Setting up a Business

This guide provides you with a short theoretical background to the different types of company forms available. It also provides a roadmap to establishing a GmbH or a UG – two of the most common and relevant company structures in Germany.

Our services

  • Information on local service providers, including tax advisors, lawyers and notary services
  • Advice on potential funding programmes

 

Legal Structures

Expanding to Germany may seem daunting at first, but with a solid plan there is no need to worry. The same legal conditions apply for local and foreign entrepreneurs. Foreign companies often report that engaging with suppliers, business partners and institutions is easier if a German company is established.

Here is an overview of the most common company forms for setting up business activities in Germany as a foreigner:

 

Subsidiary

  • Establishment of a new legal entity
     
  • Different legal forms available (e.g. GmbH, AG)

Branch Office

  • No establishment of a new legal entity
  • Registration of a German physical business presence

 

Note: The decision as to which legal structure you want to use to run your business has far-reaching consequences - for example, in terms of how much equity you need and whether you are personally liable for your business. It is highly recommended that you consult a lawyer or tax advisor before making your decision. We are happy to help you find one in Cologne. 

For further information please also check: GTAI – Setting up a business in Germany

 

A German subsidiary (Tochtergesellschaft or Tochterunternehmen) is a company that is dependent on a parent company (Muttergesellschaft). Its assets are legally independent and separate from the personal assets of the shareholder. The natural person representing the company or managing its transactions are therefore relieved of personal liability.

GmbH, KG or AG are the most commonly used legal forms when establishing a subsidiary. Many foreign companies opt for an UG or GmbH due to their relatively low capital expenditure and simple formalities.

How to register a company (GmbH or UG)

Foreign companies may also choose to operate through a German branch office. Legally, a branch always remains part of the main branch (Hauptniederlassung), even if it acts as an independent company. There are two types of branch establishments that mainly differ in terms of the degree of independence from the main branch. Below you find information on each type.

Note: For both forms the local trade office registration (Gewerbeamt) generally requires that a local representative of the business resides in Germany.

A branch office in Germany must be registered within the trade register (Handelsregister) of the district court responsible for the area where the business is located and bears the name of the parent company. A notary will register the entry into the trade register as well as write up the articles of association for the German branch office.

Representative office or dependent branch office (Unselbständige Zweigniederlassung)

If your company has not many business contacts in Germany yet, establishing a dependent representative office (also known as a connection office) is a cost-effective solution. A representative office must only be registered within the Cologne trade office. However, the representative office may not sign any contracts; a legally-binding contract may only be signed by the foreign parent company.

The representative office may not issue invoices and may not request payments for the parent company. It may only exercise preparatory or supplementary activities, such as making/maintaining contacts and gathering information.

Independent or autonomous branch office (selbständige Zweigniederlassung)

The independent branch office is a branch physically separate from the parent company, while still subordinate to the parent company and only independent in terms of finances and organisation. The foreign parent company and its branch office in Germany form one cohesive business of the same entity.

The German branch office is therefore subject to the laws of the parent company, but has usually its own management, separate bank account and accounting.

 

Registering a company (GmbH or UG)

Are you looking to establish a limited liability company (UG or GmbH) in Germany?

GmbHs are the most widely used legal forms for corporations in Germany. They combine high flexibility with relatively few obligations. Another main advantage of GmbHs is their limited liability to its corporate assets. GmbHs require a minimum share capital of 25,000 Euros. For UGs, this is reduced to 1 Euro.

Here is a short roadmap with relevant links that will help you navigate the process.

  1. Choosing the right legal form for your company
  2. Get in touch with a tax advisor for legal and financial help. They help and support throughout the whole process
  3. Come up with a company name and define the business purpose of the company (Unternehmensgegenstand)
    Tip: The Chamber of Commerce and Industry (IHK) can help you check your company’s name and purpose completely for free, so make sure you take advantage of this. Likewise, it can provide you with relevant information on entering your company into the Commercial Register (Handelsregister)
  4. Draft the company’s articles of association
    Tip: You can use either standardised templates (Musterprotokoll - in German) or tailored-made versions
  5. Arrange a formal notary appointment to certify all documents
  6. Open a bank account
  7. Deposit at least 50% of the share capital (Stammkapital) into your newly-opened bank account
    Tip: Your notary will subsequently arrange for your company to be entered into the Trade Register (HR)
  8. Submit your trade registration (Gewerbeanmeldung) to your local trade office (Gewerbeamt)
  9. You are all set!

If you encounter any difficulties throughout the process, feel free to get in touch with us.

For information concerning business plans, taxes and insurance, be sure to check the IHK’s guide: Setting up a business in Germany

Funding Possibilities

At KölnBusiness, we can help you find the right funding programmes for your project.

Do you have any questions or already have a specific project in mind? Get in touch and we’ll be happy to guide you through the different local and regional funding programmes available.

Any Questions?

We are always happy to help!