Accountancy in Germany

>> Choice of Legal Form in Germany


There are no formal restrictions on operating a branch of a foreign company in Germany. A branch is not a separate legal entity distinct from its parent. Consequently, a branch cannot enter into agreements without either its head office or its parent. The branch which is operating in Germany can sue and be sued in Germany only through its foreign parent which is liable to the full extent of its assets for the liabilities of the branch.

It is possible that a branch may be registered with a German local commercial register as a “registered branch” by filing the foreign incorporation documents if the branch exercises essentially the same activities in Germany as the foreign parent company.

A representative office which is not engaged in trade or business is not regarded as a branch, although for taxation purposes the definition of a permanent establishment in an applicable double tax treaty must be considered. The mere establishment of a branch does not trigger any German taxes.


A possible option of setting up a subsidiary is the establishment of a stock corporation (Aktiengesellschaft). Nevertheless, by far the most common and flexible legal form for subsidiaries of foreign investors operating in Germany is the “limited liability company” (Gesellschaft mit beschränkter Haftung or GmbH).

The minimum statutorily required capital for the GmbH is EUR 25,000. 25% of the subscribed capital (but at least EUR 12,500) must be paid in at the time of formation (only if the share capital is  being contributed in cash).

A GmbH can be established by a sole investor. If the GmbH has only one shareholder at least 25% of the subscribed capital (but a minimum of EUR 12,500) must be paid in. In such case, the payment of the capital contribution into the assets of the newly established GmbH must be objectively recognizable. Capital contributions in kind are possible, but the contributed assets must be fairly valued and the value is subject to examination  by the registrar.

The obvious advantage of a GmbH

over a branch is that the liability of the shareholder is limited to the amount of the share capital of the GmbH. Like a branch, the mere establishment of a GmbH does not trigger German taxes. The costs of establishing a simple GmbH with a subscribed capital of EUR 25,000 is about EUR 2,500.

At the end of 2008, German legislation changed the provisions governing investments by small corporations. To facilitate doing business throughout minor capitalized legal entities, investors can set up a so-called business company (Unternehmergesellschaft or UG). This new type of a limited liability company mainly follows corporate rules of the GmbH but its required capital starts from EUR 1. Nominal capital has to be paid in, contributions in kind are excluded. The business company should include the wording “Unternehmergesellschaft (haftungsbeschränkt)” or “UG (haftungsbeschränkt)” as a supplement in its firm, to underline the limited liability. The legal entity shall reach sufficient capitalization by retaining a quarter of its profits in the capital reserves. By reaching a nominal capital of Euro 25,000 a business company with restriction may alter its firm to a GmbH.

The statutory seat of all German corporations previously had to be registered in Germany but from 2009 onwards the operating seat can be situated in foreign countries.

Other forms of business organization

In addition to corporations such as the stock corporation and the GmbH, German law permits further forms of business organization. The limited partnership with share capital (Kommanditgesellschaft auf Aktien) is another form of a corporation. Furthermore, a business can be run in the form of a partnership. The most common partnership forms are the general partnership (offene Handelsgesellschaft – OHG) and the limited partnership (Kommanditgesellschaft – KG). Although both types of partnerships play an important role in business life in Germany, foreign investors usually choose the limited partnership. In a KG only the general partner(s) (at least one – e.g. a GmbH then forming a GmbH & Co. KG)

is (are) fully liable and the liability of the limited partner(s) (at least one – e.g. an individual) is limited to the subscribed and registered contribution to the partnership.

Latest version updated 12th October 2017

Country Breakdown






$ 3.467