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.
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:
The most common type of partnerships in Germany include GbR (Gesellschaft bürgerlichen Rechts), oHG (Offene Handelsgesellschaft), KG (Kommanditgesellschaft) and GmbH & Co. KG. There is no form of share capital which is required for this form of entity. One partner’s liability is unlimited in this form of entity.
Corporations are registered companies that have the suffix GmbH (Gesellschaft mit beschränkter Haftung). In this form of company the minimum share capital is EUR 25,000. For this form of entity there has to be more than one partner. The partners of the company have limited liability. An individual would choose this type of entity for company registration in Germany as this is the most common type of structure utilised.
- Unternehmergesellschaft haftungsbeschränkt- Limited Liability Entrepreneurship Company
The minimum paid up capital for this form of entity is EUR 1. There is limited liability status for the founders of this type of organisation.
- Aktiengesellschaft- Stock Corporation
This form of entity is comparable to a large public company that has shareholders. The minimum capital subscription required is EUR 50,000. Such stocks can be traded in a stock market.
- Kommanditgesellschaft auf Aktien- Partnership Limited by Shares
There has to be two or more partners for starting this form of organisation. One of the partner’s liabilities is limited and one of the partners acts as a general partner. The liability of the general partner is unlimited. The minimum capital subscription required is EUR 50,000.
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 highspeed 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.
Eligibility Criteria for Company Registration in Germany
The following criterion has to be sufficed for Company Registration in Germany:
- Minimum Capital
For the company registration process in Germany, the type of structure would depend on the capital requirement. Usually an applicant would have to choose the structure based on the minimum capital required. The minimum capital required is EUR 25,000. However, there are some businesses which have only minimum capital of EUR 1.
- Business Structure
The applicant would have to choose the relevant business structure for company registration in Germany. For this the applicant would have to analyse the requirements of the above business and compare the same to other businesses.
The following procedure has to be considered for company registration in Germany:
- Choose the Business Structure
There are different business structures present in Germany. 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.
- Company Name
In the next step, the applicant has to choose an appropriate name for the company. The applicant would have to check in commercial register (Handelsregister) if the name of the company is already taken or not.
- Objects of the Business (Unternehmensgegenstand)
In the next step, the applicant would have to look in the commercial register for the objects of the business. Such objects have to be specifically mentioned in the application.
- Application to the German Chamber of Commerce (IHK)
After registering the objects of the business, the applicant would have to check in the German Chamber of Commerce to register the name and the objects. There is no fee required for carrying out this step. Also in this step, the applicant would have to check the notary for registering the company.
- Drafting Articles of Association
In the next step, the applicant would draft the articles of association of the company. For this the applicant can utilise the regular template version or the customised version. After this is carried out, the applicant would also have to get the documents required for the notary.
- Go to Notary
All concerned individuals would require going to the notary. However, the notary must have the conferred jurisdiction for carrying out the requirements for company registration. There are different notaries present in Germany. Hence the concerned notary must make a confirmation that the company exists. Company executives such as shareholders and managing directors must provide information. In case the individual is a managing director, then make sure that the individual has passports and requisite visas. Either a residence permit or visas would be required for the individual as the process would require multiple entry’s into Germany.
- 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. For the process of company registration in Germany the applicant would have to search a suitable bank.
- Deposit Capital in the Bank Account (Stammkapital)
After opening the bank account, the applicant would have to deposit the amount of capital that is required for the process of company formation. 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
The applicant would have to make the payment to the notary. You would also be required to make the payment of the Handelsregister invoice. This is required to be carried out by the applicant. 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. Registered Companies can also be viewed at www.unternehmensregister.de.
- Tax Implications
If you are a foreign company, then you would require to pay domestic tax in Germany. Along with this, international tax may be payable for specific transactions. In order to avoid hassles, you can consult a tax specialist. The tax advisor would first, help you ascertain the type of tax required to be paid by filing the Fragebogen zur steuerlichen Erfassung questionnaire. It is mandatory to get registered with the appropriate tax authority.
- Submission of Trade registration
In the next step, the applicant has to submit the trade registration to the trade office. The trade registration is also called as Gewerbeanmeldung. If the business is set up in centres such as Berlin, then English can be used as the language.
- Tax ID Number
After submitting the application, the applicant would get a tax ID from the tax office (Finanzamt). Such requirement has to be carried out in accordance with the requirements of the invoices.
- Secure Insurance
If the individual is a non-resident then securing insurance for the business as well as the employees would be crucial.
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 applicant in order to run the company seamlessly.
The following compliances are required for company registration in Germany:
- Annual Accounts- Shareholder meetings must be carried out at least one a year to decide on the annual accounts of the company.
- Board Meetings- Such would depend if it has been stated in the articles of association of the company.
- 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%.
- VAT Applicable is 19%.
- As per German Commercial Law, the company would require to file annual accounts with the German Federal Gazette (Bundesanzeiger). Annual financial statements have to be audited.
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.