Company Registration in Germany- An Overview
Germany is considered as the largest economic powerhouses in the European Union. Due to government support and initiatives for Small and Medium Enterprises (SMEs), there have been considerable developments in the German mainland. SMEs are also known by another name called as ‘Mittlestand’. The government offers different benefits and incentives for these enterprises to operate properly.
Government is supportive in Germany providing training for all businesses to carry out different forms of activities. SME’s in Germany are considered as the backbone for the economy. Company Registration in Germany is possible for entrepreneurs and investors as the economy offered is business friendly. The German passport is one of the strongest in the world. Hence investors would want to consider the process of Company Registration in Germany.
Benefits of Company Registration in Germany
The following are the benefits of company registration in Germany:
Germany is the world’s most transparent countries when it comes to carrying out business. Investors who go for the process of company registration in Germany find it quite straightforward to incorporate a company. Plus, there is lot of government support provided to different enterprises in Germany.
World class infrastructural facilities are offered in Germany. There is a state of the art telecommunications system present in Germany. Apart from this, there are high-speed transport facilities in the form of railways and other forms of infrastructure available in Germany.
- Less Corruption
Germany is considered as one of the least corrupted countries in the world. As per the Transparency Index of 2018, Germany is ranked in the top twenty countries in the world for less amount of corruption.
- No Exchange Controls for Foreign Investment
There is no form of exchange controls for foreign investment opportunities. Due to this, foreign firms and organisations are allowed to carry out investment in Germany.
Types of Business Structures for Company Registration in Germany
Before incorporating a company in Germany, it is crucial to first consider the type of business structure utilised for company registration. The following are the types of business structures present in Germany:
- GmbH- Limited Liability Company
This form of entity can be set up by minimum 1 investor with minimum share capital of 25,000 EUR. It may be noted here that the shares of the German GmbH cannot be transferred to the public nor can it be registered at the Stock Market. The director who is appointed through the general meeting of the shareholders takes all the day-to-day decisions.
- AG- German Joint Stock Company
This form of entity is suited for large businesses. It requires having a minimum share capital of 50,000 EUR. Articles of Association, verified by a court or notary, are essential to set up an AG. Once it enters into the commercial register, then only it becomes a legal entity. It only becomes a legal entity when it has been entered in the Commercial Register.
- German Limited Partnership
This is a type of partnership which provides for a limitation of liability by having two types of partners- the general partner- who has an unlimited liability extending to their personal assets, and the limited partner- whose liability extends only to their nominal holdings in the firm.
- Sole Trader
This form of entity can be easily formed as it only requires 1 individual.
- Branch Office
Branches are one of the popular methods of entering the German market by foreign investors. In every respect, branch office is dependent on the head office, which also is in charge of central administration.
Documents Required for Company Registration in Germany
The following documents are required for company registration in Germany:
- Application for registration;
- Notarized articles of association (AOA);
- A document showing the management board structure;
- A certificate showing that the share capital was deposited;
- Visas of Directors in case of foreign resident;
- Registered Office Address of the Business;
- Information on the Shareholders and Directors;
- Any other information as requested by the notary.
Procedure for Company Registration in Germany
The following procedure has to be considered for company registration in Germany:
- Choose the Business Structure
There are different business structures present in Germany as stated above. The appropriate business structure has to be first selected by the applicant. Usually, an applicant going for the GmbH entity would require to have EUR 25,000. However, there are other business structures in Germany which require lesser capital. So choose the business structure as per the business activity proposed to be carried out.
- Company Name
In the next step, the applicant has to choose an appropriate name for the company. It has to be checked in the commercial register (Handelsregister) if the name of the company is already taken or not. The name must be unique and should not infringe the name of an already registered business.
- Execute the Company deed
In the next step, the deed of the company formation is drafted and executed before a notary. The founders will be required to provide with AOA, IDs and specimen signatures.
- Corporate Bank Account
The notary in Germany has different forms of jurisdictions. Some notaries are very particular about the bank. Hence it is important to find a bank which is present in the list of accepted banks.
- Deposit Capital in the Bank Account (Stammkapital)
After opening the bank account, the amount of capital that is required for the process of company formation is deposited. The applicant can put the Stammkapital number for the reference. Once this is complete, the applicant for company registration in Germany will ensure that the deposit receipt is provided to the notary.
- Payment to the Notary
After that, payment shall be made to the notary. Also, payment of the Handelsregister invoice shall be executed. However, this step is not required if the notary has already carried out the step.
- Notary will notify the Applicant once the company is registered
Once the company is registered, then the notary would provide a notification. The company will be entered into the commercial register
- Obtain License/Permit
As per the type of business activity to be carried out, your business may require certain licenses/permit from the German authority. Without this, one cannot operate fully.
Compliances required for Company Registration in Germany
Setting up a business does not just stop at registering a company. There are different ongoing compliances which have to be followed by the company.
The following compliances are required for company registration in Germany:
- Annual Accounts- Shareholder meetings must be carried out at least once a year to decide on the annual accounts of the company. As per German Commercial Law, the company would require to file annual accounts with the German Federal Gazette (Bundesanzeiger).
- Board Meetings- Such would depend if it has been stated in the articles of association of the company.
- Open Bank account- Opening a bank account in Germany is one of the most crucial tasks that you have to undertake after Company Registration. Germany has one of the best international banking facilities in the world.
- Tax Returns- Tax Returns must be filed at least once a year with the competent tax authorities.
- Corporate Income Tax- All companies in Germany at taxed as corporate tax (Körperschaftsteuer) and Trade Tax (Gewerbesteuer) which is levied by the local municipalities on the company. Corporate Tax is charged at the rate of 15.825%.