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How to Set Up a Company in Germany for English-Speaking People

225 points by shapiro92 9y ago

k__ 9y ago
Is this even necessary? Can't they simply set up an LTD in Ireland and "use" it in Germany? I know some Germans who did this for tax reasons, but I could imagine that Ireland formalities are easier to understand for English speakers.
- Xylakant 9y ago
  You can do that, but then you’ll have to deal with Irish Tax law and if you want to pay yourself a wage you’ll be employed by an Irish company. This will lead to it’s own set of complications. You’ll probably need a bank account in Ireland etc. If you’re selling things in germany you’d still need to collect German VAT depending on whether your customer is a company or a private entity, ... Registering a British LtD used to be common when the UG didn’t exist and you’d need at least 25k for a GmbH to get limited liability, but it’s fallen a bit out of fashion since then.
  - Sujan 9y ago
    And now there is a Brexit looming... Poor LTD owners :/
    - Xylakant 9y ago
      No pity from my side, but yes. Some folks will pay a hefty price for the shortcut.
      - phillc73 9y ago
        Another shortcut, while still remaining in the EU is a Maltese Limited company. Very similar rules and structure to operating a UK based Limited company, but a much better corporate tax regime. I went this route, using an accountant recommended by a trusted friend. Bought an existing "off the shelf" company and have a Maltese business bank account, all without leaving the comfort of my desk.
        charlesdm 9y ago
        Have you physically been to Malta? Do you pay non Maltese taxes? Do you understand tax law? If no then it is likely you are committing tax fraud (perhaps without even realising it). People need to understand this: there is no free lunch. If you think you can be classified as a Maltese company, sitting at a desk in <insert random European country here>, you are dead wrong in 99.9% of the cases. Get proper tax counsel (not an accountant, a lawyer -- accountants are generally sloppy with details, and details matter, e.g. a word in a contract can matter). Technology and internet based businesses have some unique opportunities to optimise taxes, but the line between fraud and optimization is quite thin.. get good counsel, or prepare for a dispute where you take your (local) tax authority to court. Source: a decent knowledge of corporate and tax law and plenty of tax disputes, which I've mostly won.
        a-saleh 9y ago
        If I am thinking about something like this (my reason so far is fairly contrived, but I would really like to use Stripe, that is available i.e. in Ireland, while in mz country, it mostly seems to be paypal/braintree), where would I be able to read-up on gotchas, before I consult a proper lawyer?
        charlesdm 9y ago
        You probably want to consult a (reputable) local tax lawyer. They tend to be expensive, but check legal500.com.
        phillc73 9y ago
        Thanks for your concern, but I am very happy with the professional advice I have received and am entirely confident that no tax fraud is being committed.
        charlesdm 9y ago
        Just make sure to have good legal counsel. Because something is "legal" for person X doesn't make it legal for person Y. A wealthy family with a company that employs 1000+ people will generally get away with more than a lone wolf with no political connections (not that I'm saying you're a lone wolf, just saying it's not always clear cut). Best of luck!
      - Sujan 9y ago
        "Funny" that the "bank" that is suggested in the article is one of them: https://www.getpenta.com/imprint.html https://www.getpenta.com/imprint.html
        shapiro92 9y ago
        they were part of an accelerator in the UK probably due to that.
- gwbas1c 9y ago
  I've found that it's always easier to follow "normal" routes until you know what you're doing. In the US, the equivalent is a Delaware corporation. Companies typically incorporate in the state they operate in when they are small and the owners are more concerned about running their business. Reincorporating in Delaware happens when companies are large enough to hire someone to handle the paperwork.
  - ringaroundthetx 9y ago
    > Reincorporating in Delaware happens when companies are large enough to hire someone to handle the paperwork. right, all $200/yr worth of work. anyway, Europe is full of little hamlets that offer convenient incorporation services.
- cntlzw 9y ago
  The UG was actually made just for this purpose. With the EU law it was easier to just create a LTD or LLC in the UK. The 25k EUR are not something you have in your pockets as a founder. Even though you only need to deposit half.
- captainmuon 9y ago
  If you are based in Germany, you still have to pay German social insurances (health, retirement, care, occupational accidents) for yourself and all employees. These are probably a greater expense of money and time than having to set up a GmbH. And the whole purpose of GmbH or LTD is to limit liability if something goes wrong - but I wouldn't want to have to defend myself or liquidate my company in a irish or maltese jurisdiction...
jankotek 9y ago
> A GmbH requires a minimum of 25 thousand euros Simpler advice; buy a ticket to Bratislava and take it from there.
- dullgiulio 9y ago
  Easier still, do it online in Estonia.
  - patkai 9y ago
    Yes, the e-residency is extremely cool and forward looking. And you don't even have to travel there, only to one of their embassies.
- beberlei 9y ago
  That is the initial starting capital, not a fee. You can go on and invest or spend the money after court verified its available.
jFriedensreich 9y ago
I'm selling my empty gmbh ready setup (as shutting down a gmbh costs 3000 euros and setting up one is equally expensive this is a win-win even if it sells just for a few euros) contact me if interested. contact gmbh_selling@ntr.io
- flexie 9y ago
  How does a buyer know that there are no hidden liabilities in your GmbH? Does it come with your personal representations and warranties securing that?
  - Xylakant 9y ago
    A GmbH would need to have proper accounting, all liabilities would have to be in the books. Anything else would be fraud and that’s one of the things that suddenly pierces the veil of the limited liability for the CEO (whether you can extract any money from the seller is a different, albeit related question) Do your diligence. You could also make the personal liability part of the sale. On the upside, buying a used GmbH may come quite a bit cheaper if the company owns no assets: the initial 25k are not a minimum that needs to be kept, they can be spent on things the company needs, so you might be able to pick up an empty shell for far less than that amount. I’d not buy a GmbH from a random person on the Internet, but if you’re in a hurry to get a GmbH set up, there are notaries and lawyers that specialize in selling ready-made GmbH shells. You’d still have to get the sale notarized and probably need to jump through a few hoops to rename the company to something suitable, but there are a few reasons that may be attractive, primarily that it offers limited liability from day one. Quite a few people forget that in the intermediate phase between notary and confirmed registration (GmbH in Gründung) the shareholders are personally liable for all businesses and contracts that the company enters into.
  - jFriedensreich 9y ago
    Normally you would have an accountant you trust, (i would highly advice against trying to do GmbH paperwork yourself) he/she would get directly in touch with the company that does the current tax and accounting work for my GmbH and do the vetting for you. Germany has very strict publication and documentation laws for GmbH's so there is not really some hidden liability possible, if there was that could get me to jail even if i wasn't trying to sell the company...
Scotrix 9y ago
Don’t start a company in Germany if you don’t have to. Expensive and bureaucratic tax system (accountants and time wise), regular accountancy checks which you have to pay your accountant for, very hard to close down and insolvency is very complicated.
- bflesch 9y ago
  Yeah it is very bureaucratic indeed. If you want to raise money or add shareholders you need to make official appointments w/ lawyers and pay significant fees.
- mannigfaltig 9y ago
  [deleted]
  - exhilaration 9y ago
    Because it protects entrenched players?
  - claudius 9y ago
    It doesn’t really stifle innovation in any way?
- eastendguy 9y ago
  Is this hearsay or your experience? "regular accountancy checks"... I even forgot when our last one was...maybe 5 years ago. And this seems is typical.
- matt4077 9y ago
  Meh... It's not quite as easy as one might wish, but I haven't seen any business where it had any significance. If you're small, it's about $300 to start and maybe around $500 for an accountant. It get's more complicated once you have employees, but even that's not relevant compared to almost any other aspect of a business. I think we're paying EUR30 per quarter for managing the employees taxes and various benefits. If you're doing GAAP accounting, you're 95% done with taxes as well. And since these standards have converged over the years, the only difference in bureaucracy that remains is people's enduring stereotypes.
devdad 9y ago
Is that correct, €25000 to start a GmbH? The Swedish equivalent (AB), probably some differences, costs ~€5000. I think the registration cost another ~€150.
- explodingcamera 9y ago
  You can start a UG which is essentially the same as a GmbH for as few as 1€
  - ohthehugemanate 9y ago
    German business owner here. The accountants and tax lawyers here have all told me the UG is looked on with suspicion by the tax authorities. Don't start a company in Germany. Don't take it from me, take it from the World Bank, which ranks Germany 114th in the world for ease of starting a business. Just narrowly edging out the Dominican Republic. It sucks.
    - ahartmetz 9y ago
      Dunno, I know a happy owner-employee of an IT consulting GmbH and I'm currently setting up my own, 2/3 of the way through. It doesn't seem like a big deal. I kind of expected more bureaucracy tbh ;)
      - pgeorgi 9y ago
        Bureaucracy in Germany is an interesting meme. Everybody complains about it, I did as well. Then I encountered the bureaucracy in the US. It's even more forms, more officials that get a say about everything (Different sales tax at all levels down to the county, wtf?), they're slow to deal with even for non-complex matters (the reason why Zootopia's DMV employs sloths totally went over the heads of most of my [German] acquaintances), and with little organization. On a tangent (since it's not "public" bureaucracy per-se): You get a corporate bank account with credit line within a day in the US. That's wonderful. Now try to send money to an account at a different bank within the country, within a day. I'll wait. So yes, Germany has a huge bureaucracy. But work with them and they'll work for you (I got tons of useful advice, for free, when I asked them how to approach whatever it is I went to them in the first place) - and compared to many other places bureaucracy seems highly efficient here.
gibasmaciej 9y ago
4-5 weeks ?!
ivan_gammel 9y ago
The Very Important Question is how much time and money it takes to close the company, not how to open it. Not all startups are successful, so it always makes sense to think about the shutdown.
- shapiro92 9y ago
  you have to continue doing taxes for another 3 years if I am not mistaken. Depending on your accountant that would be around 1k per year.
  - hobofan 9y ago
    If you do a clean shutdown (= you have enough money to pay your accountant and any other debtors), you can close down a company at the end of your business year.
    - ivan_gammel 9y ago
      Isn't there a mandatory waiting period to collect claims from creditors, employees etc? If I decide to close the company few day before the end of the business year, that's unlikely to be possible to do it so quickly.
      - Xylakant 9y ago
        There's a one-year waiting period after the liquidation has been publicly announced in the Bundesanzeiger before the remaining assets can be distributed among the shareholders. See § 73 GmbhG http://www.gesetze-im-internet.de/gmbhg/__73.html http://www.gesetze-im-internet.de/gmbhg/__73.html
- pgeorgi 9y ago
  You balance the sheets, close down the company and it remains in some "in liquidation" state for another year to make sure that the sheets are, in fact, balanced. Makes the company more trustworthy for potential partners since they won't face closed doors from one day to the next, but otherwise makes little difference: a company in liquidation is really low maintenance if the paperwork is in order.
shapiro92 9y ago
Guys I just released it also on ProductHunt! https://www.producthunt.com/posts/how-to-setup-a-company-in-germany https://www.producthunt.com/posts/how-to-setup-a-company-in-...
daftmonk 9y ago
Just want to note that if you're not tied to Germany in particular, Netherlands is a much better option for US citizens looking to start a company, thanks to the Dutch-American Friendship Treaty. (yes, it's DAFT - https://en.wikipedia.org/wiki/DAFT https://en.wikipedia.org/wiki/DAFT). NL is a pretty easy place to business, at least as an entrepreneur. (Things get more complicated with lots of employees, like in most of Europe.) The tl;dr version is US citizens can get a residency permit (2 years, renewable indefinitely, considered a non-temporary purpose of stay so you're eligible for permanent residency after 5 years) to start a business in the Netherlands with very few restrictions and very little in the way of capital requirements (€4500 in the business account.) Plenty of attorneys in the Netherlands can take care of the necessary paperwork for €1500, give or take, but lots of people manage it themselves too. A few blogs and guides of the many out there: https://daftvisa.wordpress.com/step-by-step-guide/ https://daftvisa.wordpress.com/step-by-step-guide/ https://survivingdaft.tumblr.com/ https://survivingdaft.tumblr.com/ http://passthesourcream.com/daft/ http://passthesourcream.com/daft/
- jorvi 9y ago
  Not only that, we are considered the best non-native English speakers of the world, so even if you aren't keen on learning Dutch (boo!) you'll manage pretty easily :)
  - ant6n 9y ago
    The Dutch are also great at German!
    - Freak_NL 9y ago
      Only in as far as our languages are similar (they are more closely related than either of them is to English). A lot of younger Dutch are quite limited in the languages they speak; often just Dutch and passable English. Don't expect people under 30 to be able to read a German newspaper comprehensively or hold a conversation beyond ordering beer in a Biergarten when in Germany. Older generations with a tertiary education degree often can speak and read at least either French or German at a more useful level though.
0xfaded 9y ago
Countries in Europe now offering start-up visas (without major capital requirements): - Denmark - France - Italy - Netherlands - Spain - Portugal - Lithuania - Estonia - Austria - Sweden I'm currently applying for Denmark. Invest Denmark has offices all over the world (including Palo Alto) and will be more than happy to assist you through the process. I've been in SV for 3 years, but never went for the green card. The US won't let me stay, so I guess I'll have to go suppress wages somewhere else.
- anon999888999 9y ago
  To everyone else. If you care about your privacy, dont go to Denmark. That country is turning into a shitshow nazi dream. Source: I helped the government build a database registering their citizen every move. Currently has 10000 A4 pages of meta data on average on every citizen of meta data alone. Just meta data.
- robk 9y ago
  And the UK which you seem to have left out. Why? Tech City Visa is well known.
  - 0xfaded 9y ago
    Honestly I did a fair few days of research and whenever the UK is listed as an option, the figure 200,000 gbp also shows up. Looking more into this, looks like there is a special 50k gbp if the money is coming from local VC's or government grant. In my case I have a side product that is fielding licensing inquiries, and I'm looking to bootstrap (figure that's just as time consuming as fund raising). I don't have 200k gbp in the bank, and I'm not willing to nor see the need to gamble with family and friends' money. So to me the UK scheme falls into the category of "major capital requirements".
martinald 9y ago
What a giant pain in the ass compared to a UK incorporation. Takes about 5 mins, £15 and less than a day to form. You can also sign up for taxes online in a few clicks.
nik736 9y ago
You can also found the GmbH with 12,5k EUR instead of 25k, which makes much more sense than going the UG route.
- ahartmetz 9y ago
  This needs explanation: You only need to deposit half of the 25k up front, the rest... really only when the limited liability is invoked in a bankruptcy. I wouldn't call setting up a GmbH especially difficult or complicated, just slow (2-4 weeks). Your tax advisor/accountant and notary can help and advise you in case there are questions.
  - nik736 9y ago
    Yes totally, what I was trying to say is that instead of founding an UG where you have to put 25% aside until you hit the 25k, it makes much more sense to simply found a GmbH with 12,5k that comes with its prestige and it will make it much more easy to do business with others.
weinzierl 9y ago
Incorporating as a GmbH is the most common way to start a company in Germany (about 40%). The UG form is not very common (about 9%) and especially if you plan to do business with other companies in Germany I would not recommend it, because UGs are often frowned upon. Founding a GmbH is not only relatively expensive, it also takes time. Many founders avoid incorporating themselves but prefer to buy a new GmbH. This is actually a business here, there are companies that keep a pool of fresh GmbHs and sell them to founders. Search for 'Vorratsgesellschaften' if you are interested in going that route.
- hobofan 9y ago
  Other reasons why you want to avoid a UG if possible: - Sooner or later you will have to convert your UG into a GmbH anyways - Most banks don't offer bank accounts for UGs, and those that do often under really shitty conditions
  - Xylakant 9y ago
    You don't have to convert your UG to a GmbH. You may once the capital reaches 25k EUR, but you're not obligated to. Until the Stammkapital of the UG reaches 25k you're obliged to keep 25% of the yearly earnings. Bank accounts for UGs are available at the same conditions as for a newly formed GmbH (no credit line, no credit card, ...). Generally speaking, bank accounts for newly formed businesses have shitty conditions.
- cntlzw 9y ago
  What the article doesn't mention is the ongoing costs with a GmbH. The annual Bilanz is around 2000 EUR. Not to mention you pay lots of taxes and as a founder you can't get money out of the GmbH without getting taxed again (Abgeltungssteuer).
  - Xylakant 9y ago
    The taxes when you want money out of the GmbH are not the primary issue. They're structured in such a way that all earnings from the company are more or less taxed at the same rate as your normal income tax, for exampe you get to deduct the Gewerbesteuer etc. You can even use a GmbH to flatten your income and use it as a vessel to keep some money for when you want a longer holiday or for bad times. This may or may not be worth the extra effort. The primary issue is that you can't just take money out of an GmbH/UG/AG (Kapitalgesellschaft). The act itself requires a shareholder meeting (easy if you're alone) and a balance sheet is required (less easy). You can't take money that would put the balance of the company below the required minimum, ... Basically, the money placed into the company is frozen, you mostly can only access the earnings. You can, however, pay yourself a regular wage, but this wage needs to be treated like a normal wage: needs to be paid monthly, needs to be fixed, ... This will likely become an issue if the company has no established cashflow. You can also take shares of the earnings (Tantieme) as part of your wage, but that also requires a balance, so it's usually done when the yearly taxes are filed. They'd be taxed like your regular income and the company would not pay any extra tax on those (simplified, they're treated as wages paid, so regular costs that reduce the earnings).
shapiro92 9y ago
A few cents from my side, setting up a company like GmbH or UG helps when you target a German market. Germans are like that, they love to see the GmbH after the name of the company that they own or they buy / collaborate with. Now an UG is young in comparison to GmbH, it is slowly being accepted.
earlybike 9y ago
Before setting up companies in a different countries than where you live: This can get very messy and you should either have the company in the country where you live or live in a country which is very tolerant (tax-wise) about having companies in other countries. On a secondary note: Germany is the worst country to incorporate: bureaucratic, expensive, tax offices are expensive and stuff is complicated, worst privacy regulation to come (from a company perspective), Labour is expensive compared to their skill level and English skills. One good thing though: since share transactions are done with state notaries there is more safety when doing them and less need for lawyers for simple transactions. For more complicated transactions with higher funds it gets expensive again. The Articles of Association must be German, the rest can be in English.
pokemongoaway 9y ago
But why do this instead of setting it up somewhere in the US? Having an office there - if you already have HQ or something in the US - might have benefits. But I doubt choosing most places in EU would have benefits over the US.
- leoharsha2 9y ago
  I thought the way that one Apple subsidiary avoided taxes was pretty clever. The USA taxes corporations by their headquarters location, and Ireland taxes companies by their physical presence. So apple created a headquarters in Ireland, but did physical business in the USA. So the USA didn't tax it because it's HQ was in Ireland, and Ireland didn't tax it because it's physical presence was in the USA. So that subsidiary paid absolutely zero taxes, they didn't even file. It saved Apple a good 5 billion dollars.
  - pokemongoaway 9y ago
    Tax avoidance is another topic, I thought. Roger that, though.
- pgeorgi 9y ago
  > But why do this instead of setting it up somewhere in the US? Because then you have an LLC in the US. The article opens with "A quick google search of 'How to setup a company in Germany' yields numerous results". Its target audience is likely the sizable expat community in Berlin.
captainmuon 9y ago
If you are bootstrapping, or just founding a small side business, it doesn't have to be so complicated. There is a special provision for small businesses [1]. As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person - meaning you don't have to pay VAT to the government for sold goods, but you do have to pay it to vendors like regular customers. Once you've grown enough, you can register as a company. Note also that parts of the complications and expenses arise when you want to be a limited liability company - if you are just making websites on the side, this is probably not neccessary. Germany has a strong culture of entrepreneurship - being not employed but "selbstständig" (occupationally independent) is held in high regards. In my experience, while burocracy can be complicated, officials are very willing to help (I haven't made the jump myself, but I know from others). And one thing that is nicer in Germany / Europe is that it seems less litigious than the US. I would be constantly afraid to get sued or to break some unknown law in another US state, whereas here if you get a good accountant and avoid a few common pitfalls, you are pretty safe. [1]: https://de.wikipedia.org/wiki/Kleinunternehmerregelung_(Deutschland) https://de.wikipedia.org/wiki/Kleinunternehmerregelung_(Deut...
- Xylakant 9y ago
  Note that none of this has any connection with the legal form of the company, this is a tax matter which applies equally to all companies or freelancers. > As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person This is false. The conditions is that business volume [1] including taxes has not exceeded 17500 EUR in the previous year and at the same time is not expected to exceed 50000 EUR in the running year. If you're a newly founded company you need to file an estimate of your business volume with the tax authorities and if the estimate exceeds 17500 EUR you can't take advantage of the Kleinunternehmerregelung. Also note that the 17.500 EUR limit applies to the sum of all companies you own, you can't have two companies with a volume of 17500 EUR each. It's really only good for a side business and in some narrow circumstances where you sell mostly to private customers. If you want to bootstrap, you're much more likely to benefit from filing your VAT (anything you buy will be discounted 19% effectively, you can have your VAT filed by an accountant from the saving of buying a single expensive computer). A fairly good summary (in german) with a handy flowchart at the bottom is here http://www.kleinunternehmer.de/kleinunternehmerregelung.htm http://www.kleinunternehmer.de/kleinunternehmerregelung.htm [1] minus VAT-free services etc. ...
BjoernKW 9y ago
If you don't actively seek outside investment (yet) it's much easier to start off with a sole proprietorship or a partnership (GbR) in case of more than one founder. The caveat is this though: You and your partners will be personally liable for the company's liabilities. In most cases however this doesn't matter as much as is often presumed. This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners. First of all, as long as it's just you and potential partners, who put in their own time there usually isn't a whole lot of financial risk involved anyway. That changes once you decide to hire employees. At that moment you quite likely should incorporate. Secondly, in many cases even with a GmbH or UG you will be held personally liable as a managing director anyway (for example when taking up a loan).
- sneak 9y ago
  > This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners. That level of risk is nuts. Most companies would never get started, or lots of founders would get screwed.
  - BjoernKW 9y ago
    There's indeed a considerable level of risk but it's often also grossly overstated. There are plenty of partnerships and sole proprietorships and there have been for years. They're doing just fine. I agree the system is far from perfect but in my experience the people who commonly complain about the risk of setting up a partnership on one hand or the high cost and the bureaucracy that comes with incorporating in Germany on the other hand often don't really want to found a company in the first place but rather find a convenient reason not to. After all, it's a matter of risk assessment. If your proposed business is inherently risky, you have to hire right from the start or you're looking for equity financing then by all means do incorporate. Doing so is a one-time effort (or rather a once-per-year effort when including the additional requirements for annual accounts). In a company's lifetime that effort really doesn't matter all that much.

225 points by shapiro92 9y ago

k__ 9y ago

Is this even necessary? Can't they simply set up an LTD in Ireland and "use" it in Germany? I know some Germans who did this for tax reasons, but I could imagine that Ireland formalities are easier to understand for English speakers.

Xylakant 9y ago
You can do that, but then you’ll have to deal with Irish Tax law and if you want to pay yourself a wage you’ll be employed by an Irish company. This will lead to it’s own set of complications. You’ll probably need a bank account in Ireland etc. If you’re selling things in germany you’d still need to collect German VAT depending on whether your customer is a company or a private entity, ... Registering a British LtD used to be common when the UG didn’t exist and you’d need at least 25k for a GmbH to get limited liability, but it’s fallen a bit out of fashion since then.
- Sujan 9y ago
  And now there is a Brexit looming... Poor LTD owners :/
  - Xylakant 9y ago
    No pity from my side, but yes. Some folks will pay a hefty price for the shortcut.
    - phillc73 9y ago
      Another shortcut, while still remaining in the EU is a Maltese Limited company. Very similar rules and structure to operating a UK based Limited company, but a much better corporate tax regime. I went this route, using an accountant recommended by a trusted friend. Bought an existing "off the shelf" company and have a Maltese business bank account, all without leaving the comfort of my desk.
      - charlesdm 9y ago
        Have you physically been to Malta? Do you pay non Maltese taxes? Do you understand tax law? If no then it is likely you are committing tax fraud (perhaps without even realising it). People need to understand this: there is no free lunch. If you think you can be classified as a Maltese company, sitting at a desk in <insert random European country here>, you are dead wrong in 99.9% of the cases. Get proper tax counsel (not an accountant, a lawyer -- accountants are generally sloppy with details, and details matter, e.g. a word in a contract can matter). Technology and internet based businesses have some unique opportunities to optimise taxes, but the line between fraud and optimization is quite thin.. get good counsel, or prepare for a dispute where you take your (local) tax authority to court. Source: a decent knowledge of corporate and tax law and plenty of tax disputes, which I've mostly won.
        a-saleh 9y ago
        If I am thinking about something like this (my reason so far is fairly contrived, but I would really like to use Stripe, that is available i.e. in Ireland, while in mz country, it mostly seems to be paypal/braintree), where would I be able to read-up on gotchas, before I consult a proper lawyer?
        charlesdm 9y ago
        You probably want to consult a (reputable) local tax lawyer. They tend to be expensive, but check legal500.com.
        phillc73 9y ago
        Thanks for your concern, but I am very happy with the professional advice I have received and am entirely confident that no tax fraud is being committed.
        charlesdm 9y ago
        Just make sure to have good legal counsel. Because something is "legal" for person X doesn't make it legal for person Y. A wealthy family with a company that employs 1000+ people will generally get away with more than a lone wolf with no political connections (not that I'm saying you're a lone wolf, just saying it's not always clear cut). Best of luck!
    - Sujan 9y ago
      "Funny" that the "bank" that is suggested in the article is one of them: https://www.getpenta.com/imprint.html https://www.getpenta.com/imprint.html
      - shapiro92 9y ago
        they were part of an accelerator in the UK probably due to that.
gwbas1c 9y ago
I've found that it's always easier to follow "normal" routes until you know what you're doing. In the US, the equivalent is a Delaware corporation. Companies typically incorporate in the state they operate in when they are small and the owners are more concerned about running their business. Reincorporating in Delaware happens when companies are large enough to hire someone to handle the paperwork.
- ringaroundthetx 9y ago
  > Reincorporating in Delaware happens when companies are large enough to hire someone to handle the paperwork. right, all $200/yr worth of work. anyway, Europe is full of little hamlets that offer convenient incorporation services.
cntlzw 9y ago
The UG was actually made just for this purpose. With the EU law it was easier to just create a LTD or LLC in the UK. The 25k EUR are not something you have in your pockets as a founder. Even though you only need to deposit half.
captainmuon 9y ago
If you are based in Germany, you still have to pay German social insurances (health, retirement, care, occupational accidents) for yourself and all employees. These are probably a greater expense of money and time than having to set up a GmbH. And the whole purpose of GmbH or LTD is to limit liability if something goes wrong - but I wouldn't want to have to defend myself or liquidate my company in a irish or maltese jurisdiction...

jankotek 9y ago

> A GmbH requires a minimum of 25 thousand euros Simpler advice; buy a ticket to Bratislava and take it from there.

dullgiulio 9y ago
Easier still, do it online in Estonia.
- patkai 9y ago
  Yes, the e-residency is extremely cool and forward looking. And you don't even have to travel there, only to one of their embassies.
beberlei 9y ago
That is the initial starting capital, not a fee. You can go on and invest or spend the money after court verified its available.

jFriedensreich 9y ago

I'm selling my empty gmbh ready setup (as shutting down a gmbh costs 3000 euros and setting up one is equally expensive this is a win-win even if it sells just for a few euros) contact me if interested. contact gmbh_selling@ntr.io

flexie 9y ago
How does a buyer know that there are no hidden liabilities in your GmbH? Does it come with your personal representations and warranties securing that?
- Xylakant 9y ago
  A GmbH would need to have proper accounting, all liabilities would have to be in the books. Anything else would be fraud and that’s one of the things that suddenly pierces the veil of the limited liability for the CEO (whether you can extract any money from the seller is a different, albeit related question) Do your diligence. You could also make the personal liability part of the sale. On the upside, buying a used GmbH may come quite a bit cheaper if the company owns no assets: the initial 25k are not a minimum that needs to be kept, they can be spent on things the company needs, so you might be able to pick up an empty shell for far less than that amount. I’d not buy a GmbH from a random person on the Internet, but if you’re in a hurry to get a GmbH set up, there are notaries and lawyers that specialize in selling ready-made GmbH shells. You’d still have to get the sale notarized and probably need to jump through a few hoops to rename the company to something suitable, but there are a few reasons that may be attractive, primarily that it offers limited liability from day one. Quite a few people forget that in the intermediate phase between notary and confirmed registration (GmbH in Gründung) the shareholders are personally liable for all businesses and contracts that the company enters into.
- jFriedensreich 9y ago
  Normally you would have an accountant you trust, (i would highly advice against trying to do GmbH paperwork yourself) he/she would get directly in touch with the company that does the current tax and accounting work for my GmbH and do the vetting for you. Germany has very strict publication and documentation laws for GmbH's so there is not really some hidden liability possible, if there was that could get me to jail even if i wasn't trying to sell the company...

Scotrix 9y ago

Don’t start a company in Germany if you don’t have to. Expensive and bureaucratic tax system (accountants and time wise), regular accountancy checks which you have to pay your accountant for, very hard to close down and insolvency is very complicated.

bflesch 9y ago
Yeah it is very bureaucratic indeed. If you want to raise money or add shareholders you need to make official appointments w/ lawyers and pay significant fees.
mannigfaltig 9y ago
[deleted]
- exhilaration 9y ago
  Because it protects entrenched players?
- claudius 9y ago
  It doesn’t really stifle innovation in any way?
eastendguy 9y ago
Is this hearsay or your experience? "regular accountancy checks"... I even forgot when our last one was...maybe 5 years ago. And this seems is typical.
matt4077 9y ago
Meh... It's not quite as easy as one might wish, but I haven't seen any business where it had any significance. If you're small, it's about $300 to start and maybe around $500 for an accountant. It get's more complicated once you have employees, but even that's not relevant compared to almost any other aspect of a business. I think we're paying EUR30 per quarter for managing the employees taxes and various benefits. If you're doing GAAP accounting, you're 95% done with taxes as well. And since these standards have converged over the years, the only difference in bureaucracy that remains is people's enduring stereotypes.

devdad 9y ago

Is that correct, €25000 to start a GmbH? The Swedish equivalent (AB), probably some differences, costs ~€5000. I think the registration cost another ~€150.

explodingcamera 9y ago
You can start a UG which is essentially the same as a GmbH for as few as 1€
- ohthehugemanate 9y ago
  German business owner here. The accountants and tax lawyers here have all told me the UG is looked on with suspicion by the tax authorities. Don't start a company in Germany. Don't take it from me, take it from the World Bank, which ranks Germany 114th in the world for ease of starting a business. Just narrowly edging out the Dominican Republic. It sucks.
  - ahartmetz 9y ago
    Dunno, I know a happy owner-employee of an IT consulting GmbH and I'm currently setting up my own, 2/3 of the way through. It doesn't seem like a big deal. I kind of expected more bureaucracy tbh ;)
    - pgeorgi 9y ago
      Bureaucracy in Germany is an interesting meme. Everybody complains about it, I did as well. Then I encountered the bureaucracy in the US. It's even more forms, more officials that get a say about everything (Different sales tax at all levels down to the county, wtf?), they're slow to deal with even for non-complex matters (the reason why Zootopia's DMV employs sloths totally went over the heads of most of my [German] acquaintances), and with little organization. On a tangent (since it's not "public" bureaucracy per-se): You get a corporate bank account with credit line within a day in the US. That's wonderful. Now try to send money to an account at a different bank within the country, within a day. I'll wait. So yes, Germany has a huge bureaucracy. But work with them and they'll work for you (I got tons of useful advice, for free, when I asked them how to approach whatever it is I went to them in the first place) - and compared to many other places bureaucracy seems highly efficient here.

gibasmaciej 9y ago

4-5 weeks ?!

ivan_gammel 9y ago

The Very Important Question is how much time and money it takes to close the company, not how to open it. Not all startups are successful, so it always makes sense to think about the shutdown.

shapiro92 9y ago
you have to continue doing taxes for another 3 years if I am not mistaken. Depending on your accountant that would be around 1k per year.
- hobofan 9y ago
  If you do a clean shutdown (= you have enough money to pay your accountant and any other debtors), you can close down a company at the end of your business year.
  - ivan_gammel 9y ago
    Isn't there a mandatory waiting period to collect claims from creditors, employees etc? If I decide to close the company few day before the end of the business year, that's unlikely to be possible to do it so quickly.
    - Xylakant 9y ago
      There's a one-year waiting period after the liquidation has been publicly announced in the Bundesanzeiger before the remaining assets can be distributed among the shareholders. See § 73 GmbhG http://www.gesetze-im-internet.de/gmbhg/__73.html http://www.gesetze-im-internet.de/gmbhg/__73.html
pgeorgi 9y ago
You balance the sheets, close down the company and it remains in some "in liquidation" state for another year to make sure that the sheets are, in fact, balanced. Makes the company more trustworthy for potential partners since they won't face closed doors from one day to the next, but otherwise makes little difference: a company in liquidation is really low maintenance if the paperwork is in order.

shapiro92 9y ago

Guys I just released it also on ProductHunt! https://www.producthunt.com/posts/how-to-setup-a-company-in-germany https://www.producthunt.com/posts/how-to-setup-a-company-in-...

daftmonk 9y ago

Just want to note that if you're not tied to Germany in particular, Netherlands is a much better option for US citizens looking to start a company, thanks to the Dutch-American Friendship Treaty. (yes, it's DAFT - https://en.wikipedia.org/wiki/DAFT https://en.wikipedia.org/wiki/DAFT). NL is a pretty easy place to business, at least as an entrepreneur. (Things get more complicated with lots of employees, like in most of Europe.) The tl;dr version is US citizens can get a residency permit (2 years, renewable indefinitely, considered a non-temporary purpose of stay so you're eligible for permanent residency after 5 years) to start a business in the Netherlands with very few restrictions and very little in the way of capital requirements (€4500 in the business account.) Plenty of attorneys in the Netherlands can take care of the necessary paperwork for €1500, give or take, but lots of people manage it themselves too. A few blogs and guides of the many out there: https://daftvisa.wordpress.com/step-by-step-guide/ https://daftvisa.wordpress.com/step-by-step-guide/ https://survivingdaft.tumblr.com/ https://survivingdaft.tumblr.com/ http://passthesourcream.com/daft/ http://passthesourcream.com/daft/

jorvi 9y ago
Not only that, we are considered the best non-native English speakers of the world, so even if you aren't keen on learning Dutch (boo!) you'll manage pretty easily :)
- ant6n 9y ago
  The Dutch are also great at German!
  - Freak_NL 9y ago
    Only in as far as our languages are similar (they are more closely related than either of them is to English). A lot of younger Dutch are quite limited in the languages they speak; often just Dutch and passable English. Don't expect people under 30 to be able to read a German newspaper comprehensively or hold a conversation beyond ordering beer in a Biergarten when in Germany. Older generations with a tertiary education degree often can speak and read at least either French or German at a more useful level though.

0xfaded 9y ago

Countries in Europe now offering start-up visas (without major capital requirements): - Denmark - France - Italy - Netherlands - Spain - Portugal - Lithuania - Estonia - Austria - Sweden I'm currently applying for Denmark. Invest Denmark has offices all over the world (including Palo Alto) and will be more than happy to assist you through the process. I've been in SV for 3 years, but never went for the green card. The US won't let me stay, so I guess I'll have to go suppress wages somewhere else.

anon999888999 9y ago
To everyone else. If you care about your privacy, dont go to Denmark. That country is turning into a shitshow nazi dream. Source: I helped the government build a database registering their citizen every move. Currently has 10000 A4 pages of meta data on average on every citizen of meta data alone. Just meta data.
robk 9y ago
And the UK which you seem to have left out. Why? Tech City Visa is well known.
- 0xfaded 9y ago
  Honestly I did a fair few days of research and whenever the UK is listed as an option, the figure 200,000 gbp also shows up. Looking more into this, looks like there is a special 50k gbp if the money is coming from local VC's or government grant. In my case I have a side product that is fielding licensing inquiries, and I'm looking to bootstrap (figure that's just as time consuming as fund raising). I don't have 200k gbp in the bank, and I'm not willing to nor see the need to gamble with family and friends' money. So to me the UK scheme falls into the category of "major capital requirements".

martinald 9y ago

What a giant pain in the ass compared to a UK incorporation. Takes about 5 mins, £15 and less than a day to form. You can also sign up for taxes online in a few clicks.

nik736 9y ago

You can also found the GmbH with 12,5k EUR instead of 25k, which makes much more sense than going the UG route.

ahartmetz 9y ago
This needs explanation: You only need to deposit half of the 25k up front, the rest... really only when the limited liability is invoked in a bankruptcy. I wouldn't call setting up a GmbH especially difficult or complicated, just slow (2-4 weeks). Your tax advisor/accountant and notary can help and advise you in case there are questions.
- nik736 9y ago
  Yes totally, what I was trying to say is that instead of founding an UG where you have to put 25% aside until you hit the 25k, it makes much more sense to simply found a GmbH with 12,5k that comes with its prestige and it will make it much more easy to do business with others.

weinzierl 9y ago

Incorporating as a GmbH is the most common way to start a company in Germany (about 40%). The UG form is not very common (about 9%) and especially if you plan to do business with other companies in Germany I would not recommend it, because UGs are often frowned upon. Founding a GmbH is not only relatively expensive, it also takes time. Many founders avoid incorporating themselves but prefer to buy a new GmbH. This is actually a business here, there are companies that keep a pool of fresh GmbHs and sell them to founders. Search for 'Vorratsgesellschaften' if you are interested in going that route.

hobofan 9y ago
Other reasons why you want to avoid a UG if possible: - Sooner or later you will have to convert your UG into a GmbH anyways - Most banks don't offer bank accounts for UGs, and those that do often under really shitty conditions
- Xylakant 9y ago
  You don't have to convert your UG to a GmbH. You may once the capital reaches 25k EUR, but you're not obligated to. Until the Stammkapital of the UG reaches 25k you're obliged to keep 25% of the yearly earnings. Bank accounts for UGs are available at the same conditions as for a newly formed GmbH (no credit line, no credit card, ...). Generally speaking, bank accounts for newly formed businesses have shitty conditions.
cntlzw 9y ago
What the article doesn't mention is the ongoing costs with a GmbH. The annual Bilanz is around 2000 EUR. Not to mention you pay lots of taxes and as a founder you can't get money out of the GmbH without getting taxed again (Abgeltungssteuer).
- Xylakant 9y ago
  The taxes when you want money out of the GmbH are not the primary issue. They're structured in such a way that all earnings from the company are more or less taxed at the same rate as your normal income tax, for exampe you get to deduct the Gewerbesteuer etc. You can even use a GmbH to flatten your income and use it as a vessel to keep some money for when you want a longer holiday or for bad times. This may or may not be worth the extra effort. The primary issue is that you can't just take money out of an GmbH/UG/AG (Kapitalgesellschaft). The act itself requires a shareholder meeting (easy if you're alone) and a balance sheet is required (less easy). You can't take money that would put the balance of the company below the required minimum, ... Basically, the money placed into the company is frozen, you mostly can only access the earnings. You can, however, pay yourself a regular wage, but this wage needs to be treated like a normal wage: needs to be paid monthly, needs to be fixed, ... This will likely become an issue if the company has no established cashflow. You can also take shares of the earnings (Tantieme) as part of your wage, but that also requires a balance, so it's usually done when the yearly taxes are filed. They'd be taxed like your regular income and the company would not pay any extra tax on those (simplified, they're treated as wages paid, so regular costs that reduce the earnings).

shapiro92 9y ago

A few cents from my side, setting up a company like GmbH or UG helps when you target a German market. Germans are like that, they love to see the GmbH after the name of the company that they own or they buy / collaborate with. Now an UG is young in comparison to GmbH, it is slowly being accepted.

earlybike 9y ago

Before setting up companies in a different countries than where you live: This can get very messy and you should either have the company in the country where you live or live in a country which is very tolerant (tax-wise) about having companies in other countries. On a secondary note: Germany is the worst country to incorporate: bureaucratic, expensive, tax offices are expensive and stuff is complicated, worst privacy regulation to come (from a company perspective), Labour is expensive compared to their skill level and English skills. One good thing though: since share transactions are done with state notaries there is more safety when doing them and less need for lawyers for simple transactions. For more complicated transactions with higher funds it gets expensive again. The Articles of Association must be German, the rest can be in English.

pokemongoaway 9y ago

But why do this instead of setting it up somewhere in the US? Having an office there - if you already have HQ or something in the US - might have benefits. But I doubt choosing most places in EU would have benefits over the US.

leoharsha2 9y ago
I thought the way that one Apple subsidiary avoided taxes was pretty clever. The USA taxes corporations by their headquarters location, and Ireland taxes companies by their physical presence. So apple created a headquarters in Ireland, but did physical business in the USA. So the USA didn't tax it because it's HQ was in Ireland, and Ireland didn't tax it because it's physical presence was in the USA. So that subsidiary paid absolutely zero taxes, they didn't even file. It saved Apple a good 5 billion dollars.
- pokemongoaway 9y ago
  Tax avoidance is another topic, I thought. Roger that, though.
pgeorgi 9y ago
> But why do this instead of setting it up somewhere in the US? Because then you have an LLC in the US. The article opens with "A quick google search of 'How to setup a company in Germany' yields numerous results". Its target audience is likely the sizable expat community in Berlin.

captainmuon 9y ago

If you are bootstrapping, or just founding a small side business, it doesn't have to be so complicated. There is a special provision for small businesses [1]. As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person - meaning you don't have to pay VAT to the government for sold goods, but you do have to pay it to vendors like regular customers. Once you've grown enough, you can register as a company. Note also that parts of the complications and expenses arise when you want to be a limited liability company - if you are just making websites on the side, this is probably not neccessary. Germany has a strong culture of entrepreneurship - being not employed but "selbstständig" (occupationally independent) is held in high regards. In my experience, while burocracy can be complicated, officials are very willing to help (I haven't made the jump myself, but I know from others). And one thing that is nicer in Germany / Europe is that it seems less litigious than the US. I would be constantly afraid to get sued or to break some unknown law in another US state, whereas here if you get a good accountant and avoid a few common pitfalls, you are pretty safe. [1]: https://de.wikipedia.org/wiki/Kleinunternehmerregelung_(Deutschland) https://de.wikipedia.org/wiki/Kleinunternehmerregelung_(Deut...

Xylakant 9y ago
Note that none of this has any connection with the legal form of the company, this is a tax matter which applies equally to all companies or freelancers. > As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person This is false. The conditions is that business volume [1] including taxes has not exceeded 17500 EUR in the previous year and at the same time is not expected to exceed 50000 EUR in the running year. If you're a newly founded company you need to file an estimate of your business volume with the tax authorities and if the estimate exceeds 17500 EUR you can't take advantage of the Kleinunternehmerregelung. Also note that the 17.500 EUR limit applies to the sum of all companies you own, you can't have two companies with a volume of 17500 EUR each. It's really only good for a side business and in some narrow circumstances where you sell mostly to private customers. If you want to bootstrap, you're much more likely to benefit from filing your VAT (anything you buy will be discounted 19% effectively, you can have your VAT filed by an accountant from the saving of buying a single expensive computer). A fairly good summary (in german) with a handy flowchart at the bottom is here http://www.kleinunternehmer.de/kleinunternehmerregelung.htm http://www.kleinunternehmer.de/kleinunternehmerregelung.htm [1] minus VAT-free services etc. ...

BjoernKW 9y ago

If you don't actively seek outside investment (yet) it's much easier to start off with a sole proprietorship or a partnership (GbR) in case of more than one founder. The caveat is this though: You and your partners will be personally liable for the company's liabilities. In most cases however this doesn't matter as much as is often presumed. This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners. First of all, as long as it's just you and potential partners, who put in their own time there usually isn't a whole lot of financial risk involved anyway. That changes once you decide to hire employees. At that moment you quite likely should incorporate. Secondly, in many cases even with a GmbH or UG you will be held personally liable as a managing director anyway (for example when taking up a loan).

sneak 9y ago
> This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners. That level of risk is nuts. Most companies would never get started, or lots of founders would get screwed.
- BjoernKW 9y ago
  There's indeed a considerable level of risk but it's often also grossly overstated. There are plenty of partnerships and sole proprietorships and there have been for years. They're doing just fine. I agree the system is far from perfect but in my experience the people who commonly complain about the risk of setting up a partnership on one hand or the high cost and the bureaucracy that comes with incorporating in Germany on the other hand often don't really want to found a company in the first place but rather find a convenient reason not to. After all, it's a matter of risk assessment. If your proposed business is inherently risky, you have to hire right from the start or you're looking for equity financing then by all means do incorporate. Doing so is a one-time effort (or rather a once-per-year effort when including the additional requirements for annual accounts). In a company's lifetime that effort really doesn't matter all that much.