Introduction
\nGermany is not only at the geographic centre of Europe; it is also one of the key driving forces of the European Economic Area. It offers a favourable environment for companies of every type and size, providing opportunities for development, growth and long-term commercial success. This is due not only to Germany\u2019s central location and excellent infrastructure, but also to its legal system, which is designed to enable businesses to grow steadily and operate successfully over the long term.<\/p>\n
In the following article, NZP NAGY LEGAL provides an overview of what to expect when establishing a company in Germany, the key issues that need to be considered and the extent to which the choice of your company\u2019s registered office may be decisive.<\/p>\n
The Mittelstand: How Large Is Your Company?<\/p>\n
Every business starts small, regardless of how ambitious its goals may be. Compared internationally, German corporate culture is particularly notable for the structure of its different forms of business organisation and the role they play in the economy.<\/p>\n
The key distinction is not simply between small and medium-sized enterprises and large corporations. Of particular importance is the share of gross value added generated by small and medium-sized enterprises (*SMEs*), which accounted for 47.1% nationwide as of 2013, with growth of 18% between 2010 and 2015.<\/p>\n
SMEs are businesses with up to 500 employees and annual revenues of up to EUR 50 million.<\/p>\n
These figures already provide a good indication of how successful medium-sized businesses can be in Germany. If your business plan envisages a company of this scale, Germany may therefore offer considerable advantages.<\/p>\n
As a medium-sized enterprise, you may benefit from various forms of government economic support, including reduced administrative burdens, favourable opportunities regarding waste management and raw-material procurement, easier access to public-sector financing, improved coordination and recruitment of skilled workers, substantial start-up support programmes and many other advantages.<\/p>\n
One of the greatest advantages of an SME is undoubtedly its versatility: whether your company is engaged in manufacturing goods on any scale or providing virtually any type of service, a broad range of business models is possible. Your company also operates within an economic area that has prospered since the Middle Ages.<\/p>\n
Size Matters
\nWhat should determine the appropriate size and legal form of your company? Precisely because Germany offers a wide variety of corporate and partnership structures, this decision should not be underestimated. The legal form you choose lays the foundation for your company\u2019s future prospects and development. NZP NAGY LEGAL is pleased to assist you in making this decision and to support you on the way towards achieving your business objectives.<\/p>\n
Germany offers a wide range of options for establishing a business, with different legal forms suited to different company sizes and capital requirements. One of the first questions to consider is whether establishing a corporation is appropriate. Corporations are generally distinguished from partnerships.<\/p>\n
Corporations are among the most commonly used forms of business organisation in Germany.<\/p>\n
Below, we present three of the most important forms of corporation, followed by an overview of additional business structures.<\/p>\n
One particularly important legal form is the *Gesellschaft mit beschr\u00e4nkter Haftung (GmbH)*, internationally comparable to a limited liability company. At least one founder is required. The statutory share capital amounts to EUR 25,000, of which at least EUR 12,500 generally has to be contributed before registration. The GmbH formally comes into existence upon registration with the Commercial Register. At least one managing director must be appointed. This corporate form is highly flexible and adaptable to a broad variety of business models, which makes it one of the most popular legal forms in Germany.<\/p>\n
The *Unternehmergesellschaft (UG)* is particularly attractive for start-ups. This corporate form has provided a low-capital entry into business since 1 November 2008. The UG is essentially based on the legal framework applicable to the GmbH, but may be established with share capital starting from EUR 1. The model is based on the accumulation of reserves: 25% of the annual net profit must generally be allocated to a statutory reserve, with the longer-term possibility of increasing the company\u2019s capital and converting it into a GmbH.<\/p>\n
Another widely used form is the *Aktiengesellschaft (AG)*, or public limited company \/ stock corporation. Its share capital must amount to at least EUR 50,000. The AG is managed by a management board and supervised by a supervisory board. It formally comes into existence upon registration with the Commercial Register. Its annual financial statements are subject to statutory disclosure requirements. The AG is deeply rooted in the German legal system and has gained particular importance due to its structured corporate governance and transparency requirements. Comparable corporate forms can now also be found throughout other European legal systems.<\/p>\n
Additional legal forms available in Germany include:<\/p>\n
*Kommanditgesellschaft auf Aktien (KGaA)*: a partnership limited by shares combining elements of a corporation and a limited partnership; its personally liable partners are responsible for managing the company.
\r\n*Offene Handelsgesellschaft (OHG)*: a general commercial partnership established by at least two persons for the operation of a commercial business, whose partners generally bear unlimited personal liability.
\r\n*Kommanditgesellschaft (KG)*: a limited partnership consisting of at least one limited partner (*Kommanditist*) and at least one general partner (*Komplement\u00e4r*) who bears unlimited liability and generally represents the company.
\r\n*GmbH & Co. KG*: a form of limited partnership in which the general partner is typically a GmbH, thereby combining elements of partnership and corporate structures.<\/p>\n
Growth and Development<\/p>\n
As your company grows, you may consider expanding into foreign markets. Several approaches are available, differing primarily in the degree of legal and organisational independence involved.<\/p>\n
A *subsidiary* is a legally independent company that is economically controlled by its *parent company*. The subsidiary has its own assets, management, accounting and financial statements. However, the parent company generally determines the overall corporate strategy. A subsidiary must be registered in the Commercial Register.<\/p>\n
A *branch office*, by contrast, may participate independently in commercial transactions but does not have separate legal personality. Legally, it remains part of the principal establishment.<\/p>\n
As your company grows in Germany, you may therefore decide to expand its activities. Several structures are available for doing so, offering different levels of independence.<\/p>\n
The Role of the Legal Form for Tax Purposes<\/p>\n
Managing directors and entrepreneurs inevitably have to consider how the choice of legal form affects the company\u2019s overall tax burden and how that burden can be structured efficiently.<\/p>\n
The following provides a brief overview of the principal taxes that may apply and the key issues to consider. Taxes in Germany are levied at federal, state and municipal level. Although the German tax system is complex, it provides a highly developed and structured framework for business activity. The applicable taxation depends, among other things, on the legal form selected.<\/p>\n
AGs, UGs and GmbHs are generally subject to *corporate income tax (K\u00f6rperschaftsteuer)* at a rate of 15% on taxable income. In addition, *trade tax (Gewerbesteuer)* and the *solidarity surcharge (Solidarit\u00e4tszuschlag)* may apply.<\/p>\n
Trade tax is a municipal tax based on the company\u2019s taxable trade income. Each municipality determines its own assessment rate (*Hebesatz*), which means that the effective trade tax burden varies depending on the location of the business.<\/p>\n
The solidarity surcharge has been levied since 1995 as a supplementary charge on income tax and corporate income tax. It was originally introduced in connection with the financial burdens associated with German reunification and is calculated as a percentage of the relevant income or corporate income tax liability.<\/p>\n
Companies must also take *value-added tax (VAT \/ Umsatzsteuer)* into account. The standard German VAT rate is 19%, while a reduced rate of 7% applies to certain goods and services. Businesses generally collect VAT from their customers and remit it to the tax authorities, meaning that the final economic burden is normally borne by the consumer. A special form of VAT is *import VAT (Einfuhrumsatzsteuer)*, which applies to goods imported from non-EU countries and is collected by the customs authorities.<\/p>\n
*Real property tax (Grundsteuer)* and *real estate transfer tax (Grunderwerbsteuer)* must also be considered where the company owns, acquires or transfers real estate.<\/p>\n
Choosing the Registered Office of Your Company<\/p>\n
This introduction is intended to provide a concise overview of the main issues to consider when establishing a company in Germany. To avoid unexpected legal or tax consequences, we recommend consulting experienced tax advisers and lawyers. This allows you to concentrate on developing your business idea while ensuring that the legal and tax framework is properly structured.<\/p>\n
As explained above, a substantial part of the effective tax burden depends on municipal tax assessment rates. The choice of the company\u2019s registered office should therefore take this into account. By combining a suitable business location with an advantageous tax environment, you can create favourable conditions for your company\u2019s sustainable growth.<\/p>\n
### **The Nuremberg\u2013F\u00fcrth Metropolitan Region Is Well Worth Considering**<\/p>\n
Located in the heart of northern Bavaria and, more specifically, in the centre of Middle Franconia, the Nuremberg\u2013F\u00fcrth metropolitan region is one of Europe\u2019s highly developed economic centres. NZP NAGY LEGAL has its headquarters here, at the heart of this business environment.<\/p>\n
Bavaria is one of Germany\u2019s economically strongest federal states, and Nuremberg in particular demonstrates how a commercial centre can develop and continually reinvent itself over centuries. The Nuremberg\u2013F\u00fcrth region represents a major economic hub with an economic output measured in the tens of billions of euros. It is home to more than 14,000 companies, many of them operating in sectors such as energy, innovation and healthcare.<\/p>\n
The large number of universities and universities of applied sciences in the Nuremberg\u2013F\u00fcrth area provides excellent conditions for research and development. The region offers significant scope for innovation, creativity and entrepreneurial ambition. It is therefore an environment in which business ideas can be realised, developed and successfully established in the market.<\/p>\n
Since 1974, *N\u00fcrnbergMesse* has provided businesses with an important platform for establishing contacts, developing commercial relationships and concluding transactions. The exhibition centre has continued to grow alongside the wider economy of the Nuremberg\u2013F\u00fcrth region.<\/p>\n
NZP NAGY LEGAL likewise has extensive experience in supporting business transactions, including cross-border matters involving leading international companies in the automotive and innovation sectors.<\/p>\n
Tax conditions in the Nuremberg\u2013F\u00fcrth metropolitan area may also compare favourably with those of many other major German cities. Municipal trade tax rates and various investment incentives may make the region particularly attractive, while research and development activities may benefit from federal, state and EU-supported incentive and investment programmes.<\/p>\n
And all of this without even mentioning the beauty of medieval Nuremberg. For a thousand years, this former Imperial City has stood for commerce, influence and connectivity. With its imposing old-city walls, the Pegnitz River and the Franconian landscape, it is certainly not a bad place to establish a company.<\/p>\n
NZP NAGY LEGAL is located in the centre of Nuremberg and is pleased to assist you with every stage of establishing and developing your company in Germany.<\/p>","protected":false},"excerpt":{"rendered":"
Introduction Germany is not only at the geographic centre of Europe; it is also one of the key driving forces of the European Economic Area. It offers a favourable environment for companies of every type and size, providing opportunities for development, growth and long-term commercial success. This is due not only to Germany\u2019s central location […]<\/p>\n","protected":false},"author":29,"featured_media":55596,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[139],"tags":[],"class_list":["post-55595","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-en"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\t