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Doing business in Germany

How quickly can I set up a business?

There are several issues you must consider before setting up your business. In addition to a promising business idea, that you have ideally tested for its economic feasibility you must keep in mind that the founding process will take some time. The process as such depends on the type of business to be established, but you should plan several weeks (approx. 3-4 weeks) for it.

What is the minimum investment needed?

The Investment depends on the scale of business structure of the project. In the case of partnerships (typically General Partnership or Limited Liability Partnership) no minimum capital is required whereas in order to form a corporation, investors must make a capital contribution. The capital contribution as such varies depending on the type of company.

The most common form of corporation in Germany is the limited liability company (“GmbH”). In addition, the so-called entrepreneurial company at limited liability (“UG”) is also becoming increasingly popular, especially for start-ups. In both types of companies, the shareholders must pay in share capital after the company is established.

For a limited liability company, the minimum share capital is EUR 25,000.00, whereas an entrepreneurial company at limited liability can be founded with a capital of at least EUR 1.00. In addition, founders can also establish a corporation in the form of a stock corporation (AG).

Since the requirements for the share capital (at least EUR 50,000.00) and formal requirements for the formation are considerably higher, this type of company is less relevant for founders than the other types of companies mentioned.

How can I raise finance?

For a given capital requirement, equity and debt financing are available for corporate financing. In the context of self-financing, self-financing through profit retention or the capital increase by shareholders must be taken into consideration; in the case of debt financing, in addition to shareholders (shareholder loans), the largest creditor groups are credit institutions with bank loans and suppliers with supplier loans.

In that context we would like to point out that in the case of corporations (especially limited liability companies), the main danger in connection with corporate financing is that, for example, a shareholder loan could be treated as liable equity capital in the event of the company’s insolvency.

In addition, it should also be noted that with regard to possible debt financing, access to debt capital markets (e.g. IPOs) is reserved only for large corporations such as public limited companies (so called “AGs”) or partnerships limited by shares (so called “KGaAs”). All in all, it can be summarized that a mixture of equity and debt financing is generally advisable. In this context, the issue of vertical capital structure also plays a key role in the context of leverage effect aspects.

What are the legal requirements for setting up my business?

You can either establish a company with its own legal form or instead establish a branch, which can either be an independent branch or a dependent branch (permanent establishment) of a parent company. The different legal form requirements for the formation of partnerships and corporations are explained in more detail below.



The partnership agreement as such can be concluded in private writing (i.e., no notarial certification is required), but a notarial entry in the Commercial register is necessary.



The memorandum and articles of association must be notarised, and a notarised application to the commercial register is also required. With this type of company there is basically the possibility of providing the contributions either in cash (so called “cash incorporation”) or in the form of contributions in kind (so called “incorporation in kind”), whereby the latter is associated with increased formal requirements (report on incorporation in kind, certificate of impairment from an auditor).

What structure should I consider?

In the following, the civil and corporate law aspects and typical features of German corporate forms are discussed in more detail. Subsequently, additional tax aspects for companies on the one hand and branches on the other hand will be examined in more detail.


Civil and company law aspects:
  1. Limited Company (GmbH)
  • Can be established by one or more persons.
  • Articles of association must be notarized. The company’s legal existence does not begin before the publication of the articles of association in the Commercial Register.
  • An excerpt of company accounts has to be filed electronically in the electronic German Federal Gazette (“eBundesanzeiger”).


  1. General Partnership (OHG)
  • Consists of at least two members (partners).
  • An entry in the Commercial register is necessary.
  • Each partner has direct, unlimited, and joint liability.
  • Management and representation: each partner individually.
  • Profit-sharing: according to the articles of association, otherwise: 4 % of the capital, the remainder according to head.
  • The tax residence of the partner and the place where the profits of the partnership arose determine in which country and how these profits are taxed.


  1. Limited Liability Partnership (KG)
  • At least two partners are required, one of which must have unlimited liability and other(s) have liability not exceeding the value of his/ her shares in the partnership.
  • An entry in the Commercial register is necessary.
  • Profit sharing: according to the articles of association, otherwise: appropriate share.


Tax aspects:

In the case of a Limited Company tax must be paid on the company’s profits, whereas in the case of General Partnerships and Limited Liability Partnerships, the tax residence of the partners and the place where the profits are earned determine in which country and in what way the profits are taxed. In the following, important tax aspects of branches, which exist either independently or in the form of permanent establishments, are examined in more detail, before concluding with a general presentation of corporate tax rates.


  1. Permanent Establishment
  • Limited/ or unlimited tax liability (i.e., both corporate income tax and trade tax could be incurred).
  • Employer’s obligation to withhold wage tax.
  • Effects of any VAT liability must be examined.
  • Profit is not calculated determined for the permanent establishment but for the enterprise company as a whole. This results in the need for profit accrual for the permanent establishment from the profit generated for the company as a whole. Two levels of impact must be considered (national profit determination regulations and profit accrual regulations under treaty law).


  1. Independent Branch Office
  • Legally and organizationally part of the company of the main branch and is therefore subject to the law of the main branch.
  • Profit is taxable in Germany.


Current Corporation Tax rates in Germany are:
  • Corporate Income Tax rate 15% (15.825%, including the solidarity surcharge)
  • Trade Tax: 14%-17% (varies from city to city)
  • Property Transfer Tax: 3.5%-6,5% (charged on the transfer of beneficial interests in real estate)


The effective tax rate for corporations typically ranges between 30% and 33% in total. In addition to tax obligations, companies must also comply with accounting obligations and various documentation requirements.

What advice can you give me in regards to payroll and taxation requirements?
Business location:
  • Germany enjoys a good reputation with both domestic companies and foreign investors.
  • Central location advantages: good infrastructure, well-trained specialists, State support for research and development, political stability and legal certainty, high quality of life.
Payroll and HR requirements:
  • Individuals, resident in Germany, are subject to German personal income tax. The progressive tax rates go from 14% up to 45% and a solidarity surcharge of 5.5% on the tax itself, resulting in a top rate of 47.5%.

Employers with registered seat, place of management or permanent establishment/permanent representative in Germany have a monthly withholding requirement on salary. In addition, it is the employer’s legal obligation to transfer the entire statutory social security contributions to the relevant social security agency (that means pension insurance, health insurance, nursing insurance and unemployment insurance plus additional levies)


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