Legal Structure

set up your own business

Legal Structure

Business Establishment

Unlock your entrepreneurial potential and pave the way to success as you learn how to "set up your own business" with precision and purpose.

There exist various pathways for entering the German market. When foreign companies decide to expand, they commonly choose between creating a local subsidiary or setting up a branch office. The option frequently favored by foreign companies for establishing a local subsidiary involves forming a private limited liability company, known as a "Gesellschaft mit beschränkter Haftung" (GmbH).

Setting Up a GmbH:

The GmbH stands as the predominant legal structure for corporations within Germany. It harmonizes remarkable flexibility with modest obligations and upholds a favorable reputation. Another asset of the GmbH is the containment of liability within its corporate assets. Establishing a GmbH necessitates at least one shareholder, who can be either a private individual or a legal entity.

The nationality and domicile of the shareholder(s) and managing director(s) hold no significance for a GmbH. Nevertheless, the company must possess a German business address and appoint a local representative. A minimum share capital of EUR 25,000 is mandated for a GmbH, which can be provided in monetary funds or through non-monetary contributions.

Online Formation:

Since August 2022, the online formation of a GmbH through cash contributions has been possible - enabling a remote and faster incorporation procedure. The virtual notarization occurs through a video conference involving the notary and the concerned parties. The German Federal Chamber of Notaries offers a video communication platform with a two-step authentication process that necessitates electronic identity verification (eID from Germany or any other EU member state). The necessary signatures for the establishment are acquired using a qualified electronic signature.

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Necessary Documentation:

To effectively enroll a business in Germany, documentation confirming the presence of a parent company and the authority of individuals representing it is essential. Typically, a portion of the foreign commercial register and the articles of association from the foreign parent company will be requested. This documentation must undergo notarization and either be legalized or furnished with an apostille. Additionally, a certified translation into German must accompany these documents. Please be aware that the necessary documentation may vary based on the foreign company's legal structure and source. Seeking guidance from a German notary early on is recommended for personalized counsel.

Legal Structure
Step 01

Drafting of Articles of Association:

The articles of association define the essence and structure of the company. Due to its extensive potential for contractual arrangements, the GmbH is an incredibly adaptable corporation. Essential elements encompass the share capital, shareholders and their respective ownership portions, business name, registered office, and the company's purpose.

Step 02

Notarization of Articles of Association:

Typically, the composition and notarization of the articles of association are carried out in a single session through a German notary. During this session, the founding shareholder(s) approve the articles of association and designate one or more managing directors through a notarized document.

Legal Structure
Legal Structure
Step 03

Payment of Share Capital :

After the articles of association have received notarization, it's recommended to initiate the opening of a company account and make the necessary deposit for the share capital. A sum of EUR 12,500 is adequate for the registration process with the commercial register of a standard EUR 25,000 GmbH (with a cash contribution).

Step 04

Commercial Register Registration:

Once the necessary share capital has been substantiated as contributed to the GmbH, the managing director(s) proceed to request the registration of the GmbH in the commercial register (Handelsregister) through a German notary. Upon confirmation by the commercial register that all formation prerequisites have been met, the GmbH is officially registered and commences its existence as a legal entity with restricted liability.

Legal Structure
Legal Structure
Step 05

Trade Office Registration :

Before initiating business operations, it's crucial to notify the trade office (Gewerbe-/Ordnungsamt) in the applicable municipality where the business is set to operate. Generally, acquiring a business license or permit is optional for the company's registration process. However, specific business sectors might require a permit or authorization. Registering with the trade office mandates having at least one local representative.

Setting Up a Branch Office :

Any foreign company with a head office and registered business operations abroad can establish a German branch office. There are two categories of branch offices: the autonomous branch office (selbständige Zweigniederlassung) and the dependent branch office (unselbständige Zweigniederlassung). A branch office lacks a distinct legal identity from the principal/head office. Legally, it functions as an integral part of the main office's business, with the main office assuming liability for all its business responsibilities. Consequently, there is no separate formation process; solely registering the branch within the German business registers is necessary.

The self-governing branch office connects with the parent/head office company internally while conducting business activities independently. Organizationally, self-governing branch offices possess a degree of independence from the parent company: Typically, they have their management with decision-making authority, a distinct bank account, business assets, and accounting (either independently or through the parent company). Conversely, the reliant branch office concentrates on nurturing connections and initiating business within Germany. It carries out supportive and implementation-related functions without autonomous business discretion, relying entirely on the parent company.

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