The legal form of a company has an impact on the tax burden and also on the applicable tax, i.e. corporation tax, income tax and trade tax.
However, taxes are only one aspect regarding the legal form of a company. Othe aspects such as limitations of liability, legal formalities and publicity obligations might also be relevant.
We help can help you with your company formation in Germany.
Businesses (including a GmbHs) must formally make a business registration with indication of the exact activity in the local community. The cost is depending on the municipality and ranges from EUR 15 to EUR 100. The tax offices receive a compy of the business registrations and then sent out questionnaires to the shareholders for registration purposes and tax assetsment purposes.
As a foreign investor there are two avenues available to set up a business in Germany, involving the creation of:
For individuals, a sole proprietorship may be the easiest way to establish a business in Germany. Also, partnerships and corporations are possible.
In the case of start-ups for smaller projects, a society of civil law ("GbR") is often chosen, since a "GbR" can be established without a notary. The company
agreement does not have to be written down, but this is urgently recommended. Disadvantage of the GbR: the shareholders are liable to the company with their private assets. Each shareholder is
liable for the entire debt.
There are also the following methods for doing business in Germany, by establishing:
We provide specialist tax and legal advice regarding the formation of a company in Germany.
If you plan to set-up a company in Germany please also keep in mind that the levy rates of the local trade tax may have a significant impact on the tax rate. In Germany every municipality is able to set its levy rate for the Trade Tax on Income. In the Munich area the differences in the rate can be significant as they vary between 490%, which results in a trade tax on Income rate of 17,15% and 240%, which results in a trade tax on Income rate of only 8,4%!
We can explain what the legal and tax consequences of certain legal entities (partnerships vs. corporations such as GmbH) are, since income tax, corporation tax and trade tax application is also based on the legal status of a business.