How to set up a German Gmbh?

Looking to Establish a GmbH (company with limited liability)? Your Essential Guide to Incorporation, Legalities, and Expanding in Germany.

If you intend to engage in any commercial activity in Germany, it is highly recommended to establish your legal entity company. The GmbH is the most common form of all new companies incorporated in Germany and can be compared to the French Sàrl, the Spanish SL or the well-known Private Limited in the UK. Most foreign investors incorporate a GmbH in order to have a representative office in Europe which allows them to start and grow their sales operations in both Germany and the rest of Europe.

The German GmbH is successfully established by having the Deed of Formation documents as well as the Articles of Association signed by the director in front of an official German notary. The GmbH can also be represented by further natural persons. Those representatives are required to hold power of attorney, which has to be notarized by the German notary as well.

To complete the process of incorporation, the proposed GmbH must be registered with the local Chamber of Commerce and Industry. For registration, the managing director has to sign the application in front of the German notary. The notary certifies the signatures, informs the managing directors about their duties, and finally files the application.

Upon registration in the commercial register, the GmbH becomes a legal entity and gains full legal capacity. Furthermore, a newly-incorporated GmbH must also be registered at the local trade office. The GmbH can already start its business without this last registration, however, the limitation of liability of the shareholders will only become effective when the registration is filed.

Gesellschaft mit beschränkter Haftung (GmbH) 
(Company with limited liability)

This is the most widespread company form. Its shareholders are not personally responsible for the company's debts.

• One person is sufficient to set up a GmbH and to be its shareholder. A notarial agreement must be drawn up between the shareholders and the company being set up. The company legally comes into existence only when it is entered into the Register of Companies (Handelsregister). The name of the GmbH must derive either from the purpose of the enterprise or the names of the shareholders and must contain the abbreviation "GmbH".
• Shares in a GmbH are not embodied in a certificate and cannot be quoted on the stock exchange. However, they may be transferred through properly notarized documents. A GmbH must appoint at least one managing director (Geschäftsführer), who may also be a shareholder of the company. He is the only person entitled to represent the company.

Investment

To form a GmbH, a minimum share capital of EUR 25,000 is required (paid on a company bank account or made of contribution in kind). To facilitate the formation, at the time of registration it is sufficient for half of the minimum capital, (EUR 12,500), to have been actually and verifiably contributed. According to the newest legislation, a so-called mini-GmbH can be formed. According to this form of investment, the investor does not have to pay the whole sum of EUR 25,000.00, but the mini-GmbH will have to retain a part of its profits until the minimum share capital of EUR 25,000.00 is reached. If the mini-GmbH only has a single shareholder, this shareholder is liable for any unpaid amount of the minimum share capital and must provide security for it.

Overview: German limited (GmbH)