The Federal Republic of Germany belongs to the United Nations, the G7, and the G20. The official language of Germany is German. Berlin, Germany’s capital, is located in the country’s east-central region. Frankfurt serves as the financial centre, and German is the official language there.
Apart from that, Germany offers several opportunities to investors and entrepreneurs desiring to open a company in the country.
However, this article explores the pros and cons of registering your company in Germany. Explored also are types of companies in Germany and how to register a company in Germany.
Overview
In terms of landmass, Germany encompasses an area of 357 022 Km². With a population of about 82,200,000 across its 16 partly sovereign and federated states. This gives them a ranking of the second-most populous country in Europe after Russia.
The Gross Domestic Product (GPD) of Germany by the International Monetary Fund(IMF) is $4.743 trillion. Germany is a great country with a strong economy. It has the largest GDP in Europe, the fourth-largest economy in terms of nominal GDP globally, and the fifth-largest by PPP.
Industrially, the Bloomberg Innovation Index ranks Germany in 2020 as the most innovative country worldwide. Still, it is a global leader in the scientific and technological industry. It is the third-largest exporter and importer of goods.
Types Of Companies In Germany
As earlier stated, Germany has the largest economy in Europe and the third-largest in the world. Therefore, it is arguably the most lucrative business location in the European Union.
Foreign Investors seeking to establish a company in Germany have a range of items to choose from. Setting up a company in Germany can be relatively cheap. This is partly because law firms in the country offer assistance in obtaining required licenses and permits.
The Types of Companies in Germany are:
- Limited Liability Company (GmbH)
- Mini-GmbH
- Joint Stock Company (AG)
- Partnerships
1. Limited Liability Company
Limited Liability Company is the most common type of company in Germany. It is most suitable for small and medium-sized businesses. It is a sole proprietorship business that requires a single shareholder and a capital of £ 25,000.
During the registration, a total sum of 12,500 EUR is required as a deposit in the company’s bank account. Nonetheless, the shares of the GmbH cannot be made available in the stock exchange market.
2. Mini-GmbH
It is a fragment of the Limited Liability Company type and came into existence in 2008. 1 EUR is the due capital for setting up a Mini-GmbH although a quarter of its yearly turnover must be put aside by its shareholders till it attains a share value of £ 25 000.
3. Stock Company
This type of company applies to large corporations. It’s similar to the GmbH though its shares are available for trading in the stock exchange market. However, starting up a joint-stock company in Germany requires a capital of £ 50,000.
Minimum of one shareholder for registration though there are no restrictions to the number of shareholders. Meanwhile, the board of a stock company in Germany is usually in control of shareholders.
4. Partnerships
There are two legal forms of partnership companies in Germany: General partnership (OHG) and limited partnership (KG).
Establishing a general partnership requires no capital as each partner has limited liability. The company must be registered with the trade register and mandated to bear OHG in its name. Regardless, its accounting procedures are different and quite simpler than others.
On the other hand, a limited partnership requires a minimum of 50,000 EUR and will be split across various shares for its registration. It’s a collaboration of two partners with one of them having limited liability.
The Step-by-Step Process To Register A Company In Germany
To start a business in any country, consult a lawyer for the rules and regulations guiding the registration of companies in that country. The steps are:
- Choose a company type.
- Choose the company’s name but check the commercial register to ascertain its originality.
- Register the name of the company and the aim at the German Chamber of Commerce and Industry.
- Book an appointment with a notary and notarize the files of the association.
- Open a business bank account.
- Deposit the share capital into your company’s bank account.
- Inform the notary of the deposit and pay the notary’s invoice.
- Pay the Commercial register invoice.
- Submit your trade registration form to your local trade office.
- Send the documentation to the tax office.
- Register your business with the transparency register.
- Lastly, register your business with the right insurance company.
Pros And Cons Of Registering Your Company In Germany
As a result of the government support for small and medium-sized businesses, there’s been a drastic growth in the industrial sector of Germany.
In addition, the German Government offers different incentives to businesses conducted properly.
Pros Of Registering Your Company In Germany
- Germany has the largest economy in Europe
- There is a high level of business transparency in Germany
- Germany is one of the countries with the least amount of corruption globally
- Availability of high-speed transportation for goods
- Presence of world-class infrastructure
- The country is free of exchange controls for foreign investment
- Favourable government policies in support of enterprises
- Ease of business funding
- Access to the liberalized labour market
- Absence of German law between locals and foreigners
- Availability of an excellent environment for start-up companies
- Lack of currency control
- The German banking sector offers loans with minimal interest
- Access to using the service of a notary
Cons Of Registering Your Company In Germany
Despite the benefits of registering your company in Germany, few cons exist. They are:
1. High Taxes:
Even though Germany houses a lot of international companies, it is also important to know that their tax payment method/system is not quite favourable.
In Germany, companies are given a high tax rate with a stipulated time frame. Also know that as a business, you must make at least 9 tax payments in a year with an average of 218 business hours.
2. High Business Competition:
Germany has the largest economy in Europe and the third largest economy in the world, without a doubt, but it also has a high level of business competitiveness, in the sense that there are likely many businesses in the same field of industry.
3. Cultural Differences:
It is also important to note that Germany is recognised as one of the countries that engages in fair business practices in comparison to other countries. People here place a high priority on time.
As a result, transparency, assertiveness, and efficiency are highly regarded in Germany. This can be a disadvantage if your company is not based on fairness or equity.
However, it can be beneficial if you are currently following these practices.
Conclusion
Generally, there are pros and cons of registering your company in Germany and all the European countries.
However, the advantages of registering a company in Germany surpass the disadvantages and the country is open to starting all kinds of business.
Also, a residence permit is not a prerequisite to becoming a director in a German local company
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