The most common form of company is GmbH (Gessellschaft mit beschrankter Haftung), equivalent to a Limited Company or Ltd. In order to start GmbH, an individual must hold a minimum share capital (Stammkapital/Grundkapital) of €25,000.
AG (Aktiengesellschaft) is a joint stock company, equivalent to a Public Limited Company or PLC. The company must have five members and a minimum starting capital of €50,000.
GbR (Gesellschaft bürgerlichen Rechts) is a flexible company model, which can be either a one-person business or based on a contract agreed upon by two or more persons.
Zweigniederlassung (or subsidiary) is a German branch of a company which is registered in a foreign country. It must be commercially registered as a subsidiary. The parent company assumes liability for this subsidiary, therefore there is no minimum equity.
And lastly, there is OHG (Offene Handelsgesellschaft), a simple company model in which the partners involved have unlimited liability and are obligated to operate the business depending on the terms of the contract.
In order to start a business, an individual must organise two sets of tax registration, for commercial tax at the Gewerbesteueram and the local tax office at the Finanzamt. You must also hire a notary and register the business at the local court (Amtsgericht). You’ll also need a proof of German settlement permit (Niederlassungserlaubnis), passport and startup capital for your chosen company form.
Business registration process
When starting up a business, your company must be registered at the local trade office (Gewerbeamt). To do so, you will need the following:
- A valid ID [Personalausweis] or passport
- A residence permit
- A permit or authorisation depending on the sector (e.g. catering),
Furthermore, you will need a craft card (Handwerkskarte), if you are setting up in business in the craft sector or a trading card (Gewerbekarte) for activities similar to the craft sector and between 10-40€ for the registration fee.
The trade office will automatically inform you of the other authorities with whom you will need to register, such as the tax office, accident insurance fund, local court, trade supervisory office, chamber of industry and commerce or chamber of crafts. It is a good idea to do a follow-up to ensure that your company has actually been registered.
Certain target groups and projects can benefit from the grants and aids offered by the German government. Those who are unemployed and looking to start a business, for example, may be eligible for a start-up grant from the Federal Employment Agency.
State aid can also be issued, although it requires at least a year of previous employment in the country. For more information on state aid and grants, read the information here. Individuals wishing to start a business can also apply for an English language online service, offered by The German Ministry for Economy and Technology (Bundesministerium für Wirtschaft und Technologie). The course focuses on business strategies and offers tips on how to run a successful company. Individuals can also be offered a private guarantee, as long as they are able to pay off the loan at any given time. The guarantee banks also provide default guarantees, backing a borrower with his bank to cover a loan.