How to set up a business in Germany: An overview for entrepreneurs

updated on 31. May 2022 10 minutes reading time
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If you want to make your business official, you have to go through the legal process of setting it up. We’ve put together this guide to give you a bird’s eye view of the formation processes of the different legal forms in Germany.

Introduction

Starting a business in Germany always involves a lot of bureaucratic steps. How bureaucratic depends on its legal form (Rechtsform).

If you incorporate your business (i.e., you’re starting a UG or GmbH etc.) expect to jump through hoops. For example, one crucial step is the notary appointment – an official process in which a notary (a type of lawyer) reads aloud legal documents before notarising them.

Unincorporated legal structures like the GbR are much easier. But, things like opening a business account can still take some time (especially if you’ve got a “third country” nationality).

The all-around easiest business to set up is the Einzelunternehmen (sole proprietorship). Even opening a bank account for this type of business is quick and easy.

Here, we’ll give you what’s involved at glance. This just covers the mandatory bureaucratic steps that you have to take. But, in practice there is a lot more involved to get everything humming along nicely. That’s why each section links to an in-depth guide that goes into the ins and outs.

 

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Andreas Munck

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Got questions about setting up a business in Germany? 

  • Startup expert
  • 10+ years experience

Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.

 

Contents

 

Before you even think about doing anything official, make sure you’ve got your visa/residence permit sorted and that the legal form you want fits your business aspirations.

 

How to form a GmbH

A GmbH is the classic limited liability company of Germany. 

Setting up a GmbH is essentially incorporating a company (once it’s entered into the Handelsregister/commercial register).

The official steps to set up a GmbH: 

  • Formulate the company name and objective
  • Determine share capital (min €25K)
  • Prepare articles of association
  • Go to the notary appointment
  • Open a business (bank) account
  • Deposit the share capital in the business account
  • Pay the Handelsregister (Commercial Register) entry invoice
  • Register with the Transparenzregister (Transparency Register)
  • Register with the Gewerbeamt (Trade Office)
  • Submit the tax office questionnaire to the Finanzamt (tax office)

 

Would you like to know more? Our step-by-step guide to forming a GmbH gives you everything you need.

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How to form a UG (haftungsbeschränkt)

Setting up a UG is the same as the GmbH with the only difference being the minimum share capital is much lower.

The official steps to set up a UG (haftungsbeschränkt): 

  • Formulate the company name and objective
  • Determine the UG’s Stammkapital (share capital) (min one euro per shareholder)
  • Draft the articles of association
  • Go to the notary appointment
  • Open a business (bank) account
  • Deposit the Stammkapital (share capital) in the business account
  • Pay the Handelsregister (Commercial Register) invoice
  • Register with the Gewerbeamt (Trade Office)
  • Submit the Finanzamt (tax office) questionnaire
  • Register with the Transparenzregister (Transparency Register)

 

Would you like to know more? Our step-by-step guide does a deep dive into the UG formation process.

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How to form a Holding

Logistically, a holding structure is the hardest legal entity to set up. Incorporating multiple legal entities for one business can be hectic but definitely worth it if your business idea is a lucrative one!

The official steps to set up a Holding:

  • Decide on how to configure the holding structure (must be one parent company and one or more subsidiaries)
  • Set up (or prepare) the parent company.
  • Set up (or prepare) the subsidiary and give the parent company at least a 10% shareholding.

 

Would you like to know more? Take a look at our How to set up a Holding guide.

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How to form an AG

The AG is an entity you can list on the stock exchange. So, naturally, the bureaucracy is a lot more intense.

The official steps to set up an AG: 

  • Draft the articles of association
  • Go to the notary appointment
  • “Take over the shares”
  • Appoint the corporate bodies:
    • Vorstand (Executive board)
    • Hauptversammlung (General meeting)
    • Aufsichtsrat (Supervisory board)
  • Create the “Gründungsbericht” (“formation report” )
  • Deposit the share capital contributions
  • Enter the company into the Handelsregister (Commercial Register)
  • Register with the Gewerbeamt (Trade Office)
  • Get a formation audit (Gründungsprüfung) by a third-party auditor
  • Register with the Transparenzregister (Transparency Register)

 

Would you like to know more? Here is your guide to setting up an AG in Germany.

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How to establish an Einzelunternehmen (Sole Proprietorship)

Starting an Einzelunternehmen (Sole Proprietorship) has the least amount of steps. But, it comes with a catch: Your business liability is unlimited.

The official steps to set up a Sole Proprietorship: 

  • Register with the Gewerbeamt (trade pffice)*
  • Submit the Finanzamt (tax office) questionnaire

 

If you’re a If you’re a Freiberufler (liberal professional) that wants to set up a one-person business than you can skip this step and just register your business with the Finanzamt.

Would you like to know more? This is our guide on setting up a Einzelunternehmen.

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How to establish a GbR

The GbR is a way to structure a business as a “civil law partnership”. It’s an unincorporated legal form which means fewer bureaucratic steps than a GmbH/UG, but there is no limitation of liability. Thus, business insurance is not a mandatory step but is highly recommended to protect yourself.

The official steps of how to set up a GbR: 

  • Create the rules for the GbR
  • Draft the partnership agreement (optional but at your own peril)
  • If the business is “gewerbliche GbR” (a business that is outside of the liberal professions, agriculture, forestry, fishing and mining), it needs to register with the Gewerbeamt (Trade Office)
  • Submit the Finanzamt (tax office) questionnaire
  • Open a business account

 

Would you like to know more? Learn how to get a GbR up and running in no time here.

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How to establish a gGmbH

If you want to start a charitable or non-profit limited liability company in Germany, the gGmbH is the best legal for you. The formation process follows the standard GmbH but with some extra steps to prove the non-profit status of the enterprise.

The official steps of how to set up a gGmbH: 

  • Determine the charitable/non-profit purpose
  • Formulate the company name and objective
  • Determine share capital (min €25K)
  • Prepare articles of association
  • Get a review by the Finanzamt (tax office) to confirm non-profit status
  • Go to the notary appointment
  • Open a business (bank) account
  • Deposit the share capital in the business account
  • Pay the Handelsregister (Commercial Register) entry invoice
  • Register with the Gewerbeamt (Trade Office)
  • Submit the tax office questionnaire to the Finanzamt (tax office)
  • Register with the Transparenzregister (Transparency Register)

 

Would you like to know more? This is our guide to setting up a social enterprise with the gGmbH.

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The information published on our site is all written and checked by experts with the greatest care. Nevertheless, we cannot guarantee the accuracy of this information, as laws and regulations are subject to constant change. Therefore, always consult an expert in a specific case – we would be happy to connect you with the right professional.

firma.de assumes no liability for damages caused by errors in the texts.

 

The Master list of all Company Formation articles can be found here. 

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