How To Start Your GmbH In Germany
Starting a GmbH or mini GmbH (UG) in Germany can be a very lengthy & bureaucratic process. Our 8 steps to start your own business in Germany will help you out.
Table of contents
Introduction: 3 Advantages Of A GmbH In Germany
In Germany, it is recommended to work as a freelancer first. Afterward, you can deal with the issue of setting up a company. Here, the formation of a GmbH in Germany can offer several advantages over solo entrepreneurship.
- Liability: One of the biggest advantages of a GmbH, or limited liability company, compared to solo entrepreneurship is the limited liability it offers to its owners. As a solo entrepreneur, you are personally liable for all of the debts and obligations of your business, which means that your personal assets, including your home and savings, are at risk if your business fails or is unable to pay its debts. In contrast, the owners of a GmbH are only liable for the company’s debts up to the amount of their share capital contribution. This means that their personal assets are typically protected in the event of the company’s insolvency or bankruptcy.
- Reputation: Another advantage of a GmbH is its reputation and standing in the market. A GmbH is generally seen as a more credible and professional business entity than solo entrepreneurship, and this can make it easier to attract clients, business partners, and investors. In addition, a GmbH has a better standing with regulatory authorities and is generally subject to fewer restrictions and requirements than solo entrepreneurship.
- Tax Efficiency: Finally, a GmbH is often more tax efficient than solo entrepreneurship. A GmbH is subject to a lower corporate tax rate than an individual entrepreneur, and it also has more flexibility in terms of how it structures its finances and operations to minimize its tax liability. This can result in significant savings for the owners of a GmbH, compared to what they would pay as a solo entrepreneur.
Overall, the limited liability, improved reputation, and greater tax efficiency of a GmbH make it a compelling choice for many business owners in Germany, provided they are willing to invest the time and effort required to set up and maintain the company.
GmbH Step 1: Check Requirements
Before starting a business in Germany, it’s important to check whether you are allowed to do so based on your visa status and any existing employment contracts. If you have a blue card, you may not be permitted to start a business, so it’s best to check with the “Ausländerbehörde” to confirm your eligibility. If you have a permanent residency, you should be able to start a business, but you may need to check with your employer if you are currently employed and want to continue working while starting your own business.
- Choosing a unique name: Once you have confirmed your eligibility to start a business, you will need to choose a unique name for your company and determine its business purpose. The name must not be already in use by another business and must not be misleading. You can check the availability of a name with your local IHK, and it’s important to choose a name that accurately represents the nature of your business.
- Ownership & decision-making structure: In addition to choosing a name, you will also need to decide on the ownership and decision-making structure of your company. This is particularly important if you are starting a GmbH as a team, as you will need to determine how much of the company each owner will own and who will have the final say in important business decisions.
- The legal form of the company: Finally, when starting a business in Germany, it’s important to consider the legal form of the company. A GmbH offers many advantages over solo entrepreneurship, including limited liability, improved reputation, and greater tax efficiency. However, a GmbH requires a minimum share capital of 25.000€, whereas a UG, or “mini GmbH,” only requires a minimum of 1€. It’s important to weigh the costs and benefits of each option and choose the one that is right for your business. In general, it’s recommended to start with a GmbH if you can afford it, as the additional investment in share capital can pay off in the long run.
GmbH Step 2: GmbH Or UG (Mini GmbH) At The Notary?
After completing the first steps of starting a GmbH in Germany, the next step is to visit a notary. A notary is a legal professional who is authorized to draft and certify the articles of association (Satzung) for your GmbH. This document is a crucial part of the process of founding a GmbH, as it outlines the company’s purpose, ownership structure, and decision-making process.
It’s not necessary to consult a lawyer before visiting the notary, but it’s important to choose a notary who is experienced in drafting articles of association for GmbHs. A good notary will be able to guide you through the process and provide advice on any minor details that need to be addressed. All you need to do is provide the notary with the necessary information and sign the articles of association to confirm your intention to create a GmbH.
Once you have signed the articles of association with the notary, your GmbH is considered to be in foundation. This means that the company has been created, but it is not yet registered with the local trade office (Handelsregister) and is not yet fully operational.
GmbH Step 3: Open A Business Bank Account
Once your GmbH is in foundation, you can move on to the next step: opening a business bank account in the name of your company. It is important to open a business bank account, rather than a personal bank account, for your GmbH, as using a personal account for business purposes can lead to the account being closed by the bank.
To find the best bank for your GmbH, you can use a business bank account calculator, such as the one available on the PerFinEx website. Simply enter your requirements, such as the legal form of your business and whether you need a credit card, and the calculator will show you the best options. In some cases, you may even be eligible for a bonus if you open your account through the calculator.
Once your business bank account is active, transfer the required share capital of 12.500€ (in cash) or 25.000€ (as stock capital) to the account and provide the notary with proof that the funds are available. This will enable the notary to register your GmbH with the local court.
It’s important to be aware that once your GmbH is registered, you may receive fake invoices from unscrupulous companies. These invoices may look official and may request large sums of money, but they are not legitimate and should be ignored. The only real invoice you will receive is from the notary for a fee of around 150€ for registering your GmbH. You can use the sample invoice in the image below as a reference. Do not pay any other invoices that you receive.
GmbH Step 4: Register At Local Trade Office (Gewerbeamt)
To register your company in Germany, you’ll need to visit your local trade office, known as a “Gewerbeamt” in German. In Munich, this process can be completed online, but it may vary in other cities.
To find out the specific steps for your location, simply search for your local Gewerbeamt online and follow their instructions. Keep in mind that the process may be slightly different in each city, so it’s important to check with your local trade office for the most accurate information.
GmbH Step 5: Register At Finanzamt For Tax Numbers
To complete the fifth step in starting a GmbH in Germany, you’ll need to fill out a “Fragebogen zur steuerlichen Erfassung” with your local Finanzamt. This will allow your GmbH to obtain a tax number, which is necessary for conducting business in the country.
Because this step can be complex, especially for those with a language barrier, it’s advisable to work with a tax advisor who can handle the paperwork and ensure that everything is completed correctly. Your tax advisor can also assist with other aspects of your GmbH, such as payroll, and provide guidance on the most tax-efficient way to receive income from your company.
For example, paying yourself a salary that is taxed at a rate of up to 42% may not be the most cost-effective option; instead, you could consider taking a dividend that is taxed at a lower rate of 25% capital gains tax.
GmbH Step 6: Get All Required Licences For Your Business
To operate a GmbH in Germany, you’ll need to obtain any necessary licenses and permits. These may vary depending on the type of business you are running and the location where you are conducting business.
To find out which licenses are required for your specific business, you can contact your local IHK (Industrie- und Handelskammer) or Gewerbeamt (trade office). These organizations can provide guidance on the licenses and permits that your GmbH may need to obtain. For example, PerFinEx GmbH has four licenses:
- 34c GewO for loans
- 34d GewO for insurance and pensions
- 34f GewO for investments
- 34i GewO for real estate loans
In addition to obtaining the necessary licenses, your GmbH will also need to register as a member of the local IHK, which is mandatory. This will require a fee, but the IHK can provide support and resources to help your business succeed.
GmbH Step 7: Insurance & Social Security Check
The seventh step in starting a GmbH in Germany is to obtain the necessary insurance coverage for your business. Depending on the nature of your business and the licenses you hold, you may be required by law to have certain types of insurance. It is important to carefully research and understand the insurance requirements for your business, and to obtain coverage that meets your needs.
In addition to mandatory insurance, it’s also advisable to consider additional coverage such as business liability, legal, and cyber insurance. These can provide protection for your business and yourself as the managing director of the GmbH. Working with an insurance advisor can help you select the right policies for your business.
Best Legal insurance in Germany
Best liability insurance in Germany
Consider exit from the social security system
It’s also worth considering your options for social security, as a managing director of a GmbH you may be able to opt-out of the public system and instead choose private pension and private health insurance plans. This can provide additional flexibility and potentially save you money. An advisor can help you understand your options and make the best decisions for your GmbH in Germany.
GmbH Step 8: Protect Your Business With A Trademark
The final step in starting a GmbH in Germany is to obtain a protected trademark for your business. This is important for several reasons. First, Germany is divided into local court districts, so registering your business with the local court in your area will provide protection for your business name on a regional level.
However, this does not prevent someone from registering a business with the same name in another court district. To ensure that your business name is protected nationwide, you’ll need to register a trademark with the German trademark agency DPMR. This will prevent others from using your business name in the same categories as your business, such as insurance, investments, and real estate.
Obtaining a trademark is relatively inexpensive, costing just 290€ for 10 years of protection. This can provide peace of mind and protect your business from potential confusion or misrepresentation. If you have any further questions about starting a GmbH in Germany, feel free to contact us for assistance.
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