Setting Up A GmbH Company In Germany - What You Ought To Know?

Taxation

The Federal Central Tax office is the entity which deals with all the taxation matters in Germany. A number of corporate taxes are applicable to GmbH companies:

>>> Corporate Income Tax

The corporate income tax has an effective rate which is applicable to the revenue of the GmbH companies. The municipal trade tax and withholding tax are the other corporate taxes which are applicable to GmbH companies.

>>> Tax On Business Income

The regular income from the trade of the company as well as the capital gains is taxed.

>>> Deductions

The companies are allowed to deduct certain expenses which are typical to regular business activities. For instance, in the case of gifts or donations, a limited deduction may be done.

>>> Value Added Tax

The standard VAT rate of Germany is applicable to the GmbH companies.

Financial Records Of GmbH Company

All GmbH companies are required to maintain their financial records. As per the bylaws, the company is required to make note of all commercial transactions. These companies are required to submit all the annual financial statements, balance sheet and income statements on a regular basis. The annual account statement is drafted in accordance with the German Generally Accepted Accounting Principles.

The Management Structure Of A GmbH

The management structure in case of GmbH Company comprises of the Managing Directors, who represents the company in business matters. These Management Directors are appointed by the shareholders of the company. A shareholder may or may not be the Management Director.

Minimum Number Of Shareholders

1 shareholder can start a GmbH company in Germany. The shareholders are liable for the debts and obligations incurred by the company in accordance with the percentage contribution to the share capital. There is no upper limit for the number of shareholders. The shareholders are not required to be the residents of Germany in order to become a shareholder of the GmbH firms. The shareholders can be individuals, partnerships or even corporates.

Minimum Share Capital

Investors who intend to start a GmbH company are required to invest a minimum of 25,000 Euro as the initial capital, which can be contributed in cash or kind. One peculiar feature of this form of company is that the capital invested is divided into shares, but, the shares can neither be traded publicly on a stock exchange nor can be transferred. A minimum of 25% of the cash contributions and 100 % of the non-cash contributions made towards the startup capital must be deposited before registration of the company.

The GmbH Company is the most popular business structure used by both locals and foreign investors in Germany. It is a form of limited liability Company which is registered under German companies act. The process of setting up a GmbH in Germany is quite straightforward and takes only a few days for registration. The investors who are engaged in this company type are not allowed to undertake any commercial activity till the time the company is not registered with a Commercial Register.

The companies registers under GmbH are required to include the abbreviation of the chosen company type i.e. GmbH in the name of the company.

So, we append below a few things about setting up a company in Germany which one must know before starting GmbH company formation Germany: