The German private limited liability company (GmbH) is the most widely used legal form for corporations. It combines high flexibility with relatively few obligations.
Corporations like the GmbH based in Germany or with an executive board in Germany are liable to corporate taxation on globally generated income. Setting up a GmbH is easy and uncomplicated and can be accomplished in just a few steps.
Five steps formation process
In order to establish a GmbH in Germany, at least one shareholder (private individual or legal entity) is required. The nationality and residence of the shareholder(s) and the managing director(s) of a GmbH are irrelevant. However, the GmbH must have a German business address and a local representative.
The involvement of a German notary is required for the incorporation of a GmbH.
Certain documents are required for the incorporation of a GmbH. Typically, the notary will ask for documentation verifying the existence of any parent company as well as the power of representation for persons acting on behalf of it. In general, an excerpt of the foreign commercial register as well as articles of association of the foreign parent company will be required.
Please note that specific requirements regarding authentication and translation apply, depending on the legal form and origin of the foreign company. It is advisable to consult a German notary at an early stage for individual advice.
Articles of association
The articles of association shape the identity and constitution of the company. Thanks to the large scope for contractual design, the GmbH is a very flexible corporation form. Mandatory content includes share capital, shareholders and respective shares held, business name, registered office, and company purpose.
For a standardized formation of a GmbH model articles of association (for set-ups by cash subscription with a maximum of three shareholders and one managing director) are provided. These articles must still be notarized, but for a reduced fee. In addition, sample deeds are also provided by the chambers of industry and commerce (Industrie-und Handelskammer, IHK).
Share capital of a GmbH
The GmbH requires a minimum share capital of EUR 25,000. At the time of registration, at least half of the minimum capital (i.e. EUR 12,500) must be actually and verifiably contributed on a bank account. The capital is not a deposit and, to certain extent, can be used for the company’s business operations.
The share capital can also be contributed in kind (e.g. real estate or patents). A contribution in kind must be agreed upon in the articles of association, a valuation report is necessary, and the asset must be fully contributed.
Registration of the new company
Registration with the German commercial register (Handelsregister) via a German notary is mandatory. Once registered in the commercial register, the GmbH becomes a legal entity and the limited liability exists.
Before business operations are started, the competent local trade office (Gewerbe-/Ordnungsamt) must be notified about the planned activity. A business license or permit is not necessary for registering the business in the majority of cases. In some sectors, a permit or authorization might be required.