
Incorporating a limited company in Germany - timmy-turner
https://thomas.skowron.biz/blog/incorporating-in-germany/
======
retromario
A couple comments (having started both an UG and GmbH):

\- I don't recommend starting an UG with less than 2k capital. If you do the
minimum (1 euro), you won't have anything to pay your startup bills and it
costs extra money (and a trip to the notary) to change your company's
investment capital.

\- While a GmbH requires 25k capital, only half has to be paid into the
company. The rest is marked as a liability on the shareholders.

\- A GmbH is generally looked upon as "more serious" than an UG. Some
companies won't interact with you if you're an UG, but this is changing over
time.

\- For what it's worth, I used to hate the bureaucracy, and it can be
streamlined further but over the years (and multiple attempts) I've come
appreciate how it reduces the risk that you are dealing with shady companies.

\- Thanks for the tip about Fidor bank! Setting up a company bank account is a
pain in the ass in Germany.

~~~
harperlee
Can't you just donate money to the company? Would that entail tax?

~~~
matt4077
"Donate" sounds strange, but yes, you can pay any bill from any account –
including your personal one, or cash in your wallet. Technically, this would
be regarded as a loan to the company, and you can later pay it back to
yourself. As long as it's a business-related expense and the company's name is
on the bill (above a certain threshold), you can claim those expenses on the
business' taxes if you later make any revenue.

What may make this a bit complicated (and make the advice given above sound)
is that one of the condition triggering bankruptcy is having more liabilities
than assets. If you start the company with 1 Euro, and then go for coffee with
the notary spending 10 Euros with the intent to claim it as a business
expense, you're 9 Euros underwater. Not sure if this is something you have to
monitor throughout the year or if it only becomes relevant when you actually
do the bookkeeping at the end of the year.

Contrary to popular opinion (and the article) this stuff is quite easy to sort
out as long as it doesn't involve real money, so I wouldn't worry about it. I
know some people start companies with a bit of money for this reason, or even
use something physical (i. e. their notebook) as an initial deposit into the
company.

And just in case people are wondering "but why": these rules are supposed to
protect vendors. Limited liability companies shield the founders from
financial responsibility, so the rules are written in such a way that
founders/owners are on the hook for at least 25,000 Euro (GmbH), or – nowadays
– that the risk is clearly communicated to vendors. You can start a personal
company much easier (basically a form with an address field and three
questions) if you don't need limited liability.

~~~
realityking
> Not sure if this is something you have to monitor throughout the year or if
> it only becomes relevant when you actually do the bookkeeping at the end of
> the year.

You have to deal with it as soon as you can not meet a obligation.
("Zahlungunfähigkeit") If you give your own company a loan, then you can meet
your obligation and you're fine on this side.

You also have to keep an eye on your debt level but that's more complicated,
especially for owner-loans.

> I know some people start companies with a bit of money for this reason, or
> even use something physical (i. e. their notebook) as an initial deposit
> into the company.

Funding with physical good ("Sacheinlage") is however only allowed with a
proper GmbH. This rule makes it sometimes a little bit interesting to convert
an existing, fully liable, business into a limited liability corporation if if
all the goods and money don't add up to 25,000 Euro.

~~~
charlesdm
Is this really seen as a problem for a consulting business or a tech business
without significant capex?

Most jurisdictions have similar laws, and as long as you put money in through
loans when you need it, you're fine, since you will be able to service your
liabilities.

------
LanguageBarrier
I would not recommend Bulgaria, Estonia or any other "dodgy" countries to form
a limited company alas you yourself are from that country.

For a lot of big businesses simply looking at a company address where the
country has no to bad rep is already a red flag. So you will have to do a lot
of convincing work to do if you want to get funding.

Even a UK limited is the running gag in upper management since it needs next
to no effort to create one and they are by default a risky to work with. In
the past it was a common thing for dubious companies to create limiteds in the
UK and this history is what drives the stereotypes of today.

That said I am confident that Germany is not the cheapest option tax wise and
there is a lot of paperwork to do to get your company running. On the flip
side you will inherently gain more trust with potential customers and
investors.

~~~
loxs
I wonder how did you come up to put Bulgaria and Estonia in the same bucket.
The two countries have almost nothing in common. I am a Bulgarian native and
for my current endeavor I seriously consider creating an Estonian company.

~~~
adventured
The parent's comment ("dodgy") definitely doesn't seem to make sense. Estonia
ranks fairly well internationally in terms of being non-corrupt and safe to
live and do business in. It's at least on par with highly developed nations
such as France or Japan and is better than most of Europe.

eg:
[http://www.transparency.org/news/feature/corruption_percepti...](http://www.transparency.org/news/feature/corruption_perceptions_index_2016)

~~~
matt4077
The dodgyness ("caninety?") in this case may actually be a result of their
non-dodginess ("felinity?"):

Estonia is big on e-government and have apparently made the process of
registering an llc really easy. That attracts all sorts of people for whom it
makes a difference if the process costs $100 or $110. And that is – as a group
– self-selecting for people you can't necessarily trust as much as others. The
same mechanism is at work with British LLCs. Those became somewhat famous
(being first in this market) because they were often used by people who
couldn't start a company in their native country – most often because of messy
bankruptcies that can get barred from trying again for certain periods.

------
DanSmooth
There is missing ("Gewerbeamt") and partially wrong information there (the
17.500 VAT thing), so use with caution!

My best advice: get a tax-guy. They do all this crap and more and while they
come with a price (German tax laws are no laughing matters) it's money well
spent and also acts as security because said tax-guy shoulders a lot of
accountability (pun intended).

~~~
dom0
> German tax laws are no laughing matters

Which are?

~~~
zdkl
Ever been to the middle east?

------
Loic
For the context: 7 years running a UK limited from outside the UK (until 2014)
and 3 years running a GmbH from Germany (now). In both cases, I am a chemical
engineer and I am doing mostly programming/consulting work[0].

At the end of the day, it costs basically the same if you are in UK or in
Germany because your cost will be your salary and if you read the advices here
you are anyway to small to run some special tax optimization programs.

For Germany because the costs are in my head:

\- Notary costs for the contract: 450€

\- Registration of the company (chamber of commerce): 150€

\- Registration at the city level: 20€

Opening a bank account is free but it will cost you about 100€ to "run" it.

The real added costs are the accounting costs. About 80€/month to take care of
the books and the paper work for the salary (inclusive transmission of the
salary tax information to the Finanzamt and VAT) + 1500 to 2500€/year for the
"end of the year" accounting and taking care of the related taxes.

So, the "company structure" costs are about €2000/year if you go through the
services of an accountant (you really must do it in fact).

The real cost will anyway be your salary.

In UK, the taxes on the profit of the company is lower than in Germany, it is
here where I would have been pleased to have in Germany at least a small "less
than XXX€ no taxes" or a relatively easy way to schedule charges in the future
to _transfer_ money from one year to another. If you are a single person,
saving for a future project is a bit hard in the current structure. Let say
you want to accumulate 100k€ before hiring somebody, you end up with the need
to make 150k€ extra on top of your salary to have the 100 on your bank account
"free" from tax liability.

[0]: [https://www.ceondo.com](https://www.ceondo.com)

~~~
matt4077
Do you feel that any of the bureaucracy creates an undue burden – or one that
could possibly thwart a company which would otherwise achieve scale?

I'm asking because the article seems to buy into the narrative that these
rules and regulation create an actual obstacle to ventures such as google ever
being founded in Germany, and having gone through the process a few times, I
can neither find any step of the process that I would consider completely
unreasonable (except the chamber of commerce), nor could I imagine it being
more than an irrelevant nuisance to any dedicated team.

I also think the 2000 Euro/year you're citing is true only for a company
actually doing a fair amount of business and having employees. I'm sure it's
less than half that if you're just maintaining the legal structure, or are a
single founder before launch – VAT reporting, for example, has threshold below
which reporting happens only quarterly or yearly.

~~~
helge5
The 2k/y (a little more) is what I pay for a one person GmbH serviced by an
accountant. If you employ people or earn significant money, it'll cost you
extra (employing people has its own filing/processing requirements, but the
tax-account will do that for you, so it is not 'hard' per se). Note: you can
reduce costs by doing a lot of stuff on your own, but well, do you want to?
:-)

BTW: If you plan Google big and want to take on multiple investors pouring in
100k's or millions, you wouldn't usually found a 'GmbH' or UG but an 'AG'
(Aktiengesellschaft, a share based construct). This involves more
reporting/regulations but also makes it easier to deal with the ownership of
the company.

Wrt your 'Google ever being founded in Germany'. The process of founding a
company is not an obstacle, that part is easy enough. Other obstacles are
manyfold: you don't have nearly as much VC money available, there are strong
data protection laws, employing people is a significant liability in Germany
(vs California where you can quit them any day), side-costs of employment are
very high (state required insurances for medical, unemployment, disability,
pension, ...) etc etc.

Summary: If you plan a small software/IT business it probably makes sense to
just start with an UG and see where it goes.

------
tobltobs
I incorporated a Limited in the past in Switzerland, Germany and France.
Switzerland is a snap, Germany is unnecessary time consuming. France is hell.

Clarification: Setting up a SARL in France is comparable to Germany, but the
red tape to run it is hell.

~~~
thibaut_barrere
Curious to know when you incorporated in France exactly?

It didn't seem too hard to me when I did it, and sites like
[https://www.legalstart.fr/fiches-pratiques/creer-sa-
societe/](https://www.legalstart.fr/fiches-pratiques/creer-sa-societe/)
mention that you need 5 admin procedure and 7 days to start one, where the
average of the G20 countries is 7.6 admin procedures and 22 days on average.

So I really wanted to know more about when and how you incorporated etc, out
of curiosity.

EDIT: more data, here is a report from 2013 with the data I mentioned above
(table at page 8) [http://www.ey.com/Publication/vwLUAssets/EY-G20-country-
repo...](http://www.ey.com/Publication/vwLUAssets/EY-G20-country-
report-2013-France/$FILE/EY-G20-country-report-2013-France.pdf)

~~~
charlesdm
Belgium is probably similar. One "trick" I've discovered for bureaucratic
countries is that certain lawyers will be able to set up entities blazingly
fast, in comparison to doing it all yourself.

That's because they have the contacts to get it all done (bank account, notary
visit, required reports, etc) in a day or two, instead of 1-2 months.

------
crypt1d
Not sure if there is a specific benefit in incorporating in Germany vs some
other EU country. If there isn't, I'd suggest looking into Estonia and their
e-residency program. They have a fixed 20% corporate tax which you only pay
when you take the money out of the company (as opposed to paying on income).
I've recently applied and the bureaucracy has been a breeze so far.

You can find some more info at [https://bkpk.me/estonia-eresidency-digital-
nomads](https://bkpk.me/estonia-eresidency-digital-nomads)

~~~
therealmarv
In my opinion this is only great if you live outside the EU and want to have a
financial place in the EU. One example: Imagine you live in Germany. When you
create this company in Estonia good luck in describing to German tax
authorities why you have founded it there and not in Germany! You probably
also have to pay more taxes in total (to Estonia and Germany) if you are
transferring money to yourself.

~~~
helge5
If you want to keep it simple it very likely makes sense to found the company
where you reside. If you don't mind complexity, lookup `Double Irish With a
Dutch Sandwich` :->

If you want to move to Europe (which I think was part of the idea of the
article), it may indeed make sense to consider _where_ to move. Germany (and
one of its startup hubs, like Berlin or Hamburg) is probably not the worst
place to be for various reasons, but I've also heard good things about e.g.
Estonia.

I don't have backup readily available but I think your statement about the
taxes is just plain wrong. Generally I think income is taxed where it is
produced and Europe has (no)double-taxation treaties with pretty much any
country. Personally I'd still avoid the extra complexity for a startup :-)

~~~
tornadoboy55
Please don't put a smile after that. Corporate tax evasion is a blight on
society and people facilitating it are scum. Pay your dues, just like the
people of a society have to.

~~~
WildUtah
It's not a company's responsibility to pay more than it owes. It's the
people's responsibility to elect a government that will write rules without
such gross and long standing loopholes. Or at least to elect a government that
will close them after a decade or two of abuse instead of keeping them
permanently.

~~~
pantalaimon
According to that logic, if I found a software exploit that allows me to order
anything for free on Amazon, I should be allowed to keep all the stuff without
any consequences, because it's the resistibility of Amazon to prevent such
loopholes from being used?

~~~
WildUtah
Imagine how nasty Amazon would be and how much money they would lose if they
just blamed their users for bugs of that magnitude. That's how Europe's tax
authorities are running their business.

And the USA isn't all that much better.

------
jcrei
Estonia, simple forms, simple tax system (even a layman can understand it and
can do their own taxes or small biz taxes). No need to visit to open a company
or bank account if you have an e-resident card. E-residency cards are
available to citizens of most nations.

~~~
velcro
have always wondered on the benefits of forming a company in Estonia - I'm not
an expert - but wouldn't you still need to pay personal taxes in your country
of residence (where you spend 6+ months in a year) in addition on what you pay
in Estonia?

~~~
helge5
You pay personal taxes on your _personal_ income (the salary the company may
give you). That is completely distinct to the type of the company discussed in
the link, a GmbH/UG. A company construct like that is its own legal person and
it pays its own taxes (which usually works different to your 'personal
taxes'). Where it has to pay them is a question for your tax accountant, I
think (ignoring loopholes) a company producing income in Germany has to pay
taxes on that in Germany, regardless where the company is registered. Though
especially with IT it is sometimes hard to specify the 'where' :-) But trust
me, the tax authorities will know :-)

What you can gain by filing your company in Estonia is less bureaucracy. The
talk is that Estonia is a lot in e-government, so I suppose that means you can
do a lot of filing stuff very conveniently on the Internet. Or if you employ
people _in_ Estonia, the employment laws may be less strict than in a country
like Germany.

If you plan to operate out of Germany, I don't think you'll gain much by
registering a company in Estonia. If you want to move to and operate in
Estonia, it may be well worth a consideration.

As mentioned, in the past people filed companies in the UK to avoid the 25000
Euro investment required for a GmbH. But that's gone with the UG.

~~~
sparkling
Just to clarify, as long as all the money remains in the Estonian company
entity (e.g. you are not paying yourself a salary), you should not owe any
personal income tax in Germany since their is no income, correct?

~~~
helge5
If you have no personal income from a company (profits or salary) you do not
owe personal income taxes - wherever. No personal income, no personal income
taxes. That seems kinda obvious :-)

However, the company itself very likely has to pay German company taxes and
need German business permits if you operate from Germany / generate the income
in Germany.

But if you have 10 Estonian developers in your Estonian company doing
programming for you in Estonia and you are only the founder/investor living in
Germany, you probably wouldn't have to pay anything in Germany if you don't
pay out profits.

To get a dependable answer you really have to discuss that with a tax lawyer.
And finding one which can deal with multinational businesses is going to be
really tough and presumably expensive. Which is another reason why this whole
thing is more headache than gain, IMO.

------
atemerev
The same story in Switzerland, perhaps even worse. Any company here generally
requires a full-time administrator to handle the paperwork (and salaries here
are huge). Or you can outsource it to the agency, but it will cost at least
$10k/year, even for the smallest operations (cheaper than hiring a full-time
administrator, however, agencies tend to miss things).

~~~
alternize
huh, where does your experience come from?

currently running two small swiss it companies (3 and 6 employees), and ran
several more in the past. none had a "full-time administrator".

founding costs (notary, fees etc) were always around €2000 for GmbH and €5000
for AG. our yearly expense for an external accounting expert to do our end-of-
year accounting and taxes is around 1k to 2k per company (i.e. 1 to 2 man-
day).

~~~
atemerev
Which canton are you incorporated in? My experience is with the canton of
Geneva, where I have made multiple beginner's mistakes.

~~~
alternize
sorry for the late reply. nidwalden and zurich... there was not much
difference between the process in the two cantons. we had a lawyer and an
accountant help us in the beginning to get the hard-to-figure-out things
during incorporation right. money well spent!

------
hdivider
Infinitely easier in the UK: you don't need capital, the forms are simple, it
costs virtually nothing and you'll be done in less than a day.

[https://www.gov.uk/limited-company-formation/register-
your-c...](https://www.gov.uk/limited-company-formation/register-your-company)

~~~
wukerplank
There is/was quite some founding tourism from EU countries with more
complicated laws to the UK. I wonder how the Brexit will affect them.

~~~
danmaz74
I did that from Italy, wouldn't do it now because of the uncertainty related
to brexit. We'll see in the near future.

~~~
stefano
Don't you need to have physical presence in the UK to open a company?

~~~
helge5
You just need a postbox/business-address which is usually hosted by the
service provider you use to do the UK registration and all that.

Note that a Limited doesn't free you from having to deal with the local
authorities (Gewerbeamt in Germany, tax office, etc).

------
_petronius
Although designed for investors, rather than founders, this is an interesting
(English-language) primer on different corporate structures available under
German business law, and the regulations that pertain to each: [http://www.fr-
lawfirm.de/fileadmin/user_upload/Aufsaetze/Doi...](http://www.fr-
lawfirm.de/fileadmin/user_upload/Aufsaetze/Doin_Business_in_Germany.pdf)

------
ringtail
Is there a reason to not go BVI/Nevis IBC route for a small online startup ?
The no accounting/record-keeping requirement should look appealing to many,
beside 0% tax :).

~~~
charlesdm
Some EU countries have tax laws that look through said structures, attributing
earned income to the shareholders. That's one reason.

Second, if you play by the book (and a lot of people who use these entities
don't), you can't control said entity directly from an EU jurisdiction. You
need to fly there (or somewhere else with no corporate tax) and do board
meetings there.

There are cases where it's worth it, but it almost always has to do with
shaving off percentage points of corporate tax from your profits, and not with
reducing administrative burden. If anything, if you want to use a company like
this (or any foreign company), you need to be careful and understand what you
can and cannot do under the laws of your resident country.

The internet does offer some additional opportunities, because it's not
location linked and it's often hard to figure out how to tax internet
generated revenue. It's easier to do tax arbitrage, but doing it right also
requires a great deal of additional paperwork (+ extra overhead expenses).

You should read up on tax law -- the cost of getting it wrong can be high.

~~~
ringtail
Any real world success & failure stories I can read upon ?

> _Some EU countries have tax laws that look through said structures,
> attributing earned income to the shareholders. That 's one reason._

Even if the company is not tax resident of said countries ? Mind pointing me
to the laws/countries.

> _doing it right also requires a great deal of additional paperwork (+ extra
> overhead expenses)_

Any estimate ?

This is very informative. Thank You.

~~~
charlesdm
You could write a whole book on that first question. In fact, books have been
written about it. It depends on the laws of your country of residence.

One UK example: [http://bit.ly/2kAqV7r](http://bit.ly/2kAqV7r)

> Even if the company is not tax resident of said countries ? Mind pointing me
> to the laws/countries.

Yes. Broadly this falls under CFC ("Controlled foreign corporation") related
laws. Taxation of the foreign entity could exist at either the corporate level
(i.e. some domestic entity owns a low tax subsidiary in some tax haven), or
the shareholder level (i.e. you own shares of a company in some tax haven).

> Any estimate?

Depends on the business. Some things you can't run through a low tax entity,
others you can. If you sell an app on the app store, that would be relatively
easy, for example. But you'd have to fly to the jurisdiction to sign the
contract + probably have a local director.

The problem with these structures is not the set up cost. It's the cost of
defending it in court if the tax authority of your residence country comes
after you. And they do.

If you can't afford to defend yourself, you might as well not set it up.

------
jankotek
Germany is probably bad option within EU. I would recommend Bulgaria: flat tax
rate 10% on corporate income and capital gains. Considerably cheaper office
and accounting cost.

~~~
JPLeRouzic
Interesting, is there some kind of e-residency as in Estonia?

~~~
jankotek
To run corporation you should have physical presence in Estonia as well.

~~~
kennell
Others in this thread have suggested that no physical presence is required.

~~~
Neliquat
Others in this thread have also suggested tax fraud. Hearsay in either
direction are not facts.

------
hhstartuper
Anyway, I don't understand what I do wrong, if: 1\. I have a job in Germany
and live in Germany 2\. I have opened a company in Estonia (owner) 3\. I do
consultancy through USA services (like Upwork) for USA or UK clients and money
is earned by a company in Estonia 4\. How an estonian's company income (not a
income of a person) be taxed by germany? 5\. If i want to get money from
company - it will be dividents with taxation in Estonia and rest in Germany

Is something wrong in this situation?

~~~
helge5
Nothing about that seems wrong at all.

1\. doesn't matter. It sounds like this is your day job unrelated to the
hypothetical company.

2\. this is OK, you can do that.

3\. this is where it becomes a little more difficult. since you are presumably
working from Germany, the value is created in Germany and therefore is going
to be taxed there. sounds like the obvious (and fair) thing to do to me.

4\. income is taxed where it is created, not where you originate from.
Consider it like this: If I'm a German and live more than 6 months in the US,
my primary taxation point is the US. My origin doesn't matter, it is where I
live (and in essence whose state services (what taxes pay for) I use). The
same goes for companies. If the company is registered in Estonia, fine, you
can do that. But if the company is actually _operating_ in Germany, well, you
have to pay taxes over there _just for the business you do over there, NOT for
business you do from Estonia_.

5\. yes, this is personal income. You'll pay taxes in Estonia which you can
match up to your taxes in Germany. In no circumstance you pay twice. Again
sounds very correct to me.

To be honest I'm not entirely sure this _is_ the actual situation, but nothing
about it seems wrong :-)

------
gcp
Don't worry, your government representative has some good ideas to improve the
startup landscape and internet companies! You'll get a 40% corporate tax
deduction for the first 4 years if you crowdfund.

There are, of course, specific conditions and regulatory work for the
crowdfunding agency which mean no existing one (that anyone here has ever
heard of) meets the bar and will essentially require a local operation to be
set up. One of the biggest local banks (who probably pushed for the
legislation?) meets the bar, though.

What do you mean, your potential backers want to use existing platforms they
know? I'm sorry but can you ask those Kickstarter guys to file paperwork in
our country (which _they_ have never heard of either)?

If that's not an option, there' also the possibility to issue bonds.
Bondholders won't have to pay the 30% tax on the bond's dividend if you start
paying them out.

Lastly, it should be noted that all of the above benefits are forfeit if the
crowdfunding campaign sends any backers' rewards.

I wish I'd make this up, but it was signed into law 3 days ago.

~~~
sgift
Which monkey law was that? Must have missed that new "great" idea.

~~~
gcp
Wasn't in Germany, but I'd be surprised if you wouldn't find similar
"initiatives" over there. It's a common EU disease.

------
thomasbachem
And there's the BAFA INVEST program ([http://www.invest-
wagniskapital.de](http://www.invest-wagniskapital.de), German language only)
that refunds/grants 20% to any EU-based angel investor who invests in German
startups. It's actually a really great and pretty unbureaucratic program.

~~~
pmoehring
... if you invest more than 10K. But yes, it's a good setup.

~~~
dx034
I wouldn't consider someone who gives €100 to a startup an angel investor.

~~~
helge5
€100 Hm? 10k = ~10.000+. I'd consider that an angel investor (10..100k).

------
stephanos2k
Are there any (German) resources on how to do the tax reports yourself?

I can't find anything. I did incorporate too early and now have nothing but a
few payments to declare. Don't want to spend 500€+ on the accountant :-/

------
eb0la
I really love this quote: "only available in German, but don’t worry most
Germans don’t understand it either, because it contains a million juristic and
fiscal terms".

I guess this applies to any human language ;-)

------
helge5
The text is pretty good and covers some basic rules (such as having an
imprint), but it makes the process look much harder than it actually is. I did
some as a noob and found setting up an (IT) GmbH and UG in Germany _very
easy_. All the involved people, from the bank to the notary to the tax
consultants are usually very helpful and supportive. E.g. setting up the bank
account requires a certain flow (because a GmbH is its own legal person), but
the notary and the bank will tell you the exact steps (it is like 3 or 4,
having the bank and the notary close by makes it easier as you can just walk
between the two and get it done on a day :-). The notary will notify all the
local authorities that you got founded, you don't need to do anything on your
own here.

Though I suppose it is much harder if you don't speak German, or have a friend
which does.

I recommend finding a good tax consultant first. Unlike stated in the text
they actually _are_ cheap as long as your company doesn't make a lot of money
(the fees are usually bound to the earnings). You pay ~70 euros a month, plus
~1000 for the year-end stuff, and they do everything required for you, all the
filings, talk to the tax authorities when required, etc. Since they see you as
a potential future business (when you make actual money), they will usually
help you with all the other things (notary, bank). Some are even registered
'startup helpers'.

Note that you don't have to have a GmbH, you can also just register a
'Gewerbe' (a business) under your own person. That is even easier and much
cheaper, but you have full personal liability.

Important: This is specifically for IT companies, which are easy. If you setup
other companies, like in the building sector (but almost any other field is
affected by this, even a hair cutter!), it can be way harder and usually
requires an approved education (you need to be a 'meister' in your field).

The text suggests that you should delay founding the company as long as
possible. Be careful with that. If you say produced a significant amount of
software before, you technically have to 'sell' that to the company for the
fair value (and pay taxes on that etc). It can make things easier if
everything is 'owned' by the company from the start. If you talk to investors
or want to sell the company, they will want to know about such stuff.

Summary: IMO it is very easy to setup a GmbH/UG - at least if you speak German
or have a friend who can translate. Yes, it does cost some money to start and
operate (I'd say, calculate ~2500/y), but you'll get limited liability.

P.S.: This again makes the process kinda harder than easier, but most German
states actively support startups. There is sponsored consulting for setting up
business plans (usually as part of a competition), if you plan to employ
people you can get that co-financed, most states even have state-VC's! There
are many programs and a lot of public money is put into supporting startups in
Germany, but well, you have to deal with authorities :-)

------
blsquare
Germany is one of the worst options in Europe to incorporate, except you
reside in Germany.

My top 10 list of why not to incorporate in Germany:

1\. Yearly accountant costs of a limited (UG/GmbH) is around €2,000; you need
this accountant, he is kind of an API to the German tax system which is super
complicated and even native Germans wouldn't be able to handle its
requirements or to file in all the paperwork themselves; AND it's not so easy
to find good accountants/tax consultants, once you found one you are locked-in
and they happily charge you for every extra things; the pricing is regulated
but still they find ways to get all your money

2\. 'Protection money', you have to pay to IHK which should help business
owners (but they nothing) and to ARD/ZDF which are Germany's public TV
stations; the costs depend on your headcount and are not that high but once
ARD/ZDF have your name they never ever again let you out, so it's impossible
to cancel this 'subscription' and you might pay additional fees for you
'personal self'; it's a mafia which creates additional mental clutter and mail

1\. + 2. Just the operating costs of a limited which doesn't make any money is
€2,500 to €3,000

3\. Germany has probably the most friendly labor law; at the end of the day
employees have in Germany super powers; e.g. if you have more the ten
headcount it's impossible to lay off people (there are many, many more, I
could give you 20 more examples); 30% of your time is spend on how to work
around German labor law with German lawyers at €300/h

4\. They try to get everybody to pay into their social system, once you are
under 49% shares you must join them leaving most of your personal salary to
the state; the only benefits is an ok health system and an ok unemployement
insurance

4.a) Having freelancers is risky because the state always suspect you to
circumvent their social system; one mistake and the freelancer can blackmail
you

5\. Super strong consumer protection but which is applicable to all European
countries; consumers get it all (money-back guarantee, ...)

6\. Setup of the limited is unnecessary slow and bureaucratic, takes 6 to 8
weeks and all the momentum out of the founding team

7\. You need at least €12,500 share captial for the GmbH, forget about the UG,
doesn't have any reputation and to migrate to a GmbH later is a PITA

8\. Taxes are cluttered, you have VAT, corporate tax and 'Gewerbesteuer'

9\. German labor is ok but not as good as e.g. US labor; non-tech labor is in
general too expensive and education is limited, especially English skills are
not on par with other Northern European countries, still better than southern
European countries; tech labor is good but expensive compared to rest of
Europe, but cheap again compared to the US; still it's very hard to find
affordable native German devs so people look for foreign tech talent which are
good and easy to attract in bigger cities (Berlin)

10\. Political situation is ok and stable compared to US and UK but could tip
with elections in summer, right wing is strong but not as strong as in other
countries

Some more:

11\. Shutting down your limited takes one year

12\. Insolvency is covered in its own law and is super complicated, don't
apply to early, don't apply to late

13\. In general all German laws are very cryptic written and even for native
German hard to understand without experts; even simple tax stuff is hard to
grok and other countries have much more accessible laws (just look at gov.uk
as an example); calling your tax guy helps here and there but costs money;
researching stuff yourself takes days

14\. You have to save documents and even mail which led to business for 10
(!!!) years; after few years you need to rent a space just for all the folders

Who knows about better options in Europe? Happy to hear alternatives, also
from a relocation perspective, so which country is founder-friendly AND nice
to live?

~~~
Atropos
You need to differentiate between where your company has its "real seat" (=
place of business activity) and your "legal seat" (=incorporated as GmbH or
LLC or ...). If your office building is in Berlin and you employ a local team
(your "real seat"), it does not matter if your company is a GmbH, a UK Limited
or an Estonian e-company - you are still under German tax, employment,
insolvency, consumer protection law...

If you have your "real seat" in Germany, in my view, it makes sense to go for
GmbH, instead of registering in UK/Estonia, because the corporate law
differences are not that big.

The question if you should decide to build a company in Germany is another
discussion.

~~~
sparkling
Forgive me if im wrong, but as long you don't receive a salary (or money
transfers in general) from the Estonian company entity, you should not be
paying any personal taxes in Germany since all the money remains in the
company?

~~~
helge5
This is absolutely right, you don't have to pay personal taxes in Germany if
the money remains in the company (it may be a little more difficult, but in
essence this is correct).

The company however would have to pay company taxes in Germany.

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therealmarv
3 words: Don't do it! Unless you are focused on Germany and German market and
you are forced to live in Germany.

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jasonlingx
Try Singapore!

