Incorporation in Germany

Germany is the economic heart of the EU. This economic success is largely due to the ‘Mittlestand’ (SMEs), which form the backbone of the German economy. Business registration in Germany only requires one director and one shareholder, who need not be residents or citizens. There are no capital or exchange controls to discourage investment in Germany. Foreign firms can freely transfer funds from abroad and convert them into EURO. Some of the key factors behind the success of small and medium businesses in Germany are;

1. Low interest business loans are available for SMEs at both federal (maximum value 10M Euro) and state level (value between 50,000 Euro and 10M);
2. To reduce pressure on businesses, the Government provides (i) recruitment and training support and (ii) wage subsidies to entrepreneurs who register a company in Germany;
3. Grants are provided by the states through the GRW scheme to cover either a firm’s investment costs or two years of wage costs. Approximately 95% of firms receiving these grants are German LLC;
4. IZ scheme provides monetary aid for investment in East Germany; this program can be combined with the GRW scheme to get cost coverage up to 50% for small firms and 40% for medium-sized enterprises;
5. For selected SMEs, the KFW Development Bank provides loans, private equity and mezzanine financing;
6. Government banks act as public guarantors to provide deficiency guarantees for up to 80% of loan amounts for expenses related to initial investments in Germany;
7. Incentive Programs like grants and interest-reduced loans are provided to cover R&D costs. These programs help young firms improve product quality and process;
8. Germany has signed double taxation agreements with over 90 different countries to minimize withholding tax on payments when doing business abroad.

PRIVATE LIMITED LIABILITY COMPANY (GMBH)

The first step for registration of a company is to draft the Article of Association (AOA) and compile other required documents which include a specimen of signatures, passport, special forms from the company registration office, opening a bank account, hiring a local accountant, etc. All the documents should be duly notarized by the public notary officer in Germany.

The minimum share capital for the incorporation of a Private Limited Company in Germany is 25000EUR. Transfer of shares to the public or registration at the stock market is not allowed for GMBH.

Even mini GMBH(UG) company can start with a minimum share capital of one euro. Once the company earns the profit of 25000 EUR it automatically becomes a GMBH company at no additional cost.

Joint Stock Company (AG)

To incorporate a joint stock company in Germany one would need certain documents such as the draft of the Article of Association (AOA) and other documents such as specimen of signatures, passport copies, company registration form, a local bank account, hiring a local accountant, etc. The documents once complete should be notarized by public notary officer in Germany.

A minimum share capital of 50000 EUR is required to start a Joint Stock Company. Shares of the company can be freely registered at the stock market and the partners will have limited liability. The management board will check the management of the company regularly by a supervisory board which is formed by at least three members. A statutory auditor will audit the accounts of the AG.

• Verification of company name – The first is to apply for verification of the company name at the Local Chamber of Industry and Commerce.
• Draft of the Articles of Association – Once the company name is approved you need to prepare a draft of the Articles of Association of the company and get it notarized by the public notary officer in Germany.
• After this, it is necessary to open a local bank account in Germany.
• The application for registration, notarized AOA, details of management board structure and share capital have to be submitted to the German Commercial Register. All these documents can also be submitted in electronic form.
• Next step is to apply for a trade license from the local office of Business Standards at the Chamber of Industry and Commerce and the Labour Office. Labour office issues an eight-digit operating number which must be reported as social security.
• Company then needs to apply to the concerned tax department for registration of corporate taxes.
• After this, the company can officially start business operations in Germany.