s business account.

GmbH can have only one or more owners who could also proceed as the managing director. It can also have more than one managing director. The company name should have relevance either with the business purpose or the name of shareholders.

2.  Joint Stock Company (Aktiengesellschaft; AG) This type of company needs at least 50,000 share capital which again can be also paid in half at the time of registration and operate with only one shareholder. The difference is that the shares should be listed on the stock exchange. The company contract should be also notarized, and the name will usually be derived from the company purpose.

The biggest difference between AG and GmbH is the existence of the board of directors authorized to make operational decision in AG companies.

3. Offene Handelsgesellschaft (OHG) General partnerhsip: In the last two legal formats, the company was the main liable entity, however, in this format this is the shareholders (in this case partners) who have the unlimited liability. Depending on the content of the article of partnership, each partner is individually active in the operation of the business. This article / Gesellschaftsvertrag will usually allow decisions by the vote majority.

4. Kommanditgesellschaft (KG) Limited partnership is like OHG except it can have the combination of the both limited and unlimited liability on behalf of the partners. It actually consists of two parties, general partner like OHG with unlimited  liability on its partner and limited partner whose liability  is confined to the nominal capital in the company.

5. GmbH & Co. KG: as obvious form its name, it is the combination of GmbH and KG in which the GmbH is the general partner of KG in which the partner has also personal limited liability.

6. UG / Unternehmensgesellschaft or Mini-GmbH: It is exactly like GmbH except you can start your business with no nominal share capital and equivalent to the private limited company in UK. So like GmbH the liability of the shareholders is also limited.

7. Zweigniederlassung or branch office which could be dependent or independent based on the scope of operation and the registration in different authorities in Germany.

Again it should be noted that for starting a business with establishing a company, it is very important to discover the purpose of this act. In addition, when the residency should come a long too, some types of legal entities will never be suggested.

For a better analysis, we suggest that you participate in our initial free strategy session in which we delve more into your business and living goals in Germany and accordingly offer you the most optimum strategy.

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