SET UP OF BUSINESS IN GERMANY

In most cases, the first step in the German market is export via a German distributor. In this case all activities in Germany are arranged by the distributor. Setting up an own German subdivision expands opportunities, however, requires a well-designed business structure.

Planned activities and choice of the legal form

The choice of a legal form is directly related to the planned activity. If your branch only distributes business cards, advertises and offers services without actually becoming commercially active, a GmbH would not be very suitable for this.

For all larger projects and for a limitation of liability, a GmbH would be the better form. A summary tabular delimitation of the various legal forms can be found here.

The position of a managing director in Germany does not differ from a position of a managing director in Europe. It is therefore possible that an EU or non-EU national can also hold this position. The managing director does not need a residence permit or visa if the managing director is also a shareholder of the company. However, there is a problem with opening an account before the company is founded. A German bank will not open a company account for a foreign non-EU citizen without a residence permit (at least 6 months) or a settlement permit, or for an EU citizen without a registered address in Germany.

Since no account can be opened, the formation of a GmbH will be impossible. This is because a deposit account must be opened prior to notarization, where at least half of the share capital (EUR 12,500) must be paid in. The payment slip is submitted to the commercial register together with the notarial certification of the GmbH formation. Consequently, an interim manager (EU citizen or non-EU citizen with residence or settlement permit) should be hired when the company is founded in order to open an account in the name of the GmbH. You can also use this service from m|legal. Please read more about interim management here.

Please read more about interim management here.

The questions of accounting and taxes must be clarified before the incorporation. There is no obligation to hire a tax advisor and accountant, but tax returns must be submitted regularly. It is therefore important to find at least one tax advisor who would be willing to take you on after you have set up and started your business. However, it is not absolutely necessary to set up your own bookkeeping immediately, since the effort after the foundation is very manageable and your own bookkeeping only pays off from a certain company size.

A company, whether sole proprietorship, GmbH, AG or similar, needs a legal address that can be reached by the authorities. When registering the company, a trustworthy and functioning address should be selected by a reputable provider if a real office is not rented at the beginning. The company can also be registered at the registration address of the managing director or shareholder. In this way you can initially save costs for a legal address.

In principle, foreign workers may only work in Germany with a residence permit that states that gainful employment is permitted, regardless of whether the settlement is actually active at the beginning or not. The easiest way to obtain a residence permit with the said endorsement is to obtain a Blue Card for skilled workers. An annual minimum gross salary of 56,400 euros (as of July 2022) is to be paid. The Blue Card is initially issued for 2 years and allows several exits and entries.

The penalty for employment without a work permit could be severe, in addition to terminating the operation of the branch and deporting foreign workers and employers. A description of the requirements for applying for a Blue Card can be found here.

The opening of bank accounts, especially for foreign shareholders, is a complex procedure and usually takes more effort than registering a GmbH. The choice of bank would be one of the most important decisions when entering the market.