Sun. Jul 14th, 2024
business in Germany

Why start a business in Germany? The country offers many economic and personal advantages. Its centralized location, huge economy and high quality of life provide many business advantages, including a large population of potential customers, a favorable time zone for global businesses, a high GDP per capita – USD 47,446 as of 2019 – and a hand – skilled and educated workforce. If your business can take advantage of these advantages, you will find excellent opportunities for growth and profit in Germany.

If you are planning to expand your business in Germany, one of the first steps is to officially register. Registering a business in Germany can be complicated and time-consuming, so do your research before you start the process.

How to grow a business in Germany

When your business is ready to grow, you have two basic options: create a subsidiary or work with an employer of record (EOR). Partnering with an EOR often makes the process simpler and easier, although companies that are already familiar with subsidiaries may choose this traditional option.

To start a traditional branch-based expansion, your business needs to gather essential information on topics such as the cost of living, taxes, and social security contributions you need to pay in Germany. You should also research what you need to hire, including the following:

Payroll in Germany can be particularly complex: your company cannot simply deposit funds into the bank accounts of your new employees. You need to research taxes and withholdings for various social security programs, and you’ll need to make sure you pay these amounts on time to maintain your business revenue. legal compliance .

Before completing all of these tasks, however, you need to incorporate your business and consider the cost of registering a business in Germany.

What are the requirements for setting up a business in Germany?

Registering a foreign company in Germany can be a complex and time-consuming process. Here are some of the steps your business will need to follow:

1. A business structure

When it comes to how to set up a business in Germany, your business has several options to incorporate:

Public trading company: Incorporation as a public trading company, or Offene Handelsgesellschaft (OHG), is often an attractive option for wholesalers. You wouldn’t need to bring in minimum capital, so shareholders wouldn’t be liable with their private assets for debt or bankruptcy.

Limited partnership: A limited partnership, known in Germany as Kommanditgesellschaft (KG), requires capital. As a public trading company, it requires a formal partnership agreement and registration in the German commercial register. The contract between the partners determines the distribution of profits and losses, and the founder must annually submit a report of these profits and losses to the local tax office. If the company goes bankrupt or incurs debt, the owners become liable with their private assets, but the liability of the limited partners extends only to their investment.

This structure is more complex to set up than the alternatives, although it requires only one shareholder. To form a small joint-stock company, a business must have dedicated founders who can contribute significant capital, usually at least $50,000, and then take over all the shares of the company. The company must also set up a supervisory board, obtain a notarized certificate and register with the commercial register.

2. A unique business name

Be sure not to use pre-existing German company names for your new branch. Check the German commercial register, or Handelsregister, to make sure your proposed company name is not already in use.

3. A clear business objective

German law requires you to declare an official purpose, or Unternehmensgegenstand, for your business when you register. This objective should include the purpose of your business and the activities in which you engage. The goal is legally binding, so you’ll want to carefully consider your company’s goals and activities before finalizing an official statement. You should also include your business purpose in your articles of association.

The German Chamber of Commerce and Industry usually checks your company name and purpose for free. It is worth taking advantage of this service to gain confidence in your proposals.

4. Articles of Association and list of shareholders

Your company must draw up official articles of association before you can officially register. You can use a standard template to put these articles together, write your registration statement, and set the company’s articles of association. Or, you can write your articles from scratch, if you prefer.

You should also compile a list of shareholders of your company’s branch. You will file this list officially upon registration, so please make sure it is complete and accurate.

If your shareholders and directors are not German or European Union (EU) citizens, they will need full documentation. A local notary will need to confirm the existence and proper representation of your business, and state authorities must also sign off. If your directors are not naturalized German citizens, they may need to provide proof of permanent residency or a multiple-entry visa.

Since these requirements are legally complicated, your company may prefer to engage the services of a knowledgeable EOR.

5. Assurances

Your business will likely need to carry insurance, and for added peace of mind you will likely want to carry additional insurance beyond what is required. You may need business insurance, personnel insurance, building and contents insurance, liability insurance or other types of coverage.

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