Just how complicated could it be to register a German company?
Have you heard that it is complicated to start a business in Germany?
It certainly is, but you probably don’t realise just how complicated. I have documented the process below. Buckle up, it’s a ride…
For comparison — registering a UK Limited liability company takes about 20–30 minutes (the tricky bit is the 15 min spent buying a virtual address) and it costs GBP12. With that company, you could take a company from VC investment to multi-million pound exit.
Registering a Gesellschaft mit beschränkter Haftung (GmbH) in Germany
Gesellschaft mit beschränkter Haftung means “business with reduced liability” and is basically the German equivalent of a UK Limited company.
Approximate time required — I don’t know, possibly it stretches to infinity…
First challenge, the whole process is done in German. Duh. It used to be that a significant % of tech startups in Germany started life as UK Ltds as they are so much easier to start (and invest into, but that’s another story). However, something in the past few years reduced the popularity of that route…
The whole process should be in English. I don’t care that it is Germany. English. English. English. I speak decent German, but the vocabulary of company incorporation was not covered in my Volkhochschule classes nor Duolingo.
/edit — the above paragraph really triggered the sensitive little souls over in the r/Germany sub-reddit, so allow me to clarify, since the comment is admitedly a bit flippant. Of course the process should be in German. It’s Germany. Duh. However, the process, and thus the language, is very, very complicated and not easy to translate. Every step of the process should be translated and available in English. Every step. This is not because I have anything aginst the German language. I love it and speak it well. But I want Germany to be a competitive place attracting foreigners to setup companies here. Currently it is very difficult for them. I had many people telling me I should register my company in Estonia as it would be much easier there. I have not checked, but I strongly doubt that the Estonian company registration process is only available in Estonian.
N.B. I wrote this at the time we were doing the incorporation, so there are some unknowns in there and unfinished parts, but I will leave them as I wrote them as it gives you a sense of the despair and hopelessness that I felt at the time…
So here we go. Deep breath.
- Think about registering your GmbH with your co-founders, then realise that:
- You need €25,000 capital to start the company (In the UK you need no share capital), and:
- For tax reasons, few people hold shares directly in their own companies, so forget registering your GmbH for now, you first need to register a personal holding company.
- Find a Notary
- What is a Notary? I’m not sure, but they appear to be the reason that most of my recent investors begged me to incorporate this company anywhere except Germany.
- Make appointment with Notary to incorporate an Unternehmergesellschaft (UG)
- Unternehmergesellschaft means “entrepreneurial company”, also known as a “mini-GmbH” and it was created to get around this problem of needing €25,000 share capital to start a GmbH.
- You can start a UG with as little as €1 share capital. Yipee!
- You will use this UG as your personal holding company, which will hold your shares in your eventual actual company on your behalf. The Articles of Association can be “simple” (simple for Germany) since you are the sole owner and Director so can do what the heck you want.
- Go to the Notary for a damn good speaking to.
- What Notaries seem to do is read, very quickly. In the UK you can just adopt the model articles of association (these will surely be modified as your company takes investment).
- My two co-founders and I were all registering our UGs together at the same time. Nevertheless, the notary had to read the articles of association to each of us individually, although they were all identical apart from our names and addresses. Imagine what this is like when you start doing something more compliacted. I have heard it is even the same for buying a house — you have to sit there for a few hours while every contract is read to you. In German.
- I can’t remember how much this cost.
- Wave €300 in the air and pass it from one hand, into an envelope
- Haha, you thought you could get away with only putting in €1 share capital?
- Well if you did that, then your company would be instantly insolvent as you need to pay the Notary fees from the company’s share capital. (update — this might not be entirely true, but it was what I thought at the time).
- So what you need to do is show that you have €300 in cash, put it in an envelope, and promise you will put it away and only use it for your company. Promise.
- Really, no joke, only use it for your company. Our notary did emphasise to us quite strongly that to do otherwise with that €300, would basically be fraud, and we could go to prison. Cool.
- Set up a bank account for your UG
- Do you really need a bank account? I have no idea. Theoretically not, but if you dare suggest that to anyone that you won’t bother with a company bank account they foretell doom and catastrophe, so I just shut up set up a bank account.
- I chose Penta. It costs €X per month (/update — ooh Penta got bought and now we all have to migrate to Qonto, which is a massive PITA). There is no such thing as free business banking like you might find in the UK. Haha!
- But really, what are you going to do with this bank account? Nothing until you exit presumably, but you still need one, paying €X for this pointless, more or less dormant bank account. Great.
- Find a Steuerberater (Tax consultant)
- Yeah, you need one of these to do the tax return for your not-really-doing-anything personal holding company. This will be expensive.
- To have the Steuerberater file your tax returns on your behalf, you have to grant them Power of Attorney, so that is another nice form for you to fill out. I could have signed away one of my kidneys for all I know. It’s in German.
- Wait. This is something you have to get used to in Germany. Waiting.
- Hopefully you decided to register your UG in Berlin and not in, farm sounds intensify, somewhere like Brandenburg. (update — turns out, for my co-founders, if you live in Brandenburg you probably should register your UG in Brandenburg, not Berlin.)
- Your two co-founders’ companies will be registered now in the Handelsregister (commercial register). You, on the other hand who filed your company at the same time, you can just wait.
- Eventually you receive a pdf with some information and a company number on it. Yipee! I now have my personal holding company!
- Not. So. Fast.
- You now need to do the other things
- If were to use your company at this stage it would probably be very illegal and you would probably go to prison forever.
- By “use” I mean sign anything on behalf of your personal UG — like setting up your actual startup company. That will have to… wait.
- Register with the Finanzamt — the finance office
- You will now encounter something called “Elster”
- This is bad. Very bad. You are now in a bad place and you are going to be very sad now.
- Elster seems to be the electronic way to register with the Finanzamt. It is very complicated.
- I think the only reason I managed to even do this “immediately” online is that I have a German ID card. If not, I would probably have to wait for a letter in the post with an access code.
- The only reason I managed to complete this step at all, was because my two, much-more-German-than-me, co-founders, were ahead of me in the process (see 8.b) and documented it all.
- This is a very German stage with German so difficult that it could probably be used for a C2 language test. Duolingo does not cover this.
- Turns out I did not even do it properly: Eröffnungsbilanz
- Register with the Gewerbeamt
- I’m still not really sure what this is. The Commercial register? No idea how this is different from the things I am already registered with.
- Fill in more things. I think. I can’t remember now. This is all blurring into one.
- Message them in the online portal (it’s very German) to ask why it is taking so long.
- Eventually receive a message asking you to pay €15.
- Wait another week
- Send another message asking why your registration is still pending.
- This stage is still ongoing for me. I cannot add anything yet.
- Register with the IHK.
- Really? Who is this now? I think it is the local equivalent of the Chamber of Commerce.
- Can you, like, not register with the IHK? No idea. Probably, but it may involve going to prison.
- This costs a different amount depending on where you live. I think it may be about €150 in Berlin. I don’t know because I don’t seem to have even started this process yet. (update — it is 128€ — I just received my second invoice)
- Yes, that is right you have registered your “just a holding company” UG with the local Chamber of Commerce and will have to pay €150 (update — nope, only 128€) a year for the privilege. Maybe they hold nice business brunches or something. (update — they do! I went to a nice brunch on a boat near me a few months ago.)
- Congratulations! Now you have a personal holding company!
- No, not really.
- Well, maybe you do, but you can’t use it yet.
- Receive letter from the Bundesanzeiger Verlag (this translates to “people that send letters that look like a scam, but are in fact not a scam”).
- Apparently there is a “Unstimmigkeit” in my company registration. A “discrepancy”.
- Shock. Horror. Is it possible that in this super-efficient stream-lined process I made a mistake somewhere? Maybe I forgot an Umlaut?
- Phone them. Wait. Find out nothing new.
- This is something to do with the “Transparenzregister”. Apparently the problem is that I am not in this register. I do not know what this register is. Neither of my co-founders have been sent this letter. Why am I being picked on?!
- Send every document I have about the company to the easy to remember and never make a mistake email address of firstname.lastname@example.org
- Really hope that this is not a scam (note, for some reason it is normal to receive loads of scam letters when you set up a new company. More info here. )
- Get notification that, indeed, I have to do something with this Transparenzregister because something went wrong with my electronic registration.
- Consider reading the 28-page FAQ about the Transparenzregisrer. In German.
- Complete the online Transparenzresiter. Feel smug about how transparent you are. Brag to co-founders about your superior transparency.
- Co-founder asks you if you also downloaded a confirmation pdf at the end of the process. Since you did not, go back and look again in the Transparenzregister.
- Do the whole process all over again, but this time in a different UI (the “Wizard”), and this time get a pdf confirmation.
- (Note I now realise this whole process is basically the need to disclose who owns >25% of any company in the EU. In “we was once in the EU, but now we go it alone no we don’t have fuel shortages, United Kingdom”, this is done fairly simplyy via Companies House. Good ol’ Germany seems to have a separate company to manage this process.)
- Receive confirmation that my Gewerbeanmeldung is done.
- Wait for something from the IHK.
- Waiting for a tax number. Still waiting gonna have to phone.
- Oops I had not submitted the opening balance which I think I had to do via that other software that connects to Elster.
- Got an invoice for €150 for the commercial register.
- Oh we have to register in the Genossenschaft register. (update — can’t remember what that was. Something to do with communism?)
- Pay your Steuerberater €1000 a year to do the tax returns for this super-active personal holding company. (update — this is especially painful. There is no requirement for anything like this in the UK. I think it is actually 1300€).
- Eventually, once you have your personal UG setup, now you can begin the process all over again to create your actual GmbH. Do you have your €25,000 share capital ready*?
*actually you can start with just €12,500 share capital and then retain profits until you reach the €25,000 share capital.
Timeline — we started this process at the end of June 2021 and we are now at the start of October 2021 and it is not finished. For my co-founders it was a bit faster, but it was certainly a wee bit longer than the 30min it takes in the UK.
Update November 2022 — one of the most difficult parts of all this, apart from the hassle, is the finacial outlay. You really can start and run a company for more or less nothing in the UK. In Germany it is significantly expensive.
In the end we actually did only put 12,500€ share capital into the GmbH, as we founders did not have enough spare cash to do the full 25,000€. True story. However, “retaining profits” does not work for a startup (since profits are not expected for a long time), so we had to agree with our investors that we would transfer the remaining 12,500€ over the next couple of years. This means once a quarter I have to transfer 300€ from my personal bank account, to my UG, to the GmbH. This means I also have to write a “loan” from myself to my UG.