Business presence

Main vehicles for doing business in Germany are German companies. (Almost) all of them are registered at the at the trade register of the Local Court, they all have at least one managing director, and this director has to be a natural person.

The most used companies are:

  • Limited Liability Company (Gesellschaft mit beschränkter Haftung – “GmbH”)
    • Capital Company
    • Minimum Share Capital: 25.000,00 € (whereof at least half of the capital stock must be contributed)
    • Shareholders’ liability limited to the nominal amount of the shares; so no further liability if the nominal amount has been paid to the company
    • Most popular entity, best for medium-small businesses
  • Entrepreneurial Company (limited liability)
  • (Unternehmergesellschaft (haftungsbeschränkt) – “UG”)
    • Capital Company; smaller version to GmbH
    • Minimum Share Capital: 1,00 €; at least 1.000,00 € usually (must be contributed to 100%)
    • Shareholders’ liability limited similar to GmbH
    • 25% of the profit has to be transferred to the statutory reserve until the minimum share capital of 25.000,00 € has been raised
    • Then change of name to GmbH possible
    • Used for small businesses with no seed capital
  • Public Limited Company, (Aktiengesellslchaft – “AG”)
    • Capital Company
    • Minimum Share Capital: 50.000,00 €
    • Shareholders’ liability limited to the nominal amounts of the shares
    • More formal rules, therefore rather for mayor investments
  • General Partnership (offene Handelsgesellschaft – „OHG))
    • Commercial Partnership
    • No minimum share capital
    • Joint and unlimited liability of each partner
    • Agreement formlessly effective
  • Limited Partnership (Kommanditgesellschaft – „KG))
    • Commercial Partnership
    • No minimum share capital €
    • Unlimited liability of at least one partner (who also can be a GmbH, in this case GmbH & Co. KG, a quiet popular entity, fiscally driven)
    • Limited liability of partners to a fix amount

Alternatively, you act with your foreign business/ your foreign legal entity, provided that:

  • You act in a Member State of the EU,
  • The register seat of an entity remains in the country of origin according to its legal requirements
  • Centre of administration may be transferred/ established to Germany
  • Centre of administration may be established as a registered branch

Setting up a company/ a branch

The setting up is different for each entity. Roughly spoken the following rules apply:

  • Trade Registration at the local trade office to get a concession according to the Trade, Commerce and Industry Act, principle: any commercial activity is open to anybody unless exceptions an restrictions are prescribed


  • For Commercial Partnerships:
    • Agreement formlessly effective, registration to the trade register is not a prerequisite, but partners are legally obliged to registration
    • Limited liability of partners becomes effective with its registration to the trade register
    • Formation phase takes 2 – 4 weeks
  • For Capital Companies (herein only GmbH):
    • Agreement has to be notarized and its incorporation has to be registered to the trade register
    • Evidence has to be provided for the original contribution to the entity before registration
    • Formation phase takes 2 -4 weeks
  • For Registered Branch:
    • Decision about establishment has to be taken by foreign entity according to foreign corporate law
    • Factual establishment of the branch
    • Notarially certified registration to the trade register

Labor law framework

  • Employment agreement in written form advisable
  • Statutory minimum wage for everybody, actually 8,50 € per hour
  • Limitation of the term of the agreement generally possible, without any reason for limitation a limit of two years is possible, otherwise the contract is treated as indefinite
  • Daily working time generally 8 hours
  • Statutory minimum vacation of 4 weeks a year, from a certain qualification 6 weeks usual
  • Wage payment in case of sick leave up to and including 6 weeks (afterwards compulsory health insurance)
  • Social security contributions (health, nursing, unemployment, pension) split between employers and employees, actually 19,9% each, for employer additional to gross salary
  • Dismissal in written form, period of notice 4 weeks until 15th of or until end of a month; no preliminary examination or even authorization through state authorities; with more than 10 employees Employment Protection Act applicable, justifying cause required; German jurisdiction is employee-friendly; dismissal effective if not a complaint of unfair dismissal is suited within 3 weeks after delivery

Acquisition of land

  • No restrictions for foreigners to acquire land
  • Notarized sales contract necessary
  • Acquirer becomes proprietor when registered in the real estate register of the Local Court; the entry is processed by the notary


  • Company with residence in Germany is taxable entity on all its profits, wherever realized, non-resident company with its branch in Germany is taxed on its income realized in Germany
  • Corporate tax for branch or capital company, tax rate in principle about 15%
  • Income tax: no taxation of commercial partnerships, instead separate and uniform profit statement for individual taxation of each partner; tax rate from 15% to 45%.
  • Solidary surcharge amounting to 5,5% of corporate/ income tax
  • Trade tax raised by the municipalities, tax rate roughly spoken from 7% to 17%
  • Effective tax burden of about 30,4% (in 2014)
  • VAT standard rate 19%, except for agricultural products, foodstuff, books, art objects and hotel stays a lower rate of 7% is charged

Publisher: NJP Grotstollen