What are the steps to set up a GmbH in Germany?

1. Choose a Company Name: Your company name must be unique and adhere to German naming conventions. 2. Draft Articles of Association: This document outlines the company’s purpose, share capital, and management structure. It must be notarized in Germany. 3. Register with the Commercial Register: Submit your notarized articles, proof of share capital deposit, and other required documents to the local Commercial Register. 4. Obtain a Tax Number: After registration, you'll need to obtain a tax number from the local tax office.

How to Set Up a Limited Liability Corporation in Germany

A limited liability corporation (LLC) in Germany offers various advantages for businesses. To get started, you need to choose the right legal form that fits your needs, such as GmbH or UG. It´s also important to select a suitable company name and clearly define your business objectives.

You can see the steps here:

Contents

1 What is a limited liability corporation?
- 1.1 Advantages of a LLC in Germany
- 1.2 Differences between LLCs and other business entities
2 GmbH vs. UG
3 The name of your LLC
4 Do you need help with your LLC in Germany?
5 Purpose and objectives of your LLC
6 Documentation
- 6.1 Company statutes and shareholder list
- 6.2 Bank account
7 The appointment with the notary
8 Register with the local Gewerbeamt
9 FREQUENTLY ASKED QUESTIONS
10 More questions?

What is a limited liability corporation?

A limited liability corporation, or LLC, is a legal structure that merges features of a partnership or sole proprietorship with the liability protection of a corporation. This type of business entity offers owners, referred to as members, personal liability protection, which means their personal assets are shielded from the company’s debts.

In Germany, the two most common forms of limited liability corporations are:

Gesellschaft mit beschränkter Haftung (GmbH)
Unternehmergesellschaft (haftungsbeschränkt) (UG).

Advantages of a LLC in Germany

The advantages include:

Limited Liability: The personal assets of LLC members are typically safeguarded from business-related liabilities.
Flexibility in Ownership: LLCs allow for multiple owners with different ownership percentages.
Legal Status and Credibility: Establishing an LLC provides a recognized legal status, which can enhance credibility and facilitate business relationships.

Differences between LLCs and other business entities

Some key differences include:

Liability Protection: LLCs offer limited liability protection for members, whereas sole proprietorships and partnerships do not provide it.
Ownership Structure: LLCs allow for multiple owners with flexible ownership percentages, in contrast to sole proprietorships and partnerships, which typically have a single owner or multiple partners with equal ownership.
Legal Formalities: LLCs involve certain legal formalities. Sole proprietorships and partnerships have fewer requirements.

GmbH vs. UG

As noted above, there are two options for establishing an LLC in Germany: the UG and the GmbH. Choosing between them depends on the specific requirements of your business.

It is important to mention that a GmbH is a prestigious business structure, which inspires confidence when presenting it to third parties.

Both GmbH and UG have different minimum capital requirements. A GmbH requires a minimum of €12,500, whereas UG only requires €1.

The minimum capital is important, but it’s also worth considering the long-term financial needs of your business. Additional capital can help you manage unexpected costs, support future growth, and strengthen the financial foundation of your company.

The name of your LLC

Germany has specific naming conventions that must be followed when selecting a name for your LLC. These restrictions aim to prevent confusion among companies and protect consumers from misleading information. Some key naming conventions in Germany include:

The name must include a legal form identifier, such as ‘GmbH’ or ‘UG.’
It must not include any offensive or illegal terms.
Using personal names as part of the company name may require additional documentation.

Do you need help with your LLC in Germany?

CONTACT

Purpose and objectives of your LLC

Under German law, the purpose of your LLC must be specific, clearly outlining the activities and goals your company aims to achieve.

It involves a thorough examination and identification of the services or products your company provide. Precision and detail are required when describing your business activities, as well as clearly outlining the unique value proposition that differentiates your company from others in the market.

Documentation

The following sections outline the specific documents you must prepare:

Company statutes and shareholder list

The company statutes serve as the primary document for your LLC. These articles of incorporation define important aspects such as company structure, distribution of shares, decision-making processes, and management procedures.

As part of the notary appointment, you must also present a comprehensive shareholder list. It outlines the individuals or entities who hold shares or ownership in the LLC. Include accurate details of each shareholder, such as full names, addresses, and the number or percentage of shares held. The list establishes the initial ownership structure of the company.

Bank account

Once you have determined the legal form of your LLC, such as GmbH or UG, it is necessary to research and identify banks in Germany that accept limited liability corporations.

The bank will require the company´s founding documents. These documents typically include a certified copy of the company statutes, the notary’s confirmation of the establishment, and other identity verification papers for the shareholders.

Here are the key aspects to consider:

Availability: Check if the bank offers business accounts to LLCs and if they have any specific eligibility criteria.
Services and Features: Evaluate the range of services provided, such as online banking, mobile banking, international transactions, and merchant services, to ensure they align with your business requirements.
Fees and Charges: Compare the account fees, transaction charges, and other associated costs across different banks to make an informed decision.
Customer Support: Assess the quality of customer support provided by the bank, including availability, responsiveness, and reliability.

The appointment with the notary

To establish your LLC in Germany, the necessary steps must be completed with a notary to ensure legal formation and proper documentation.

All shareholders must be present at the appointment and bring their IDs or passports. This includes individuals who hold shares in the company and have a vested interest in its success.

Once all the shareholders are present and identification is verified, the notary will proceed with the process. This involves reviewing and authenticating the company’s statutes, which outline the internal rules and regulations that govern the LLC.

Register with the local Gewerbeamt

The next step in setting up your corporation is the register with the local Gewerbeamt, also known as the Office of Trade. This registration ensures that your LLC is properly recognized and compliant with tax obligations.

This includes the determination of the applicable tax obligations and the register with the appropriate tax authorities. To ensure compliance, it is advisable to consult with a tax professional or accountant who can guide you through the process. They can assist in determining the specific tax requirements related to your LLC’s activities, such as value-added tax (VAT), corporate income tax, and trade tax.

FREQUENTLY ASKED QUESTIONS

What is a Limited Liability Corporation in Germany?

In Germany, a Limited Liability Corporation is known as a Gesellschaft mit beschränkter Haftung (GmbH). It’s a popular business structure that provides its owners limited liability protection, meaning shareholders’ personal assets are protected from business debts and liabilities.

What are the steps to set up a GmbH in Germany?

1. Choose a Company Name: Your company name must be unique and adhere to German naming conventions.
2. Draft Articles of Association: This document outlines the company’s purpose, share capital, and management structure. It must be notarized in Germany.
3. Register with the Commercial Register: Submit your notarized articles, proof of share capital deposit, and other required documents to the local Commercial Register.
4. Obtain a Tax Number: After registration, you’ll need to obtain a tax number from the local tax office.

How much capital is needed to form a GmbH in Germany?

The minimum share capital required to form a GmbH is €25,000. At least half of this amount (€12,500) must be deposited before registration with the Commercial Register.

What are the management requirements for a GmbH?

A GmbH must have at least one managing director (Geschäftsführer), who is responsible for the company’s day-to-day operations. The managing director can be a shareholder but does not have to be.

How long does it take to set up a GmbH in Germany?

The entire process can take from several weeks to a few months, depending on various factors such as the completeness of the documents submitted and the workload of the Commercial Register.

What are the tax implications for a GmbH in Germany?

A GmbH is subject to corporate income tax, solidarity surcharge, and trade tax. The effective corporate tax rate, including solidarity surcharge and trade tax, is approximately 30%. Dividends distributed to shareholders are also subject to capital gains tax.

Do I need a German bank account to set up a GmbH?

Yes, you’ll need a German bank account to deposit the share capital. This account must be set up before registering your GmbH as you’ll need to provide proof of the deposit.

Can I set up a GmbH remotely?

While much of the process can be completed remotely, certain steps, like notarizing the Articles of Association, typically require your presence in Germany. However, appointing a legal representative in Germany can allow you to handle most steps remotely.

Where can I get assistance with setting up a GmbH in Germany?

It’s advisable to seek help from professionals experienced in German corporate law, such as tax advisors, lawyers, or consultancy firms specializing in company formation. They can guide you through the process, ensuring compliance with German regulations.

For more detailed guidance on establishing your business in Germany or for assistance tailored to your specific situation, consider consulting with a professional advisor. Our expertise in German tax law and company formation can provide you with the support you need to navigate the process efficiently.