Germany offers a variety of company structures tailored to different business needs, making it an attractive destination for domestic and international entrepreneurs. Known for its strong economy, reliable legal system, and strategic location in Europe, Germany provides multiple options for setting up a business, each with specific features, requirements, and advantages.
Common Types of Companies in Germany
1. GmbH (Gesellschaft mit beschränkter Haftung)
The GmbH is the most popular legal form for small and medium-sized enterprises in Germany. It offers limited liability protection to its shareholders and is often compared to a private limited company in other jurisdictions. The incorporation process takes 2 to 4 weeks and requires a minimum share capital of €25,000, with at least half (€12,500) paid before registration. The company must have a local registered office and notarized articles of association. A GmbH can have one or more shareholders, who may be individuals or companies, resident or non-resident.
2. AG (Aktiengesellschaft)
The AG is a public limited company suited for larger enterprises, particularly those seeking to raise capital through public stock offerings. The minimum share capital is €50,000, and the company must comply with stricter governance and reporting requirements than a GmbH. AGs are typically used by listed companies or large family businesses aiming to attract external investors.
3. UG (Unternehmergesellschaft)
Often referred to as the “mini-GmbH” or entrepreneurial company, the UG is a simplified form of GmbH with very low minimum capital requirements, starting at just €1. This structure is ideal for startups and small businesses that want to benefit from limited liability without committing substantial initial capital. However, UGs are required to allocate a portion of their profits to build up the standard GmbH capital of €25,000 over time.
4. OHG (Offene Handelsgesellschaft)
An OHG is a general partnership where all partners have unlimited joint and several liability for the company’s debts. This structure suits businesses where partners want to share management responsibilities and liability.
5. KG (Kommanditgesellschaft)
A limited partnership with at least one general partner with unlimited liability and one or more limited partners whose liability is restricted to their investment. KGs are common in family businesses and joint ventures.
Incorporation Process and Requirements
Setting up a company in Germany usually requires several steps, including drafting articles of association, notarization, registering with the Handelsregister (commercial register), and obtaining a local business address. For GmbH and AG, a local director or managing director is mandatory, while shareholders can be non-resident.
The process generally takes 2 to 4 weeks but can vary depending on the complexity and completeness of the documentation.
Compliance and Reporting
German companies must maintain proper accounting records according to German GAAP or IFRS, prepare annual financial statements, and submit these to the commercial register. Depending on size, some companies require audits. Additionally, companies must comply with corporate income tax, trade tax, and VAT obligations.
Why Choose Germany?
Germany’s diversified corporate structures offer flexibility to suit various business goals, from startups to multinational corporations. The country’s robust economy, legal certainty, and EU membership provide a strong foundation for sustainable growth. Whether opting for the widely used GmbH, the capital-intensive AG, or the flexible UG, entrepreneurs can find a structure that fits their operational and financial needs.
