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Set up company in Germany: Types of business entities

To successfully set up company in Germany, Tetra Consultants will advise the business entity most suitable for our international clients' businesses. It is important to choose the right business entity depending on the business activity, financial capabilities and long term business goals.

INTRODUCTION

TYPES OF BUSINESS ENTITIES

Set up company in Germany

GmbH (Gesellschaft mit beschränkter Haftung)

When foreign investors and entrepreneurs choose to set up company in Germany, they usually go with the equivalent of a limited liability company. This is the most popular and common business entity in Germany. Regardless whether you are conducting onshore or offshore business, you are legally able to register a GmbH as it caters to any business sectors. According to Germany Companies Registry, the minimum requirements for a GmbH are:

1 director of any nationality
1 shareholder of any nationality
Minimum paid up capital of €25,000
Legal registered office address

UG (haftungsbeschränkt)

UG is a mini GmbH which is suitable for entrepreneurs who are looking to put less capital at risk. There is no minimum paid up share capital for this business entity. However, 25% of the company’s profit must be contributed to its reserves until the reserves sum up to a total of €25,000. Thereafter, the company will be converted to a standard GmbH. The benefit of setting up a UG is that businesses will face lower risk and initial cost.

Simply put, UG has the same characteristics as GmbH, without the initial paid up capital. If your business has more than 3 shareholders, you will not be allowed to register a UG. Instead, you will be required to register a GmbH.

Branch

A branch office is an extension of the parent company and can only conduct business activities in Germany similar to that of the parent company. The parent company is the 100% shareholder and is fully liable for the debts incurred by the Germany branch office. In addition, the German branch office is considered part of the foreign company and will be subject to the German taxation system applicable to them.

Representative office

A representative office is only allowed to conduct market research and marketing for the parent company. It is not allowed to sign contracts, sales agreement and earn income in Germany.

Contact us to find out more about how to set up business in Germany. Our team of experts will revert within the next 24 hours.