Company Formation In Germany – Which one to choose?

Company Formation In Germany

Setting up a company in Germany is a very exiting process. Germany is home to Europe’s largest economy and is renowned for its high standard of living. Due to this, every year, many small and medium enterprises (SMEs) go to Germany to open a business due to the many benefits that come along.  In this article, you can find the top company formation options available in Germany.

Type of legal formats in Germany:

  • Sole trader
  • Limited Liability Company (GmbH)
  • Corporation (AG)
  • Partnership
  • Subsidiary of an existing company

Sole Trader

This business structure is usually intended for people that want to work alone and is also known as self-employed. While there are some start up benefits for sole traders, you have to keep in mind that with this legal format you will have full personal liability for your company and that usually you will have to pay both corporate and personal tax together as a single company.

Limited Liability Company

Also known as the GmbH for Germany, this type of legal format is considered as a separate company to the persons that own it. The main aim of this entity, is to keep your company liabilities totally separate from personal affairs, meaning that you will not be personally liable for your business.

Corporation

This type of legal entity is quite similar to the GmbH in Germany. The main difference is that it requires at least five people to open it. Apart from that, the commencing investment amount tends to be higher than the GmbH due to the size of the corporation.

Partnership

There are several options when it comes to opening a partnership in Germany. One of the options can be a general partnership, meaning that the partners will be liable for all liabilities of the company. Alternatively, one can opt for a limited liability legal format in order not to be personally liable for the entity. Another option is to join both of the above. One of the partners can choose to be a general partner and takes responsibility of the liabilities, and the other can chose to be a limited liability partner.

The partnership in Germany can be opened by individuals or even previously established companies.

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