It often seems incredibly complex for aspiring entrepreneurs to start a company in Germany as foreigner. You need to get through different legal processes before you can open up the champagne and start invoicing. Every company needs a legal form, in-depth knowledge about taxes and appropriate authorities that will make it legal.
Keep on reading and we will provide you with some insight on how it works.
Choosing Your Type of Business
First off, you need to think about the legal form of your company. GmbH or limited liability company is widely popular among entrepreneurs. This can be started alone as long as you have the minimum of €25,000 equity ready.
A smaller version of this is the UG or Mini-GmbH which can be started with only €1. Besides these, it is also popular to open corporations (Aktiengesellschaft), branches, subsidiaries and partnerships. The legal form of your business depends on your goals.
The number of shareholders, owners and employees are all important factors in this decision. Make sure to research each company type in detail or seek out professional help.
Registering Your Company
In foreign countries, the first step toward opening a business is to register an address. In Germany, this can be done at a Bürgeramt or citizen’s office. Once registered, bring the certificate and your new tax ID to the bank where you need to open your bank account.
As the future owner of a limited company, you need to pick a name for it. There is a commercial register where name availability can be checked. The name has to represent the main purpose of your company. Checking the availability is completely free and you can do it any time with the help of the German Chamber of Commerce and Industry.
Finalizing a company registration requires papers such as a list of your shareholders, articles of association and founding papers. This will all be checked by a notary, including the share capital deposited for the business in your bank.
The last step here is to go to a tax office where you can register your business. They will give you a VAT and business tax number as well.
Bank Account for German Companies
Opening a business account in a bank is not cheap. For corporations, it is a must to go for the business accounts. Other types of businesses including partnerships and sole proprietors can choose the cheap (or free) personal account option.
If you are about to open an account for a corporation of your own, you are going to need a few documents. These always include papers about your shareholders and articles of association. The most straightforward way is to contact the bank and set up a meeting so that they can inform you before you commit.
Paying Taxes in Germany
You are going to have two responsibilities with your German company tax number. Invoicing and paying taxes. There, every next quarter year is the deadline for paying your taxes, while assessments are done yearly. There are various types of taxes such as church tax, income tax, corporate tax, solidarity tax, municipal trade tax and VAT.
VAT depends on the type of product or service your business offers. It can either be 7% or 19% but insurance, medical services and banks don’t need to pay VAT. If you own an AG or GmbH, you are obliged to pay 15% corporate tax.
The municipal trade tax is a type of tax that can be deducted from your corporate tax. The other types of taxes we mentioned apply to owners that have employees.
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