Establishing a company of any sort in Germany is generally a process quite strict but easy to comprehend and perform, since it is based on certain formal procedures.
OIKONOMAKIS CHRISTOS GLOBAL LAW FIRM is here to assist you with all the required paraphernalia, not only by preparing all relevant documentation, but mainly by proceeding with all necessary steps in order to have any such company formed within ten to fourteen days’ time. The relevant procedures and regulations read as follows:
Corporate tax is on average at 31%; This is not something exceptional in terms of taxation in relation to other jurisdictions while it includes three sorts of taxes: a. A corporate income tax of 15%, b. A solidarity tax of 0.825% and c. A regional trade tax which varies between 14-17.15% and which is not deductible. The VAT rate for goods and services is 19%, however it needs to be noted that in terms of EU, the aforementioned VAT is non-existent (in other words it amounts to 0%). On the other hand, and if not within the framework of EU, such tax i.e. The aforementioned VAT may be claimed back by business companies.
Moving further along, it has to be pinpointed the fact that Federal Republic of Germany is Europe’s leading economy, what we usually coin as Europe’s powerhouse, thus the corporate climate of Germany is quite alluring. Among other factors to be considered accordingly are the availability of exceptional human workforce able to handle and operate advanced tools and equipment given that the infrastructure upon which the German wonder has always been based on the latest and most updated technology. Both EU and non-EU nationals are eager to invest and generally work in Germany even by launching their own personal company, a procedure which, in addition, may allow them to acquire under certain circumstances German residency via the German business immigration process. If we were to narrow down the reasons one should consider the formation of a company in Germany, then the following would most probably have to be highlighted:
• Germany being in the core of the EU
• Germany being the leading economy in Europe and not just in the EU
• Germany being the 4th largest economy on a global scale
• Germany being the 3rd largest exporter on a global scale
• Skilled manpower
• Latest and most updated infrastructure
• Homeland of high caliber universal brands such as Volkswagen, Siemens, Allianz, Bayer, to name only a minimun few
• 0% VAT for businesses within the EU
Types of business entities according to German Law
UG, i.e. The “Unternehmergesellschaft”: it equals to the entity known in the continental law as Private Company, thus it can be established by someone “investing” only 1, 00€ as capital. This happens to be a very flexible thus very popular company formation among people who wish to get involved in the entrepreneurial realm of german and European things, even more so because the whole project may as well be concluded within a week’s time. Investor’s tip: permanent residency permit is to be provided to the managing director of this particular legal entity
GmbH (Gessellschaft mit beschrankter Haftung), or what we usually coin in terms of common law, private limited liability company, LTD, probably the most common type of all entities in terms of German commercial law; Currently it demands the investment of capital that equals to 25.000, 00€, be it money or assets. This capital is to be divided in shares that both in principle and in practice are neither to be listed in the stock market nor to be traded publicly. The management is to be handled by the general meeting of shareholders, while the everyday decision-making is to be taken care of by a corporate director as appointed by the aforementioned General Meeting.
German national law in principle determines the way a residence permit is to be issued when it comes to foreigners who wish to reside and get involved in the entrepreneurial life of Germany and the EU in general. However, it is to be noted that as per the EU law any EU resident is allowed and more than welcome to establish and run a business in Germany, and the only necessary precondition to be met accordingly is to have the regional registration office notified, by also providing the capital invested per se in order to have the said legal entity properly and legally established.
Please do keep in mind that if a subsidiary is to be established then such an entity is an utterly separate entity, completely independent from the parent entity. On the other hand, when a branch is formed, the procedure is completely differentiated, given that a branch is not considered to be an independent legal entity and all profits, assets, liabilities and so forth and so on are completely linked to the parent company.
AG: a formation also known as Joint Stock Company; A share capital of 50.000, 00€ is necessary for such a legal entity to be established while it is also noted that all its members are obliged to contribute to the necessary formation of the entity’s capital. A Board of Directors is in charge of the company’s management, while a separate Board is also supposed to supervise them respectively. Last but not least, please do keep in mind that an auditor is to be appointed in order to have everything related to the AG accounts properly audited.
KG: in a few words a limited partnership of the sort where at least two natural persons decide to work together via the formation of this certain legal entity. There is this certain distinction between “silent partners” and “general partners”: the “silent” ones remain reliable only for the amount of capital they have provided, whereas “general” ones are liable for any entrepreneurial decision and/ or action reached and introduced within the company’s business universe. On the other hand and all things considered, it is also a given that the “silent” partners do not have any say at all regarding day-to-day business and management.
BGB and HGB: the former constitutes a legal entity of the sort where at least two separate persons – natural or legal – decide to partner up and be subject to the rules and regulations set by the German Civil Code, whereas the latter one is more so obliged to get registered with the Business Registry as a trading company, thus by being obliged to comply with all sorts of regulations provided by the German Commercial Code. A Statute including as it is usually the case all Articles of Association in such legal occasions is not at all a necessary precondition, even though experience has admittedly proven that a Statute is always the best and most useful tool to deal with any issues that may arise, especially in times of difficulties, mishaps and business turmoil.
No minimum capital for either of the two sub-forms is necessary, while it is also clear that both of them need to be registered with the regional tax authorities and offices.
In terms of Management, essentially all shareholders are in principle able to perform such a task, even though an entirely different agreement could have been reached among members of the said entity. Having said that, it has to be underlined that in principle, two issues could be arranged otherwise in case the therein involved members decide to differentiate them:
– Management, and
– Representation and Appointment of Representatives
Other issues, such as for instance those linked to liability, may not be decided upon in a way other than that provided in the German Commercial Code which provides for joint liability, which is practically direct and unlimited; Please, also be advised that even if a shareholder decides to exit the entity at hand, his/ her liability remains as such for the next five years to come, while, at the same time, a new shareholder who has come aboard in a later time than that of initial launching, happens to be liable for all obligations already in place preexisting his/ her joining.
Last but not least, in terms of tax, the following needs to be taken into consideration regarding both sub-forms of the aforementioned entity. Profit is to be distributed according to Statute which in this case can also be determined and entered into force in a way as agreed upon by all members of the Statute; Further on, the legal entity as such pays just the regional business tax based on its income, while its members pay taxes depending on whether they are natural or legal persons, while both of them have to submit accordingly the solidarity additional extra charge.
To sum up all and conclude all of the aforementioned given information, the following necessary details should be taken into consideration when a company formation of any sort is to be properly established within the physical boundaries of Germany:
• Identity information, especially of the directors and shareholders when an UG or a GMBH is to be established;
• Copies of passport of all beneficial owners, directors, and shareholders;
• Company incorporation form completely and properly filled in by all interested parties
• A company name which needs to be verified in advance in terms of availability.
Please do bear in mind that after thorough and careful preparation of all initial documents, a visit has to be paid by all shareholders and directors to the respective and competent Registration Office, a procedure which essentially can be completed in just one day, while on the same day a bank account may also be opened.
However, and that is usually what we suggest to our Clients, Our Law Firm and respectively Our Associates may as well save you from the trouble of all the above-mentioned fuss by doing everything on your behalf and according solely to your will if a Power of Attorney has been well drafted and prepared by a/ your local Notary.
Should that be the case, i.e. A Power of Attorney has already been duly provided for, Our Law Firm and respectively Our Associates shall be presenting all necessary formation documents to the local court authorities, while the capital deposit needs also to be completed with respect to the Bank before finalization of the company registration.
Overall, the whole of the formation process, including the opening of a bank account, and the necessary registration with the competent Chamber of Commerce shall be taking maximum ten to fourteen days’ time. As already explained, all necessary steps can be made very swiftly through our firm, while keeping in mind that all necessary steps can and shall be taken in order to be assisting you with the proper setting up not only of the physical/ tangible incorporation of the company formation you have opted for, but also of the establishment of the virtual office, while also helping you out with the opening of the necessary in all such cases bank account which you shall be able to supervise, control and handle yourselves remotely at all times. In other words, thanks to all of the aforementioned detailed procedures, no personal visits shall be expected from your side, and all required arrangements might as well be handled remotely. Forming and controlling a business abroad has not been easier ever before