A German GmbH offers limited liability protection and is the most common business structure for foreign companies entering the German market. Minimum capital: €25,000.
What is a GmbH?
Gesellschaft mit beschränkter Haftung (GmbH) is Germany's limited liability company. Shareholder liability limited to share capital invested. Separate legal entity from owners. Can be owned by non-German residents and companies. Recognised across EU for cross-border trade.
GmbH Formation Requirements
Minimum share capital: €25,000 (at least 50% paid before registration, remaining 50% within 5 years). Minimum one shareholder (individual or corporate). Minimum one managing director (Geschäftsführer), must be individual. German business address (can be virtual office). Notarised articles of association.
UG (Mini-GmbH) Alternative
Unternehmergesellschaft (haftungsbeschränkt) is low-capital GmbH variant. Minimum capital: €1 (yes, one euro). Must retain 25% of annual profit until €25,000 capital reached, then convert to full GmbH. Lower credibility than standard GmbH. Suitable for: Startups, sole founders, businesses testing German market.
GmbH Registration Process
Timeline: 4-8 weeks from start to trading. Step 1: Name approval from local trade register (Handelsregister). Step 2: Draft articles of association (Gesellschaftsvertrag) with notary. Step 3: Open German bank account, deposit minimum capital. Step 4: Notarise formation documents and shareholder agreement. Step 5: Register with commercial register (Handelsregister). Step 6: Obtain tax number from Finanzamt. Step 7: Register for VAT if applicable. Step 8: Register with trade office (Gewerbeamt).
All GmbH formation documents must be in German and notarised by German Notar. English versions have no legal standing. Budget €800-2,000 for notary fees.
Required Documents
Passport copies of all shareholders and directors. Proof of address for all parties. Articles of association (drafted by notary). Shareholder agreement if multiple shareholders. Proof of capital deposit (bank statement). Business address lease or virtual office contract. Germany trade licence (Gewerbeschein) for certain industries.
GmbH Formation Costs
Notary fees: €800-€2,000 depending on share capital. Commercial register fee: €150-€240. Business address: €50-€500/month (virtual office to physical space). Bank account opening: €0-€200. Tax advisor setup: €500-€1,500. Total typical costs: €2,500-€5,000 for basic GmbH formation.
German Business Naming Rules
Must include "GmbH" or "Gesellschaft mit beschränkter Haftung" in official name. Name must be distinguishable from existing companies in same region. Cannot be misleading about business activities. Cannot include "Germany", "German", "Federal", or geographic terms suggesting broader scope than reality. Cannot include regulated terms ("Bank", "Insurance", "University") without licence.
Name Approval Process
Check availability via Handelsregister online database. Request formal name approval from local commercial register (costs €0, takes 2-5 days). Reserve approved name for 3 months during formation. Name becomes exclusive in your region upon registration. Consider trademark registration for national/EU protection - business name registration alone doesn't prevent others in different regions using same name.
German Business Address Requirements
Must have physical address in Germany for official correspondence. Virtual office acceptable (€50-€200/month) but: Some banks refuse accounts for virtual office GmbHs. Customers may perceive as less established. Local authorities may investigate if no physical presence. Alternative: Shared office space (€200-€500/month) provides credibility. Best: Own office (€500-€2,000/month depending on city) for serious market entry.
Beware of "Business Formation Service" Scams: Many charge €5,000-€10,000 for GmbH formation that costs €2,500 DIY. They provide no ongoing support. Use reputable Steuerberater (tax advisor) who will support you post-formation. Typical fee: €1,500-€3,000 including ongoing tax advice.
Managing Director Requirements
At least one required, can be shareholder or external. No German residency requirement but must be EU/EEA resident or have German work permit. Personally liable for certain GmbH debts if mismanagement proven. Must file annual accounts and maintain proper bookkeeping. Salary typical: €40,000-€150,000 depending on company size. Can appoint managing director service (€2,000-€5,000/year) if no suitable individual available.
Director Liability Risks
Personal liability for: Unpaid social security contributions, VAT owed to tax authorities, wages owed to employees, insolvency trading (continuing business when insolvent). Protection: Obtain D&O insurance (Directors and Officers insurance), costs €1,000-€5,000/year. Maintain proper financial records proving responsible management. Seek insolvency advice early if financial difficulties arise.
German Tax Registration
Corporate income tax: 15% on GmbH profits (plus 5.5% solidarity surcharge = 15.825% effective). Trade tax: 7-17% depending on municipality (average 14%). Total corporate tax burden: ~30% typically. VAT registration mandatory if turnover exceeds €22,000/year. Tax number (Steuernummer) issued by Finanzamt within 2-4 weeks.
GmbH Accounting Requirements
Double-entry bookkeeping mandatory (no cash accounting). Annual financial statements required: Balance sheet, profit & loss account, notes to accounts. Audit required if exceed 2 of 3 thresholds: €6 million balance sheet total, €12 million annual revenue, 50+ employees. Publication: Annual accounts filed with Federal Gazette (Bundesanzeiger) within 12 months of year-end. Penalties for late filing: €2,500-€25,000.
Hiring a German Steuerberater
Tax advisor (Steuerberater) handles tax compliance, payroll, VAT returns, annual accounts. Costs: €100-€300/month for small GmbH, €300-€1,000/month for medium business. Worth investment: German tax law extremely complex. Late filing penalties exceed advisor costs. Advisor can optimise tax position saving 5-15% annually. Choose advisor who speaks your language if German not fluent.
German Employment Law for GmbH
Strong employee protections: Minimum 20 days paid holiday, sick pay, notice periods 4 weeks to 7 months based on tenure. Social security contributions: ~40% of gross salary (split employer/employee). Minimum wage: €12.41/hour (2024). Termination requires justified cause after 6 months employment. Works councils (Betriebsrat) mandatory for companies with 5+ employees if workers request formation.
Employ German workers or EU/EEA nationals freely. Non-EU workers need work permit (Blue Card for skilled workers earning €43,800+). Processing time: 4-12 weeks.
Opening German Business Bank Account
Required for GmbH capital deposit and operations. German banks prefer: Local managing director, physical German office address, business plan in German. Documents needed: Notarised articles of association, passport/ID, proof of address, business plan. Processing time: 2-6 weeks. Account opening fees: €0-€200. Monthly fees: €10-€50 for basic business account.
Recommended Banks for Foreign Founders
Commerzbank: English-speaking support, experience with international GmbHs. Deutsche Bank: Premium service, higher fees (€30-€100/month). N26 Business: Online bank, fast opening (1 week), limited services. Kontist: Fintech focused on freelancers/small GmbH, €9/month. Traditional banks (Sparkasse, Volksbank): Require in-person appointment, German language, but better long-term relationship for loans.
GmbH Ongoing Compliance
Annual general meeting: Required once per year, minutes must be documented. Commercial register updates: File any changes to directors, shareholders, address within 2 weeks. Annual accounts filing: Due within 12 months of financial year end. Tax returns: Corporate income tax and trade tax returns due 7 months after year-end (or 14 months if Steuerberater filed). Transparency register: Beneficial owners with 25%+ shares must be disclosed (€4.80 one-time fee, then updates as needed).
Dissolving a German GmbH
Shareholder resolution to dissolve. Appoint liquidator (often existing managing director). Notify commercial register, tax office, creditors. Liquidation period: Minimum 1 year (creditor claim period). Distribute remaining assets to shareholders. Final registration deletion from Handelsregister. Costs: €500-€3,000 for simple dissolution, €5,000-€20,000 if complex debts or disputes.
GmbH insolvency must be filed within 3 weeks of insolvency or over-indebtedness. Directors personally liable for debts incurred after insolvency date if not filed promptly.
Trademark Lens checks German business name availability and EUIPO trademark conflicts before you invest in expensive notary fees for GmbH formation.