Company Register Germany
How to Set Up a Company in Germany
The German government provides information about their companies through the office of the German Ministry of Economy and Technology. Foreigners wishing to invest in Germany can get a lot of relevant information through the Ministry's website. They are offered step-by-step procedures on how to start investing in German companies, the business planning strategies they require, and techniques that can be used in management to ensure that the business stays afloat. The website provides information in several languages including English, Turkish, French and Russian.
Starting a company in Germany is pretty straightforward. The basic procedures and formalities that are followed during the German company registration process are based on German laws and regulations. When it comes registering a company or a business in Germany, the law does not make a distinction between locals and foreigners.
The law in Germany differentiates between limited companies, public limited companies (joint stock companies) and other forms of business partnerships. The Limited Liability Company or "Gesellschaft mit beschränkter Haftung" (GmbH) is the most common corporate structure in Germany.
In order for a business to be registered as a limited liability company (GmbH), it must have a minimum share capital of € 25,000. At least half of this nominal capital (€ 12,500) must be paid in when the business is applying to get into the German company register. If the envisaged limited liability company has only one shareholder who is also going to be the director, he will be required to provide a security for the rest of the money.
If you cannot raise the required minimum nominal capital of € 25,000 for registering a GmbH, you can still register a "Unternehmergesellschaft" (UG haftungsbeschränkt). This is a sort of baby-sized GmbH, which was introduced in November 2008. This can be registered with a minimum share capital of between € 1 and € 24,999. However, the owners of such a company are required to invest back at least a quarter of all their future annual profits into the business. This is meant to boost its capital reserves until it reaches the statutory minimum amount of € 25,000.
Before registering a limited liability company in Germany, the agreement between the partners or shareholders must be recorded by a notary public. The agreement and the Company Register Germany application is managed by the notary. This is a minimum requirement before the company is entered into the German company register.
Limited liability companies in Germany are required by law to maintain adequate accounting records. Regardless of their size, these records must be framed in an orderly manner using the double entry accounting system. The electronic accounting must comply to the German GDPdU requirements. Companies must also provide annual statements including a profit and loss report, a balance sheet and explanatory notes to the company's accounts within three months of the start of a new financial year. Small companies (Unternehmergesellschaft) can provide their accounts within an extended period. These annual statements of accounts must be published and filed with the Federal Bulletin.
Limited Liability Companies and Taxation
Limited liability companies are required to pay corporate income tax plus solidarity surcharge and municipal tax.
If a company distributes a dividend, this money is liable to capital gains taxes. However, considering double taxation agreements and parent-subsidiary directives it is tax free.
If the limited liability company suffers some losses during a financial year, partners cannot offset such losses with income from other sources. This is due to the fact that, the GmbH is a separate legal entity. It is independent from its shareholders. However, these losses can be carried forward or backwards on order to reduce the tax burden.
Limited Liability Companies and Labor Relations
Foreign investors are required to observe labor contracts. These contracts should always be in writing. This is also the case for notices of contract termination. The rights of employees are stipulated by various laws such as the Federal Vacation act, which stipulates vacation benefits that must be given to employees. Employers cannot deviate from these laws.
Companies are usually supposed to pay half of their employees' pension, old-age care, unemployment and health insurance. They must also pay accident insurance, workers compensation board insurance, which is a statutory requirement. These contributions should be paid to the health insurance fund and the Employers' Liability Insurance Association.
Before starting operations, companies must be registered to the local authorities. This is mostly the local Trade Office. This office will then inform the tax office immediately. The tax office will in turn send a questionnaire to the company. This is meant to acquire the necessary tax information. The questions concern information such as the company address, banking information and any other data necessary for taxation purposes. The tax office will also assess whether the company should pay any advance payments on business, corporation or income taxes. They may also assess whether the company is liable to pay VAT. A European VAT ID number should be applied for by companies that intend to carry out cross border business. The questionnaire should be filled in and returned back within a month.
Foreigners who intend to start a company in Germany can use the English language online portal provided by the German Ministry of Economy and Technology. This website contains procedures, regulations and requirements for starting a company in Germany.
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