Setting up a limited liability company in Germany is not a complicated process. These companies can either be registered as UG (Mini-GMBH) or GmbH. To help you set up a company in Germany, we have created a simple checklist of all the requirements. There are many German legal terms included in this guide, but they will all be explained in the easiest way. You should note that the steps don't have to be followed in the order shown. You can start with the simplest steps and handle the tough ones later. If you get overwhelmed with the process, you can reduce your stress by hiring an expert to get your company incorporated quickly.
Steps to Follow When Starting a Business in Germany:
1. Select the company type
For a limited liability company, you can either select the UG or GmbH form. The UG form is ideal since it requires very little capital. You can register your UG company for as little as €1. Although this is the mandatory minimum, you should strongly consider having a higher share capital of at least €1000.The GhmB form is best for companies that have at least €25,000 in share capital. If you select this option, you will be required to deposit at least half of the required amount right away. This means you will have to deposit a minimum of €12,500. The limited liability will be slightly different in a GhmB company. In case something happens and the money disappears, the shareholders will be personally liable.Before you set up a company in Germany, make sure you research the different company formation options available.
2. Choose a name for your company
Before you settle on a name, you will have to look through the Handelsregister. If your name has already been taken, you will have to find a different one.
3. The Unternehmensgegenstand
In Germany, all limited liability companies must have a specific object or purpose. This is referred to as the Unternehmensgegenstand. If you have trouble coming up with an object, you can check what companies in your industry have used.
4. Check the documents for compliance
You can submit the name and object to the German Chamber of Commerce and they will check them for compliance at no charge.
5. Arrange to meet a notary in order to create the company
As an English-speaker, you will find it easier to deal with a notary that speaks English. You should be able to locate such a notary at https://notar.de.
6. Complete your Musterprotokoll
This is simply a document that shows your statutes and registration statements. For this step, you can use a standard template or a customised one.
7. Plan the meeting with the notary
To make the process as smooth as possible, you should put together the articles of association, the list of shareholders, and the founding documents. Make sure you have all the documents needed to open a bank account.
8. The company formation
At the notary meeting, you will finally make your company official. You must show up for the appointment with your fellow shareholders. Everyone should have enough identification documents. If you are a foreigner or from outside the European Union, you will still be able to register the company in Germany. You can use a foreign company as a go-between, but a notary will have to confirm that the company is real and is well represented. State authorities will also have to verify that the company actually exists. You should note that this requirement applies even to companies within the EU but outside Germany.For the managing director, you may have to get a VISA that allows for multiple entries. Alternatively, you can apply for permanent residence in the country. For a smooth process, you can talk to a lawyer or notary first.It may also be a challenge to find a bank that will render its services to you as foreign founders of a company. You can consider talking to a lawyer or your notary on the opening of a bank account for the business. It will be a lot easier to open a German bank account if you are from the EU.Your notary may be able to vouch for the registration costs with the Handelsregister. It is possible that this can only be done when they work with familiar customers. You can inquire about the possibility of them vouching for the registration costs if you deposit the amount in cash with them.Handelsregister should be able to process your registration immediately, and that can save you a lot of time. They can also just send you an invoice and halt the process till you pay the fee. To make sure you receive all communication, your mailbox should have your company name on it.
9. Open the bank account
All businesses need to open a bank account. As mentioned, it may be hard to find a bank that will accept foreign founders. You should start searching for a bank very early in the process as this may be a complicated process. If you are applying at traditional banks, you should make sure you always show up with the documents given by the notary. You can apply to many banks at the same time and wait for one to accept your application. Bank appointments should be held immediately after the appointment with the notary.Different banks may have different requirements, so make sure you inquire about these documents before you make your application. Also, find out what formats they accept.
10. Deposit the Stammkapital
This is the share capital we covered earlier. It can be deposited through cash or wire transfer. The date or Stammkapitaleinlage should be clearly shown in the reference field.
11. Mail the deposit slip to your notary
You should make sure you send the share capital deposit slip promptly. Otherwise, the notary may start chasing you up for it, and that will put you on their bad books.
12. Pay the invoice to the notary
You will need to pay the notary invoice after making the share capital payments. Your registration will not be halted or denied if you fail to make the payment, but you will find it necessary to pay it quickly. This is because the notary will help you with many official matters in the future.
13. Handle the Handelsregister payment
If your notary has not made this payment on your behalf, you will have to handle it on your own.
14. Look out for frauds
It is possible for a fraudulent party to send you an invoice supposedly from the Handelsregister. Some red flags you should look out for include short non-German recipient names, complex IBAN numbers, and amounts that are higher or lower than €150.00.
15. Wait for a notification on the status of the registration
This will be sent by your notary. You can also go to www.unternehmensregister.de and track the status of the registration yourself.
16. Handle taxes
Here, you will need to find a tax advisor. They will help you complete the Fragebogen zur steuerlichen Erfassung or the tax office questionnaire. They will also grant the power of attorney and offer guidance on the tax implications of your business. You should note that without the tax registration, you will not be able to receive invoices or income.
17. Send the Gewerbeanmeldung
Along with the tax registration, you will have to complete the trade registration. This one has to be sent to the local trade office. In Berlin and Hessen, the registration can be done online and in English.
18. Get the Tax ID
This will be obtained from the tax office, and it will make all your invoices valid.
19. Get your business insured
Different insurance companies offer different types of services. Make sure you get one that suits your business. Also remember that you need a personal health insurance cover in Germany as well.
Shop around for a good bookkeeping service and make sure they are well integrated into your company. You must make sure the service provider has a good reputation and is known to provide high-quality services. First, look at how their fees are structured. Some will charge you based on the annual turnover and others will simply look at the incoming and outgoing transactions. Different structures will be ideal for different businesses.Also, you need to check the software they use. Most reputable German companies use Datev or Agenda for their bookkeeping operations. If the company doesn't use any of these products, it may not be good for your business.Another important thing to check is their method of delivering invoices and transaction receipts. If they have a complicated system, you may be better off working with a different bookkeeper.If you have a small company or work as a freelancer, you may be able to manage the accounts on your own. A larger company will definitely need a professional bookkeeper. Without a bookkeeper, you will experience severe stress at the end of the year.You will have to set up the opening balance sheet of your company. For this process, you will have to involve a good tax advisor. Otherwise, you will get in trouble with the law.
21. Accounting for salaries
You will also need to come up with an accounting system for your payrolls. This part of your business should also be handled by a professional since small mistakes can get you in legal and financial trouble.
This guide should help you set up a company in Germany. As mentioned earlier, you do not have to follow the steps as listed. Some steps should be started as soon as possible since they typically take a lot of time. For example, you may have a hard time locating a bank that is ready to work with foreign founders, and that means you have to start looking to open a bank account early. Also, remember that laws can always change. You should make sure you consult professionals to account for any changes that may have been made after this article was published.