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  • Form of entity

    GmbH – limited liability company

    The GmbH is a company for all kinds of business with a corporate organization and its own legal personality. The shareholders have the possibility to control the company by instructing the managing directors. It has a share capital, which matches the total sum of the share contributions to be made by the shareholders. Only the company is liable to creditors for corporate debts. The legal frame allows individual formation to a certain extent.

    Note: Additional forms of entity structures also exist and could be useful in some instances but are not covered in this guide either because they are less commonly used types of entity structures or not as likely to be relevant to the reader.

    Last modified 25 Jun 2024

  • Entity set up

    Partnerships

    GbR (Gesellschaft bürgerlichen Rechts), oHG (Offene Handelsgesellschaft), KG (Kommanditgesellschaft), GmbH & Co. KG

    • Require no minimum share capital and
    • At least 1 partner is personally unlimited liable.

    Corporations

    GmbH (Gesellschaft mit beschränkter Haftung) – Limited Liability Company:

    • 1 or more shareholders

    • EUR25,000 minimum share capital

    • Liability limited to share capital
    • Most popular legal form in Germany and

    • Individual formation possible due to only few mandatory provisions.

    UG (Unternehmergesellschaft haftungsbeschränkt) – Limited Liability Entrepreneurial Company:

    • 1 or more shareholders

    • EUR1 minimum share capital

    • Liability limited to share capital and
    • Strict requirements to accumulate yearly earnings.

    AG (Aktiengesellschaft) – Stock Corporation:

    • 1 or more shareholders

    • EUR50,000 minimum share capital

    • Liability limited to stock capital
    • Generally addresses a larger number shareholders and
    • Stocks fungible and can be traded at the stock markets.

    KGaA (Kommanditgesellschaft auf Aktien) – Partnership limited by Shares:

    • 2 partners or more: at least 1 as general partner and 1 as limited partner
    • EUR50,000 minimum share capital
    • General partner is personally liable without limitation (but a limited liability partner can be the general company) and
    • Limited partner's liability is limited to his share.

    Last modified 25 Jun 2024

  • Minimum capital requirement

    GmbH – limited liability company

    There is a minimum of EUR25,000. 

    Last modified 25 Jun 2024

  • Legal liability

    GmbH – limited liability company

    Shareholders are not liable to creditors if the share contribution has been paid  unless in exceptional cases of an intervention which destroyed the very existence of the company (existenzvernichtender Eingriff) or similar circumstances.

    Last modified 25 Jun 2024

  • Tax presence

    GmbH – limited liability company

    A GmbH is usually taxed on 2 levels:

    • Firstly, it is subject to corporate income tax (Körperschaftsteuer).

    • On the second level, a GmbH is subject to trade tax (Gewerbesteuer), which is imposed by local municipalities (ie, the town or city where the company is based).

    Companies are obliged to add value-added tax (VAT – Mehrwertsteuer) to the prices of their goods or services and to invoice their customers accordingly.

    Last modified 25 Jun 2024

  • Incorporation process

    GmbH – limited liability company

    Notarial certification for the articles of association (which may also take place through online notarization) to be filed with the local commercial register (Handelsregister).

    Last modified 25 Jun 2024

  • Business recognition

    GmbH – limited liability company

    Most popular legal form in Germany. However, some people might feel more secure contracting with bigger companies, especially stock companies (AG) or smaller companies where the partners are subject to personal liability.

    Last modified 25 Jun 2024

  • Shareholder meeting requirements

    GmbH – limited liability company

    Generally, a written invitation by the managing directors (including the necessary information) is used. Requirements are set out in the German Limited Liability Company Act (GmbHG) and/or in the articles of association. If all shareholders agree, written shareholders’ resolution instead of physical meeting is possible.

    At least 1 shareholder meeting each year to agree on accounts.

    Last modified 25 Jun 2024

  • Board of director meeting requirements

    GmbH – limited liability company

    Requirements depend on the respective articles of association. 

    Last modified 25 Jun 2024

  • Annual company tax returns

    GmbH – limited liability company

    Must file tax returns annually for corporate income, trade and value added tax with the competent tax authorities.

    Last modified 25 Jun 2024

  • Business registration filing requirements

    GmbH – limited liability company

    Both initial registration, as well as annual filings can be necessary. Germany recently implemented the transparency register by an amendment of its Money Laundering Act with effect as of June 27, 2017. Companies such as GmbH, AG, KG and KGaA have to submit to the transparency register specific information about their beneficial owner if a natural person directly or indirectly (with a multi-level participation structure) holds more than 25 percent of the capital or voting shares or exercises control in a comparable manner.

    With another amendment of the Money Laundering Act with effect as of August 1, 2021, such a filing with the transparency register is required in any case where the 25 percent threshold is triggered, regardless of whether or not the same information can already be retrieved from the German commercial register or any other public register.

    If no shareholder holds more than 25 percent of the capital or voting shares or exercises control in a comparable manner, the managing directors of the company need to be registered with the transparency register instead.

    Last modified 25 Jun 2024

  • Business expansion

    GmbH – limited liability company

    No need to change as business expands. It is also possible to open up branches of a German entity in order to expand in Germany. There are 2 groups:

    • Independent branch (selbständige Zweigniederlassung) and
    • Dependent office/site (unselbständige Zweigniederlassung).

    The main distinctive feature is the dependency on the head office company. Whereas the independent branch engages in business activities independently (ie, a spatial and organizational separation, independent participation in the course of business, own management with the required proxies, separate accounting and separate business assets), the dependent office/site can make out invoices only in the name of the head office company. As a consequence, while the independent branch is required to register, the dependent office/site establishment does not have to be entered in the commercial register. It is only necessary for the business activity that is being practiced to be notified at the competent local trade office (Gewerbe-/Ordnungsamt). Both groups are not separate legal entities.

    Last modified 25 Jun 2024

  • Exit strategy

    GmbH – limited liability company

    The dissolution resolution by the shareholders starts the liquidation proceedings. The liquidation process takes at least 1 year. At the end of the liquidation process there is the ending and deletion of the company in the commercial register.

    Last modified 25 Jun 2024

  • Annual corporate maintenance requirements

    GmbH – limited liability company

    Annual accounts have to be filed with the German Federal Gazette (Bundesanzeiger).

    The auditing of the annual financial statements is mandatory for large and medium-sized GmbHs in accordance with German Commercial Law.

    Last modified 25 Jun 2024

  • Director / officer requirements

    GmbH – limited liability company

    Managing directors are required (at least 1).

    A supervisory board is optional, unless the Company is subject to co-determination (500 employees and above), then, the supervisory board is mandatory.

    For more information on directors’ duties, see our Global Guide to Directors’ Duties.

    Last modified 25 Jun 2024

  • Local corporate secretary requirement

    GmbH – limited liability company

    None.

    Last modified 25 Jun 2024

  • Local legal or admin representative requirement

    GmbH – limited liability company

    None.

    Last modified 25 Jun 2024

  • Local office lease requirement

    GmbH – limited liability company

    Filing for incorporation requires an office in Germany. A lease is not required, however, a full postal address suitable for formal service of documents must be given. The actual location of the administrative headquarter can differ and therefore be in a foreign country as well (this however may have tax consequences and therefore should be carefully assessed).

    Last modified 25 Jun 2024

  • Other physical presence requirements

    GmbH – limited liability company

    None.

    Last modified 25 Jun 2024

  • Sufficiency of virtual office

    GmbH – limited liability company

    Yes, generally possible. However, you still need a registered office address.

    Last modified 25 Jun 2024

  • Provision of local registered address by law firm or third-party service provider

    GmbH – limited liability company

    Yes, but should be only an interim solution as this bears the risk of not having enough "substance" from a tax perspective. However, in the recent past some commercial register judges have refused to register an address of a law firm. Therefore, it might not be possible to register in the future with an address of a law firm or 3rd-party provider.

    Last modified 25 Jun 2024

  • Provision of local director or corporate secretary by law firm or third-party service provider

    GmbH – limited liability company

    No local directors required as long as it is ensured that the director(s) is/are able to operate and manage the business of the GmbH primarily from Germany. Having only managing directors appointed with a residence outside of Germany may however have negative tax impacts and therefore should be assessed carefully.

    Last modified 25 Jun 2024

  • Nationality or residency requirements for shareholders, directors and officers

    GmbH – limited liability company

    None as long as they can easily enter Germany (or obtain easily a Visa).

    Last modified 25 Jun 2024

  • Restrictions regarding appointment of nominee shareholders or directors

    GmbH – limited liability company

    None with respect to the shareholders.

    Directors must meet certain requirements under the German Limited Liability Company Act (GmbHG).

    Last modified 25 Jun 2024

  • Summary of director's, officer's and shareholder's authority and limitations thereof

    GmbH – limited liability company

    The shareholders’ meeting is the highest corporate body. It can issue binding instructions to the directors to carry out certain actions, decide on rules of procedure and/or the basic direction of the business. To the extent legally permissible the articles of association can define the authority and the limitations (i.e. there needs to be a core competency for the managing directors). A number of actions are mandatory managing directors' responsibilities (such as filing for insolvency).

    The managing directors represent the company vis-à-vis 3rd parties and run the company. Their power of attorney has unlimited external legal effect, and, thus, even binds the company if internal restrictions of their representational powers have been violated.

    Last modified 25 Jun 2024

  • Public disclosure of identity of directors, officers and shareholders

    GmbH – limited liability company

    The commercial register contains a list of the shareholders.

    The managing director is listed in the commercial register as well.

    Disclosure of (ultimate) beneficial owner vis-à-vis to the transparency register necessary, if a natural person directly or indirectly (with a multi-level participation structure) holds more than 25 percent of the capital or voting shares or exercises control in a comparable manner. If no shareholder holds more than 25 percent of the capital or voting shares or exercises control in a comparable manner, the managing directors of the company need to be registered with the transparency register instead.

    Last modified 25 Jun 2024

  • Minimum and maximum number of directors and shareholders

    GmbH – limited liability company

    1 shareholder.

    1 director, who can be the only shareholder (managing shareholder).

    No maximum numbers.

    Last modified 25 Jun 2024

  • Minimum number of shareholders required

    GmbH – limited liability company

    1 shareholder.

    Last modified 25 Jun 2024

  • Removal of directors or officers

    GmbH – limited liability company

    The shareholders resolve on the appointment of the managing directors.

    The removal of a managing director is possible at any time and without notice by the executive organ stated in the statutes. Removal must be filed for entry in the commercial register.

    Please note that German law distinguishes between the position as managing director and the contractual relationship based on the service agreement. The termination of the service agreement is subject to the agreed notice period.

    Last modified 25 Jun 2024

  • Required and optional officers

    GmbH – limited liability company

    None.

    Last modified 25 Jun 2024

  • Board meeting requirements

    GmbH – limited liability company

    There is no statutory requirement to have board meetings.

    Requirements depend on the respective articles of association.

    Last modified 25 Jun 2024

  • Quorum requirements for shareholder and board meetings

    GmbH – limited liability company

    There are no statutory quorum requirements for shareholder and board meetings.

    Requirements can be regulated in articles of association.

    Last modified 25 Jun 2024

  • Must a bank account be opened prior to incorporation, and must the bank account be local?

    GmbH – limited liability company

    The share capital must be paid to an account of the company to be established. It is possible to use a foreign bank account.

    Last modified 25 Jun 2024

  • Auditing of local financials. If so, must the auditor be located in local jurisdiction, and must the company's books be kept locally?

    GmbH – limited liability company

    The GmbH is obliged to prepare financial statements. It is obliged to draw up a balance sheet (annual balance sheet) and a profit and loss account at the end of every fiscal year. In addition, the annual financial statements are to be extended by notes with explanations. They must be drawn up in the German language. Auditing of the annual financial statements is mandatory for large and medium-sized limited liability companies.

    There is no statutory rule where the books have to be kept.

    Last modified 25 Jun 2024

  • Requirement regarding par value of stock

    GmbH – limited liability company

    The registered nominal amount must be at least EUR 1 per share and – in case of a higher amount per share – must be a full Euro amount.

    Last modified 25 Jun 2024

  • Increasing of capitalization if needed

    GmbH – limited liability company

    Effected by amending the articles of association, which requires a notarized shareholders’ resolution. Capital increase only becomes legally valid upon registration with the commercial register.

    Last modified 25 Jun 2024

  • Summary of how funds can be repatriated from your jurisdiction (ie dividends or redemption)

    GmbH – limited liability company

    Funds can be repatriated abroad from Germany via profit withdrawal in accordance with the relevant tax provisions.

    No exchange control exists.

    Last modified 25 Jun 2024

  • Restrictions on transferability of shares

    GmbH – limited liability company

    Shares are generally transferable. However, the articles of association can restrict the transfer (ie, by implementing approval requirements).

    Last modified 25 Jun 2024

  • Obtaining a name and naming requirements

    GmbH – limited liability company

    The name must be distinct and must show the legal form (GmbH).

    Last modified 25 Jun 2024

  • Summary of "know your client" requirements

    GmbH – limited liability company

    The German "Know Your Client" requirements are based on the European provisions.

    Most common applicable law is the Anti-Money Laundering Act (Geldwäschegesetz), pursuant to which transactions are subject to different identification and reporting requirements, with penalties resulting from non-compliance. These vary from simple proof of identification (for individuals) or a physical/electronic record of the company, to simple or enhanced due diligence, depending on the risk. For example, Politically Exposed Persons (PEPs) are always subject to an enhanced due diligence process.

    The reporting is made to the Criminal Investigation Department of the relevant state and to the central Criminal Investigation Department of Germany (Central Division for Suspicious Activity Reports (Financial Intelligence Unit FIU)).

    Last modified 25 Jun 2024

  • Approval requirements for amending charter document

    GmbH – limited liability company

    The shareholders resolve on amendments. The resolution must have a majority of 3/4 of the votes cast. The articles of association can provide additional approval requirements. The resolution needs to be notarized.

    Amended articles of association need to be filed with the commercial register.

    Last modified 25 Jun 2024

  • Licenses required to conduct business in jurisdiction

    GmbH – limited liability company

    Before starting their business operations, all business operators must inform the trade office (Gewerbe/Ordnungsamt) of the town or local district in which the business operation is located. In some additional sectors, business licenses are necessary (ie, pharmacies, property developers, real estate agents, brokers, security firms, pubs and hotels and banks).

    Last modified 25 Jun 2024

  • Process of purchasing and utilizing a shelf company

    GmbH – limited liability company

    The purchase of a shelf company is feasible and requires a share purchase agreement. After the purchase of the company and its application for registration with the commercial register, you may take up business.

    Last modified 25 Jun 2024

  • Key contacts
    Dr Nils Krause, LL.M.
    Dr Nils Krause, LL.M.
    Partner, Head of Corporate/M&A DLA Piper UK LLP [email protected] T +49 40 188 88 123 View bio
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Business expansion

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Germany

GmbH – limited liability company

No need to change as business expands. It is also possible to open up branches of a German entity in order to expand in Germany. There are 2 groups:

  • Independent branch (selbständige Zweigniederlassung) and
  • Dependent office/site (unselbständige Zweigniederlassung).

The main distinctive feature is the dependency on the head office company. Whereas the independent branch engages in business activities independently (ie, a spatial and organizational separation, independent participation in the course of business, own management with the required proxies, separate accounting and separate business assets), the dependent office/site can make out invoices only in the name of the head office company. As a consequence, while the independent branch is required to register, the dependent office/site establishment does not have to be entered in the commercial register. It is only necessary for the business activity that is being practiced to be notified at the competent local trade office (Gewerbe-/Ordnungsamt). Both groups are not separate legal entities.

Last modified 25 Jun 2024

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