A company registered in Germany enjoys significant prestige among European and American partners. Opening a business in this country immediately provides a kind of “quality mark” that helps attract more investors and consumers. Additionally, Germany ranks 17th globally in ease of doing business (according to Doing Business analysis).

This means that calculating taxes, submitting various declarations, and obtaining statements will be relatively straightforward, especially with assistance from authorities if needed. Germany offers numerous opportunities to save on payments and provides various bonuses. Germans, in this regard, have very promising prospects. For non-residents, however, the main challenge lies in the registration of the business.

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We present to you a step-by-step guide on how to open a legal entity in Germany, using the most popular form—GmbH (analogous to our limited liability company).

CONTENTS:

1. Basic Rules for Opening a GmbH
2. Step-by-Step Instructions for Creating a GmbH
3. Potential Problems When Opening a GmbH?

Basic Rules for Opening a GmbH in Germany

Opening a GmbH in Germany is possible even for individuals who do not reside or are not registered in the country. If you succeed in registering the enterprise, you can expect investment inflows from around the world. Also, note that you will gain many additional benefits since Germany is considered one of the most stable countries.

Taxes in Germany are quite high. However, there are no profit restrictions, and numerous countries have signed double taxation agreements with Germany.

GmbH (Gesellschaft mit beschränkter Haftung) is a company with limited liability. The requirements for its establishment are outlined in the Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbHG. You should consider some of its provisions regarding:

1. Company Name. It must be unique with the abbreviation GmbH at the end. The use of the words “state,” “people,” or city names is strictly prohibited.
2. Founders. They can be foreign citizens, Germans, or even legal entities.
3. Managers. Founders must appoint a manager (resident or non-resident) to run the company. The manager can be dismissed at the owners’ discretion and even without providing reasons. However, hiring or firing requires a labor contract to comply with German legislation.
4. Legal Form. GmbH implies limited personal liability for founders. The company itself is liable for debts, so the personal capital of owners does not suffer in unforeseen situations.

Now, more details on the procedure for creating a GmbH.

Step-by-Step Instructions for Creating a GmbH

The authorized capital for a German GmbH must be €25,000. Half of this amount must be deposited at the time of registration, and the remainder within a calendar year. To become a founder of the company, you need to:

• Prepare the Articles of Incorporation. It should specify the company’s objectives, its type of activity, and the size of the founders’ shares.
• Appoint a manager (director). Often, one of the shareholders becomes the manager. He/she signs an employment contract to start the business.
• Determine the authorized capital. Indicate the amount contributed at the time of signing the agreements. Each shareholder must contribute more than one-fourth of €25,000.
• Create a Vor-GmbH. This is done by a notary after signing the Articles of Incorporation. Shareholders certify it while paying the lawyer’s fees and tax to the Commercial Register. A certificate called Gründungsurkunde is then signed and issued by the notary. From the moment of signing and payment of fees, the company is considered organized as a Vor-GmbH. To become a full GmbH, information must be entered into the Commercial Register. The business can be conducted immediately after signing all documents.
• Register the GmbH in the Commercial Register. First, at least half of the authorized capital must be transferred to an already opened bank account. Then, complete the registration forms and have them signed by the manager (pre-notarized). The Commercial Register judge reviews all submitted documents, including the certification of the founding act, the contract with the manager, and the number of shareholders. The company is registered if the official has no objections to the completeness or accuracy of the documentation.

Finally, you will need to obtain a tax ID, which is very challenging for non-residents. Vor-GmbH is not a legal entity. It is represented by the manager (director), who can handle accounting and open a bank account. The company can conduct business if it is specified in the Articles of Incorporation.

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A Vor-GmbH can open a bank account and deposit the founders’ contributions (part of it). In case of debts, the founders are liable with their own money (including property).

Potential Problems When Opening a GmbH

If you are a German citizen, you should not face any problems when opening a GmbH. Non-residents, however, often experience difficulties with opening a bank account and registering the company in the Commercial Register.

To avoid wasting time, nerves, and money, there are two solutions:

• Open a legal entity in Germany and make a German citizen one of the founders;
• Purchase a ready-made company in Germany.

We recommend choosing the second option. Our company offers an extensive list of already registered and operating companies. Most of them already have a bank account. You will only need to re-register the documents in your name and continue your business.

Call our managers today, and they will be happy to answer all your questions.