
How to Set Up a Company in Germany for English-Speaking People - shapiro92
https://blog.datacircle.io/2017/10/11/setting-up-company-in-berlin/
======
daftmonk
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
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 :)

~~~
sarabande
I looked this up to make sure [0]; it's true, and the countries with a "very
high" proficiency are:

    
    
        01 Netherlands
        02 Denmark
        03 Sweden
        04 Norway
        05 Finland
        06 Singapore
        07 Luxembourg
    

0: [http://www.ef.com/epi/?mc=we](http://www.ef.com/epi/?mc=we)

~~~
Geekette
I question the validity of "global" rankings that don't include regions like
East, West or South Africa, where countries like Kenya, Ghana, Nigeria, South
Africa have very high English proficiency rates (especially given that it's
also an/the official language in most cases).

~~~
oblio
I think the point of those ranking is ESL. So if English is an official
language, you're out ;)

~~~
darklajid
Then Singapore doesn't belong on that list.

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0xfaded
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.

~~~
robk
And the UK which you seem to have left out. Why? Tech City Visa is well known.

~~~
0xfaded
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".

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weinzierl
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.

~~~
cntlzw
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
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).

------
captainmuon
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_(Deut...](https://de.wikipedia.org/wiki/Kleinunternehmerregelung_\(Deutschland\))

~~~
Xylakant
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. ...

~~~
captainmuon
I wouldn't say it is false, I was just simplifying.

If you take no outside money (yet), have no employees (yet), and don't buy
many goods, you don't really have any benefit of either not paying VAT, or
getting limited liability. This is for people who have a side-business of
"making websites". You can register a simple business ("Gewerbe") when you
have to write an invoice, or start making regular income.

Of course, if there is real capital investment involved, or once this is not
just a side business, you have to do more.

~~~
Xylakant
No, it's false, it's actually dangerously false since you personally may be
liable for the VAT not paid. The limit is actually a hard limit and it gets
more and more dangerous the closer you creep to the edge. At the years
turnover, when you write the next years first invoices, you need to know your
tax status and you don't have at that time the previous years tax declaration.
The tax authorities will not notify you of that change in status. If it turns
out you had a total (vat)-taxable income of 17499 EUR, you're fine. If you
miscalculated and had 17501 € and mistakenly already wrote your invoices
thinking you'd be VAT-free then there's two options: if your customer is a
company, you can correct the invoice and have them pay the VAT (their
accounting department will absolutely love that if you come back half a year
later on a paid invoice, trust me). If the customer is a private person, you
get to pay the VAT. I've seen people fall in that trap and I can tell you, re-
writing all your invoices for a year sucks, paying 20% of your income as VAT
because you simplified the rules sucks even more.

You also need to file the registration with the tax authorities before you
write your first invoice (you need a tax number for a correct invoice).

As a general rule of thumb: You don't simplify when it comes to taxes.

(Side note: This is still unrelated to registering a company or even
registering with the Gewerbeamt which may or may not be required depending on
what exactly you do. Members of the Freie Berufe for example don't need that.)

------
Scotrix
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.

~~~
mannigfaltig
[deleted]

~~~
claudius
It doesn’t really stifle innovation in any way?

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martinald
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.

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k__
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
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
And now there is a Brexit looming... Poor LTD owners :/

~~~
Xylakant
No pity from my side, but yes. Some folks will pay a hefty price for the
shortcut.

~~~
phillc73
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
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.

~~~
phillc73
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.

~~~
graeme
I read your comment, and the feedback you’re replying to.

I notice that you have not mentioned the word “lawyer”. Instead you said
accountant and professional. I’m going to write the rest of this on the
assumption you have not spoken to a tax lawyer.

You’ve set up a structure for years, and are likely investing tens or hundreds
of thousands in equity.

A consultation with a good tax lawyer can be had for $100-$200 in most cases,
or even free sometimes.

Your situation might be 100% correct! In which case, you have spent very
little.

But if your situation is _wrong_? You risk the total destruction of your
business, tens of thousands in penalties and legal fees, and possibly jail.

Speak to a lawyer, if you haven’t.

Incidentally, I had the same idea as you: Canadian business, international
clients. Could I incorporate abroad and save? My tax’s lawyer’s answer was no,
the local revenue authorities would not see it that way.

You’re in another jurisdicion, so the plan may work. But, you will spare
yourself the possibility of ruin by checking with a tax lawyer in the
jurisdiction you live in.

~~~
charlesdm
You're not wrong. I have a friend who used to work at PwC essentially handling
tax avoidance tactics for clients, and she recently switched to a reputable
accounting office due to unhealthy work pressure.

She's knowledgeable and is clearly aware that the advice being given by her
current accounting office is much worse (and often incorrect) in comparison to
the advice given by people at her previous job.

They're excellent at handling accounting, but not good at structuring (non
local) things and avoiding tax.

------
ivan_gammel
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
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
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
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
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)

------
BjoernKW
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).

~~~
easytiger
> In most cases however this doesn't matter as much as is often presumed.

I only hope you don't fail to deliver and get sued, misuse client data and get
sued, get accused of patent infringement et al.

Seen all of these happen.

~~~
BjoernKW
Germany and the EU in general is a civil law system (the UK and Ireland being
exceptions). Suing a company for simple failure is not as easy as it might be
in the US (though I doubt that's very common even in the notoriously litigious
US legal system).

Misusing client data is a criminal offence under European data protection
laws. Doing so not only makes you liable for damages no matter if you're a
sole proprietor or 'merely' a managing director of an Ltd-style company but it
can also land you in jail.

Finally, there are no software patents in the EU so if you run a software
startup you're fine in that respect.

~~~
gt2
With no software patents, why don't more companies incorporate in Europe to
avoid being sued for patent infringement in SV/elsewhere in the US?

~~~
easytiger
Because if you operate in any capacity in the US you are subject to US laws,
presumably. I've worked now for 3 companies that are not US HQd but have been
sued by patent trolls.

------
earlybike
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.

------
shapiro92
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.

------
devdad
Is that correct, €25000 to start a GmbH? The Swedish equivalent (AB), probably
some differences, costs ~€5000.

I think the registration cost another ~€150.

~~~
beberlei
It is not a fee you have to pay, you have to guarantee this amount of capital,
sort of as a signal to other companies in the market what solvency to except
at least :-)

You can actually spend the money on things after the court verified the
capital is present with your corporate bank.

~~~
devdad
This is the same as an AB. Many start by having €5000 and then selling things
they own such as computers to the AB, to get the funds "back". I think Sweden
changed from €10000 to €5000 a couple of years ago.

If the UG or GmbH goes belly up, am I in any way personally responsible?

~~~
Xylakant
The point where you’re selling private property to your company is the moment
you really really really want to talk to a good tax accountant in germany. If
you sell above reasonable price it’s considered tax fraud (verdeckte
Gewinnentnahme) and the reasonable price is likely to be a point of contention
between you and the tax authorities. Unless you haven very valuable machinery
you want to place into the company it’s usually not worth it and in this case
you’d want a third party to certify the price. You can, however, pay yourself
a reasonable wage and there are pretty clear guidelines on what’s considered
reasonable. Much cleaner and easier.

Personal liability is a bit a complicated topic. If you’re a pure shareholder,
your liability ends with the value of the shares. If you’re at the same time
the only shareholder and the CEO and only employee you can be liable for quite
a few things. (Social security, taxes, damages for your personal actions,
anything that constitutes fraud, ...)

~~~
charlesdm
This is simple and applies to most (Western) jurisdictionS: don't sell
anything to a company you own or control, at an above market rate.

Now, there are many ways to value something, and there is generally some room
for interpretation on how much to charge exactly. But you will need to find a
way to justify the price at which a transaction was concluded.

With IP it gets a bit blurry (e.g. you might own some trademarks you want to
transfer to your new company), but again, there are a ton of perfectly
acceptable ways to value something and not face the wrath of your local tax
collector. Just make sure you have a reasonable valuation, based on objective
facts, and you'll (mostly) be fine.

------
nik736
You can also found the GmbH with 12,5k EUR instead of 25k, which makes much
more sense than going the UG route.

~~~
ahartmetz
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
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.

------
pokemongoaway
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
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
Tax avoidance is another topic, I thought. Roger that, though.

------
jankotek
> _A GmbH requires a minimum of 25 thousand euros_

Simpler advice; buy a ticket to Bratislava and take it from there.

~~~
dullgiulio
Easier still, do it online in Estonia.

~~~
patkai
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.

------
gibasmaciej
4-5 weeks ?!

------
shapiro92
Guys I just released it also on ProductHunt!
[https://www.producthunt.com/posts/how-to-setup-a-company-
in-...](https://www.producthunt.com/posts/how-to-setup-a-company-in-germany)

