German limited company (GmbH)
The German GmbH is most closely comparable to the Anglo-American “Limited” (Ltd.). The GmbH is the most widespread legal form in German business. In addition to this, the GmbH is most preferred by foreign investors when founding a German company and, also by foreign companies when founding an entity in Germany.
Founding a GmbH
To found a GmbH, at least one founding shareholder is required, that is either a natural or legal person, but it can also be another legal entity (e.g. OHG, KG). The shareholder can be based in Germany but this is not a requirement.
The nominal capital required for founding is at least 25,000 EUR. An alternative to this is an asset-based foundation, whereby the contributed economic goods (real estate, company shares, machines etc.) must also have a common value of at least 25,000 EUR.
Procedure for founding a GmbH
The following steps are required for founding a GmbH whereby the company’s location must be in Germany:
- Completion of a company contract which must be certified by a notary
- Payment of at least half of the nominal capital (at least 12,500 EUR)
- Naming of a German business address for the GmbH
- Application for registration in the Companies Register in the district where the company is located
- Tax registration at the jurisdictional German tax office
- Local business registration at the jurisdictional local business office
Total costs for founding a GmbH are generally between 1,200 and 2,000 EUR.
A GmbH must have one or more managers (Geschaeftsfuehrer), whereby only natural persons with unlimited legal capacity may be appointed as managers. The manager may be based in Germany or in another country.
For obligations which arise before the company contract was certified, the founders shall be personally liable as joint debtors.
After entry into the Companies Register, outside liability for obligations is basically limited to the company assets of the GmbH.
The income of a GmbH is subject to corporate tax, the solidarity surcharge and local business tax.
Tax on turnover (VAT) is handled in Germany essentially independently of the company’s form and is explained in more detail on a seperate page.