Establishment of a GmbH:
stock capital, personal accountability and the steps to establish a company


The establishment of a GmbH is a much more complicated and time consuming task than the establishment of a company in England or in several other countries. This is why it is extremely important to choose a suitable professional for the establishment of a GmbH. In this page we consider the key issues of the German GmbH establishment. These include the amount of the required founding capital, personal responsibility, which is often ignored, and the critical steps in the establishment of a GmbH.




What you need to know about GmbH?

GmbH is the abbreviation of the German expression “Gesellschaft mit beschränkter Haftung” which is the German equivalent of a Private Limited Company. The establishment of a GmbH requires at least one founding member (owner) and one Executive Director. It is also possible to establish a single-person GmbH (“Ein-Personen-GmbH”) in which the owner and the Executive Director are the same person.

The GmbH company type is the second most popular legal form after the Individual enterprise. The establishment of a GmbH can provide an excellent opportunity for international companies and entrepreneurs to enter the European markets and creates confidence in its German and international business partners.




Establishment of a German GmbH step by step

Tartalom:




Advantages and disadvantages of GmbH establishment

There are several advantages and disadvantages to a German GmbH establishment which should be known before the establishment of the company. The most important of which are summarised below:

Advantages of a GmbH establishment:
+ Positive assessment and high prestige towards its international business partners
+ Stable German economic and political environment
+ Personal wealth responsibility of the GmbH owners is restricted
+ More favourable taxation conditions than those of the partnership companies or a personal enterprise if the owners leave the profit in the company
+ 95% tax exemption after the profit from the sale of subsidiaries

Disadvantages of a GmbH establishment:
- High costs of establishment
- A professional accountant is required for the preparation of the annual closings which can be expensive
- Complicated winding-up proceedings




Process of the GmbH establishment

Data reconciliation and German GmbH establishment

The easiest and quickest way to begin a GmbH establishment is to use our online configurator to assemble your own German company. This can be ordered in a few minutes directly on our website. Following your order, we prepare the company establishment, book the appointments required for the GmbH establishment and have your company name checked at the local chamber (IHK). Our notary prepares the articles of association for your enterprise which may include special rules if requested.

The actual company establishment will take place within 1-2 weeks. With the assistance of our office, it is possible for you to establish a GmbH in any city, town or village in Germany. The owners do not need to appear in person for the company establishment. Only the Executive Director will need to travel.


Opening a bank account for the established GmbH

Following the company establishment, we will open the bank account for the newly established GmbH in the company of the Executive Director. Due to changes in European Union Regulations introduced in 2016 to combat money laundering, opening bank accounts by non German citizens and by companies owned by non German citizens became difficult. Due to the increased bureaucracy, many financial institutions are unwilling to open accounts when the owners of the GmbH are not resident in Germany. The good news is that this is not true of every bank and it can be avoided. Our office has relationships with several German financial institutions which make it possible for us to successfully assist the companies established by us to open bank accounts in Germany.


GmbH company type


The payment of the capital required for GmbH establishment

Following the successful opening of the bank account, the payment of founding capital is required. The best solution for the owner(s) is to pay the capital of the company with a bank transfer to its account. In the case of GmbH the minimum amount to be paid is half of the founding capital, that is ​12,500 EUR​. It is important to note that the capital has to be actually paid. It is not sufficient that a lawyer or notary approves it, or the owners hold it in cash. Any such avoidance of the payment may later cause in the worst case, personal material responsibility for the owners. A prerequisite of the limited liability according to the GmbH Code (GmbHG) is that the owners de facto made the founding capital available for the company.


Application for a tax number for the established GmbH.

The commercial court registration which usually takes 2-6 weeks, is followed by the application for the tax numbers for the established GmbH. In Germany, the established company receives two different tax numbers. One tax number is the local corporate tax number which is required among others for the submission of tax declarations. The other tax number is the community (EU) tax number of the German company, which is also called VAT ID No. This enables VAT-free commerce with other companies within the European Union, but outside of Germany.




Costs of a GmbH establishment

GmbH establishment and the related fiscal charges

The most important expenditure during the establishment of the GmbH consists of the notarial and official expenditures. These are items prescribed by the state in all cases. The exact amount of the expenditure is influenced by the town in which the company is registered, the amount of its founding capital and the number of owners and Executive Directors the company has. During the German GmbH establishment, the following three items are to be considered: 1) Notarial (Notar) duty 2) Commercial court (Amtsgericht) duty and 3) Fee for the registration of the company for commercial activity (Gewerbeanmeldung). While the first item is affected by the founding capital of the company and the number of owners and Executives, the last two may differ from city to city. When establishing a GmbH which has one owner and one Executive Director, with a founding capital of ​25,000 EUR, ​an average of ​800 EUR ​notarial duty should be considered. The fee of the commercial court is usually about 120-150 EUR ​while the city offices charge​ the newly established GmbHs about ​30-55 EUR ​for the Gewerbeanmeldung.


GmbH establishment and the chamber membership fee

Following the successful company establishment, the GmbH will automatically join the local chamber of industry and commerce (Industrie- und Handelskammer, abbreviated as IHK). The membership fee of the IHK is regulated annually by its management. Currently, the standard membership fee is 80-150 EUR ​on average. This is billed to the GmbH by the local chamber within 1-2 months following establishment of the company. After this the membership fee of the chamber varies depending on the profit.

Those GmbHs which pursue craftsmanship activities (handwerkliche Tätigkeit), will become members of the local chamber of artisans (Handwerkskammer, abbreviated as HWK) in addition to the IHK membership. A list of craftsman activities in Germany either bound to licence or not bound to licence can be found here. (Note: Cleaning is an activity that qualifies as craftsmanship in Germany and involves obligatory HWK membership.) The starting companies and the enterprises with low turnover can apply for relief from the HWK membership fee. If requested, our office can assist you in the submission of the application for relief.


GmbH establishment and administration fee

The third item of the GmbH establishment is the administration fee which may vary from office to office. At several companies, ourselves included, there are dedicated founding packages which contain all our services. Other offices ask for payment for each task involved in the company establishment, such as on-premises interpreting. If you request proposals from multiple offices, it is advisable to compare the lists of services, to read the reviews of existing customers and to calculate the exact final amount of the establishment of the GmbH. You may be surprised to find that the final amount of company establishment is roughly the same even if there appears to be bigger differences in the amounts of the commission fees.




Conditions of a GmbH establishment

How many founding members are required to establish a German GmbH?

The establishment of the GmbH requires at least one person to perform the tasks of the owner and one person to perform the task of the Executive Director. The owners of the GmbH may be inland or foreign citizens and companies. The Executive Director can only be a private person with a valid work permit which is granted in case of EU citizens. The Executive Director is not required to have a residential address in Germany.


Is it necessary to travel to Germany in person for the establishment of the GmbH?

For the GmbH establishment, the owners do not need to travel in person to Germany. With our assistance, the German GmbH can be founded from any country. During the establishment, only the Executive Director of the company has to travel to Germany. The company establishment may take place in any city, town or village in Germany.


Rules regulating the company name of the GmbH.

When choosing a company name for the GmbH, some important rules have to be taken into account. The company name consists of two parts: 1) a chosen name which can be the name of the owner or an invented name and 2) the “GmbH” abbreviation. The company name in the majority of the cases can be chosen freely unless it has been previously registered. This can be checked on the website of the German patent and brand protection office (Deutsches Patent- und Markenamt, abbreviated as DPMA). There are some cases when the applicable law poses restrictions, for example, one cannot choose a company name for the GmbH which invokes fear or hatred. Any name suitable for misrepresentation is also to be avoided.


Do the Executive or the owners of the GmbH have any personal responsibility?

Usually, the GmbH is a limited liability company which means that the company is responsible for its possible debts only to the extent of its own capital. However, cases occur when the Executive or the owners of the GmbH are held personally responsible and in these situations, the limited liability does not apply.

The most common cases when the owners of the GmbH or its Executives undertake personal material liability:

  • Until the founding capital is (fully) paid, the owners are responsible for the missing margin.
  • Until the company is registered at the commercial court, the personal responsibility does apply for the transactions made in that period.
  • If the founding capital is withdrawn from the company for personal purposes following the establishment of the company, then in the case of possible bankruptcy the owners may be held responsible.
  • The purpose of the GmbH founding capital is to allow the company to trade freely with it. Thus the use of the capital for financing company expenditures, for example, the salary of the employees, purchasing goods, marketing, etc. is allowed. The legal act prohibits only the withdrawal for personal purposes.
  • The §15 InsO prescribes that if a company becomes insolvent, then the Executive Director shall request bankruptcy procedure within three weeks at the latest. If he/she fails to do so, he/she will be faced with personal material and criminal liability.

 

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Our clients recommend us:


Professional and the most humane attitude that I ever experienced in this field. Also a very fast administration that others would consider as a miracle. I highly recommend to anyone who is considering forming a company in Germany. Thanks!

- Peter K.,
Cogitate Games

I recommend GmbH-UG.com [...] All the time they put me in the first place, focused on all my needs. They are very patient, and all the time when i had a question he was right there. [...] I would absolutely recommend this company.

- Zoltan H.