Starting a GMBH in Germany: Process, Costs & Reasons

If you’re an investor from a foreign country and would like to set up a German company to expand your business. In this case, you should consider a complete German Limited Liability Company with its German name “GmbH (Gesellschaft mit beschränkter Haftung)”, which will be the most suitable option.

A GmbH is a type of limited liability company in Germany, which provides its owners with limited personal liability for the company’s debts. It is a popular form of business structure for small and medium-sized enterprises (SMEs) due to its flexibility and ease of setup.

Before starting a GmbH in Germany, it is essential to have a clear understanding of the business concept, target market, and the necessary resources. It is also essential to conduct market research and develop a comprehensive business plan.

Through this article, we will be going to provide you with an in-depth guide on the processes of starting a German GmbH entity. So if you’re keen to know more, let’s straight dive into it. 

What is a GmbH in Germany?

A GmbH (Gesellschaft mit beschränkter Haftung) is a limited liability company under German law. It protects shareholders from personal liability, limiting their risk to the capital they invest. This makes it an ideal structure for both local entrepreneurs and foreign investors who want to expand their business into Germany or the broader EU market.

Why Choose a GmbH to Start a Business in Germany?

Here are some key advantages of setting up a GmbH in Germany:

• Limited Liability: A shareholder’s personal liability is limited to the amount they invested.
• Professional Image: A GmbH adds legal credibility and trust with clients and partners.
• Access to Capital: GmbHs often find it easier to obtain financing compared to sole proprietorships.
• Transferability: Ownership can be easily transferred via share sales.
• EU Market Access: Being a part of the European Union gives Germany access to a huge market.

How to Open a GmBH in Germany?

Follow the procedure below to open a GmBH in Germany:

Step 1: Choose a Company Name

Check its availability and legality through the Commercial Register (Handelsregister) and the local IHK (Chamber of Commerce). It must be unique and meet legal naming rules.

Step 2: Prepare the Articles of Association (Gesellschaftsvertrag)

Prepare the legal foundation of the company. This must include:

• Company name and address
• Share capital distribution
• Business purpose
• Managing directors

Step 3: Notarize the Articles of Association

The notary will authenticate the document and officially start the incorporation process.

Step 4: Open a Business Bank Account

A minimum share capital of €25,000 must be deposited out of which a minimum of €12,500 must be paid in before registration. Get bank confirmation of the deposit.

Step 5: Register with the Commercial Register (Handelsregister)

Submit the notarized documents and bank confirmation to the local court (Amtsgericht). Upon approval, your GmbH becomes legally recognized.

Step 6: Apply for a Tax Identification Number (Steuernummer)

Register with the Tax Office (Finanzamt) and complete the Questionnaire for Tax Registration. Also register for VAT (Umsatzsteuer) if applicable.

Step 7: Register with the Local Trade Office (Gewerbeamt)

Obtain a Gewerbeanmeldung (Trade License) to legally operate your business.

Step 8: Register with the Chamber of Commerce (IHK or HWK)

Membership is mandatory. The relevant chamber depends on the type of business (IHK for commercial, HWK for trades).

Documents Needed to Set up a GmbH in Germany

To set up a GmbH in Germany, the following documents are generally needed:

• Company name reservation certificate.
• Notarized articles of association (Gesellschaftsvertrag)
• Proof of share capital deposit (e.g. bank confirmation)
• Identification documents for all managing directors
• Proof of registration with the Commercial Register (Handelsregister)
• Tax identification number (Steuernummer) for the company
• Proof of registration with the local trade office (Gewerbeamt)
• Business registration certificate (Gewerbeschein)
• VAT registration certificate (if applicable)
• Proof of social security registration for employees (if applicable)
• Business insurance certificates (if applicable)

Read More: Open a General Partnership in Germany

Eligibility Criteria for Starting a German GmbH

To establish a GmbH in Germany, the following conditions must be met:

• Company Name: Must be unique and not already registered.
• Share Capital: A minimum of €25,000, with at least €12,500 paid in before registration.
• Managing Director: At least one managing director (Geschäftsführer) is required—can be a resident or non-resident.
• Registered Office: Must have a local address in Germany.
• Business Purpose: Must operate a legal business activity.
• Articles of Association: Must be notarized and aligned with German legal requirements.

Cost of Starting a GmbH in Germany

The cost of Starting a German GmbH can vary depending on several factors, such as the location, the services needed, and the type of business.

Here are a few of the costs that you should consider:

• Notary fees: Notarizing the articles of association is mandatory for registering a GmbH. The costs for this assistance can differ, but they typically range from €150 to €300.
• Court fees: Registering a GmbH with the commercial register (Handelsregister) involves paying court fees. The pay relies on the share capital of the firm, but it typically ranges from €150 to €350.
• Legal and tax advisory fees: Depending on your needs, you may want to seek advice from a lawyer or a tax advisor. The fees for these services can vary, but they typically range from a few hundred euros to several thousand euros.
• Share capital deposit: A minimum share capital of €25,000 is required to register a GmbH. This money needs to be deposited in a bank account, and the associated fees can vary depending on the bank and the services required.
• Other costs: There may be other costs to consider, such as registering with the local trade office (Gewerbeamt), obtaining a business registration certificate (Gewerbeschein), or getting business insurance.

Conclusion

Germany has a well-developed legal system, a stable political environment, and access to a large and diverse market through the European Union. Overall, while the process of setting up a GmbH can be complex and time-consuming, it can be a worthwhile investment for those looking to start a business in Germany.

It is important to carefully consider your needs and situation before making any decisions and to seek expert guidance from professionals like OnDemand International to ensure that you are following all legal requirements and regulations.