Company registration in Germany: Legal aspects and advice

Company registration is the process of formalizing the status of a legal entity in accordance with the laws of a certain country. During this process, the company is officially recognized as a legal entity with its own legal capacity.

To receive this status, it is necessary to provide certain documentation and fulfill the requirements established by the state authorities. Due to registration, the entity is able to conduct commercial activities, conclude contracts, participate in court proceedings and perform other legally significant actions.

If you plan to start a business in Europe, Germany is an excellent choice for registering your company.

The Manimama team has conducted in-depth research, analyzed the main subtleties of incorporating in Germany, and is ready to share its results and help you choose the right jurisdiction.

What are the main advantages of incorporating a company (business) in Germany?

1.Promising location and access to the European market

Germany’s strategic location at the heart of Europe makes it an ideal hub for businesses targeting the European market. Companies registered in Germany gain direct access to more than 500 million consumers within the European Union, without customs barriers and with minimal regulatory restrictions. Additionally, close economic ties with other European countries make Germany a crucial link in the supply chain for many industries.

2. Economic stability

Germany has one of the most stable economic systems in the world, making it an attractive place for doing business. It is the largest economy in Europe and ensures steady growth, low inflation, and predictable market conditions, which reduces risks for investors. The German system is supported by a reliable banking infrastructure and transparent legal regulations that protect business interests.

3. Favorable tax system

Germany offers a favorable tax system attractive to foreign investors and local entrepreneurs. Corporate tax rates in Germany are competitive within the EU. The country also frequently provides tax incentives and deductions, especially for companies investing in research, development, or new technologies. Additionally, Germany has signed numerous double taxation agreements, allowing foreign companies to reduce their tax liabilities when conducting international operations.

4. Developed innovation and high-tech sectors

Germany is a leader in innovation and high technologies, particularly in industries such as manufacturing, automotive, IT, and engineering. The country actively invests in research and development, creating an environment conducive to implementing new technologies and solutions. German companies have access to modern technology centers and startup incubators that foster the development of innovative products and processes.

5. Highly skilled workers

The country is known for its strong education system, which combines theory and practice to prepare highly skilled workers across various sectors. This ensures that businesses have access to employees who possess both in-depth knowledge and practical experience. Additionally, ongoing investments in upskilling and professional development make German workers exceptionally competent and ready to operate in technologically advanced and complex environments.

6. Investment incentives and support for startups

Germany offers various investment incentives and support programs for startups, making it an attractive location for new businesses and investors. Additionally, numerous startup incubators and accelerators located in leading cities like Berlin and Munich provide young entrepreneurs with access to mentors, networking opportunities, and funding.

How to register a company in Germany and what are the main requirements for such registration?

Step 1. Initial setup

• Initiating a preliminary project assessment, assessing risks, choosing the type of company, preparing the necessary documents and obtaining the necessary permits, determining the time frame, budget, and resources required to complete the process
• Preparation and filing of the package of documents

Step 2. Company registration

• Choosing and reservation of the company name – we will apply to the German Chamber of Commerce and Industry (IHK) to check the availability of the chosen name
• Facilitating the notarial process for the company’s official registration
• Opening a corporate bank account and paying at least half of the minimum capital (i.e. €12,500) on a bank account
• Incorporating the company’s data into the German Companies Registry (Handelsregister)
• Obtaining the Certificate of incorporation issued by the Companies Registry, and Articles of Association
• Notifying the local trade office (Gewerbeamt) about the planned activity and applying for any necessary business permits
• Filing application for tax, VAT & EORI numbers

Requirements for registering a company in Germany on the example of a Limited Liability Company (LLC) / Gesellschaft mit beschr?nkter Haftung (GmbH):

• Shareholders: the company must have a minimum 1 shareholder, who can be an individual or legal entity. The nationality and residence of the shareholder(s) are irrelevant.
• Director: the company is required to have at least 1 managing director, who can be a natural person or a legal entity. The nationality and residence of the director(s) are irrelevant.
• Company secretary: no requirement.
• Minimum share capital: minimum amount of the share capital is €25,000. The share capital can also be contributed in kind. The contribution in kind must be stipulated in the articles of association, a valuation report is needed, and the asset must be contributed in full.
• Legal address: a GmbH is required to have its registered office in Germany, where it can receive official correspondence.
• Liability: the liability of shareholders is limited to their capital contributions, protecting them from personal liability beyond their investment.
• Accounting: a GmbH is required to maintain proper accounting records and prepare annual financial statements in accordance with German accounting standards.

What do you have to know about taxes when registering a company in Germany?

Corporate income tax (CIT):

• Companies based in Germany or with an executive board in Germany must pay CIT on globally generated income.
• The standard rate is 15%.
• In addition, a solidarity surcharge is added on top of the CIT. This is a fixed and flat nationwide component of company taxation and set at a rate of 5.5% of the 15% CIT (not the income); creating a total of around 0.8% of taxable income. So, the CIT and solidarity surcharge amount to a total taxable rate of around 15.8%.
• According to German commercial law, the annual profit of a corporate company is calculated on an accrual basis. It is reported in the annual financial report and serves as the basis for determining taxable profit.

Personal income tax (PIT):

• All resident individuals are taxed on their worldwide income. Non-resident individuals are only taxed on German source income.
• The PIT rates ingle persons are as follows:€0 – €11,604 – 0%€11,605 – €66,760 – 14% to 42%€66,761 – €277,825 – 42%€277,826 and above – 45%
• The most convenient way to complete tax forms is online through the BZSt’s Mein ELSTER portal.

Value-added tax (VAT):

• The standard rate is 19%.
• The reduced rates are 7% (food, newspapers, local public transport, and hotel stays) and 0% (bank and health services or community work).
• Companies submit periodic VAT reports online to the tax authorities on a monthly or quarterly basis using Germany’s ELSTER online tax office system.
• An annual VAT return must be submitted.

For readers

Manimama provides assistance in choosing the right jurisdiction for company incorporation and in registering a business specifically in Germany. We have a good understanding of the tax and legal peculiarities of specific jurisdictions, which helps our clients make an informed choice based on their unique needs and development strategies. In our work, we take into account factors affecting the business environment, such as the level of competition, access to financial and human resources, as well as opportunities for further growth and development in different jurisdictions.

By choosing our company formation service in Germany, you are working with a law firm that values integrity, competence, and client satisfaction. Let us help you set up a company in Germany and pave the way for your business success!

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The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.