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Company law in the Germany

Company Law in the Germany

Germany has a well-developed legal framework for business entities governed primarily by the German Commercial Code (Handelsgesetzbuch or HGB) and the German Stock Corporation Act (Aktiengesetz or AktG). Under German company law, there are various types of business entities, each with its own characteristics and requirements. Here's an overview of the provisions, types of business entities, incorporation procedure, applicable forms, required documents, fees, and taxation under German company law:

Types of Business Entities in Germany:

  1. Sole Proprietorship (Einzelunternehmen):
    • A single individual owns and operates the business.
    • The owner is personally liable for business debts and obligations.
  2. General Partnership (Offene Handelsgesellschaft or OHG):
    • Formed by two or more individuals or legal entities.
    • Partners share profits and losses.
    • Partners are personally liable for business debts.
  3. Limited Partnership (Kommanditgesellschaft or KG):
    • Comprises at least one general partner (with unlimited liability) and one limited partner (with liability limited to their investment).
    • Limited partners cannot actively manage the business.
  4. GmbH (Gesellschaft mit beschränkter Haftung):
    • A private limited liability company.
    • Owners are called shareholders.
    • Shareholders' liability is limited to their capital contributions.
    • Suitable for small to medium-sized businesses.
  5. AG (Aktiengesellschaft):
    • A public limited liability company.
    • Shares can be publicly traded.
    • Suitable for larger enterprises.
    • Strict regulatory requirements apply.

Procedure of Incorporation in Germany:

1. Choose Business Entity Type:

  • Determine the most suitable business entity type based on your business needs.

2. Reserve Company Name:

  • Check the availability of your desired company name with the local trade office (Gewerbeamt).

3. Draft Articles of Association (for GmbH and AG):

  • Prepare the articles of association (Gesellschaftsvertrag) outlining company details, management, and shareholder information.

4. Notary Appointment:

  • For GmbH and AG, a notary public must certify the articles of association.

5. Open Bank Account:

  • Deposit the minimum share capital in a German bank account (required for GmbH and AG).

6. Register with Local Trade Office:

  • Register your business with the local trade office to obtain a trade license (Gewerbeschein).

7. Register with Commercial Register:

  • Submit the necessary documents to the local commercial register (Handelsregister) where your company will be registered.
  • Documents may include the articles of association, notary certification (if applicable), and information about shareholders and directors.

8. Tax Registration:

  • Register for tax purposes with the local tax office (Finanzamt).

9. Social Security and Labor Office Registration:

  • If you plan to hire employees, register with the social security and labor authorities.

Forms, Documents, and Fees:

  • The required forms, documents, and fees can vary depending on the business entity type and location. Generally, you will need:
    • Articles of association (for GmbH and AG).
    • Shareholders' agreement (if applicable).
    • Proof of minimum share capital deposit (for GmbH and AG).
    • Notary certification (for GmbH and AG).
    • Trade license (Gewerbeschein).
    • Registration forms for the commercial register.
    • Proof of tax registration.

Taxation under German Tax Laws:

  • Businesses in Germany are subject to various taxes, including:
    • Corporate Income Tax (Körperschaftsteuer): Applicable to corporations like GmbH and AG.
    • Trade Tax (Gewerbesteuer): Levied at the municipal level.
    • Value Added Tax (VAT or Umsatzsteuer): Applies to the sale of goods and services.
    • Personal Income Tax (Einkommensteuer): Relevant for sole proprietors and partners in partnerships.
  • Corporate income tax rate: As of my last update in September 2021, the corporate income tax rate was 15% plus a solidarity surcharge and trade tax.
  • VAT rates: Germany had multiple VAT rates, with the standard rate at 19% and a reduced rate of 7%.

Please note that tax rates and regulations can change over time, so it's essential to consult with tax professionals and legal advisors or refer to the latest government guidance for the most current information on taxation and compliance requirements in Germany.


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