How to found a company in Germany: 14 "easy" steps and lots of pain

Just last week, I was telling people that the best way to get married in Germany is to get married in Denmark.

I cannot overstate how terrible German bureaucracy is, and how defeating it is to deal with it. A lot of people give up and leave the country over it.

[0] https://allaboutberlin.com

My wife is Italian and wanted to get married in her small home town. In order for her to get married to an American in her home town required paperwork that bordered on the Kafkaesque. We had to show up at the Italian embassy in Washington DC (fortunately we live there!) with proof and witnesses that I was not already married, plus another ten pages of forms. We had multiple stages of notorization. And we had to have forms signed by other witnesses vouching for the truthfulness of our witnesses. In Italy we had to draw up a long declaration of vows in italian -- in Italy, a wedding is a contract -- and then even though I wrote the vows myself in Italian, just because I am American we had to have it translated by someone else back into English, by hand, just so I understood the vows I had myself written. We then had to contract someone to read the vows out loud in English at the ceremony so I understood my own words.

At every step on the way, the bureaucrats apologized for the bureaucracy and asked us the same question, over and over and over again: "Why don't you just get married in the US?"

Don't get me started on the *hilarious* complexity of getting a Permesso di Soggiorno (sort of an Italian Green Card) this year. I applied this past July and there are still more steps to do.

1. Most startups now create an UG which has most of the GmbH benefits and protections, but only negligible cost.

2. The handelsregister website is deprecated. It's replacement is quite nice and fast.

Their section 2b also doesn't apply for UG because it's so cheap there is no need for trickery.

Their section about issues finding a bank seem weird to me. I just took the paper slip from the notary office and walked over to Deutsche Bank (the largest mainstream bank) and it took them only a few minutes to set up the account. Then after the card arrived in the mail, I walked back there, paid in the money and gave the paper confirmation from them to the notary guy. I'm not sure how you could make it any easier.

The only thing where I agree is that the spam is a problem.

Notaries should not exist, and could be replaced by a simple website.

It's all incredibly tedious and slow, and there are lots of reoccurring work and fees. Closing a company takes 2-3 years too, even if there are no irregularities.

One more thing I'd recommend doing before going to a notary though is get a "Vorabstellungnahme" from IHK to ensure that they won't reject your company name which would create delays and additional notary cost. It costs some money, but is worth ensuring it doesn't cause chaos afterwards.

1. Get "Vorabstellungnahme" from IHK, takes a few hours.

2. E-mail notary (yes I've worked with them a couple times, that might speed up their response time), get pre-fab founding docs within a few hours, appointment next day. Digital version of the founding docs will be available within a few hours.

3. Create account with Qonto or something equivalent, there's an explicit configuration for your notary email, so they will take care of providing proof of the starting capital.

4. Transfer starting capital.

5. Notary hands in Handelsregisteranmeldung, sends you a copy and upload it to your bank.

In practice, I find the founding process not complicated, but the day-to-day operation, bookkeeping, taxes, etc. way more painful.

Founding a GmbH wholly owned by a Delaware C-Corp, however, is intensely painful, practically no bank wants to work with you, and notaries aren't enough, you need to work with apostilles (international notaries). I highly recommend working with a law firm to set this up correctly but expect easily upwards of $10k between lawyer, apostille, and bank account costs.

When it comes to founding a company the author overcomplicates things, however. This is OK when you want to study the process, or want to become an expert in this and maybe make a business out of it.

If you just want a company get started, just buy a ready made one. There are specialized lawyers that always keep a pool of freshly founded companies to sell - exactly for that purpose. These companies are brand new, usually just a couple of weeks old and have no significant history. They have generic names and you can decide on a proper name later.

If you don't have anyone to advise you and insist finding a suitable lawyer on your own: Go to Germany's central company register (Handelsregister) and research startups in your field. The lawyers and law firms specialized in selling new companies will stick out pretty quickly to you.

Basically, the system works in general for the average population but is broken such that it affects most those at the margins (for example, the rich, the poor, those entrepreneurial, etc).

In other countries, when this happens, you see the rich paying their way to access while the poor generally suffer until some populist movement comes and promises to save them.

It's thus really not that surprising, I just had yo change my view on where I placed each country in this developed/developing country mental model

I can get an IRS EIN (tax ID), register an LLC, obtain a sales tax license (only required for selling stuff), and open a business checking account in about 2 hours in Colorado. Someone who knows what they’re doing and doesn’t spend time researching banking options could probably get it all done in 30 minutes.

Alternatively, a legal services company will do it all for you for about $500. If you have partners and want multiple shareholders, the price jumps to about $1000, but you can also do that on your own.

- For services that you never signed up for (there are certain institutions in Germany that can bill you for stuff you neither want nor need but they have the full force of the government behind them): IHK, GEZ (Rundfunk), Verwaltungsberufsgenossenschaft (in case white collar workers hurt themselves by typing on the keyboard...). If you refuse to pay, they can literally put you in jail.

- For services whose necessity is entirely generated by the government: 1k EUR for the Notary to read you some boilerplate text. 500 EUR per month for bookkeeping services (govt creates all these arcane rules to make sure you never want to do it yourself). Plus many legal bills because German business and employment law is a minefield and you don't want to blow yourself up.

- For tax on imagined revenue that you didn't even realise yet. Yes, the govt. literally makes things up and says "that's probably going to be your revenue this year and you owe us tax on that".

If you're a big company with large predictable revenue and departments of people to deal with this, I guess it's tolerable, but there is no doubt in my mind whatsoever why the vast majority of successful startups exist outside of Germany.

https://news.ycombinator.com/item?id=39786934#39788110

In the author's case, because he is using a holding company, his exit tax burden will be doubled!

It is nearly impossible to find a tax lawyer that is willing to take on the case, and my accountant keeps telling me that there is nothing to do except pay up and then wait for the refund. I don’t now have, or ever had in the past, the kind of money they are demanding. The anxiety that this situation has been causing for the past year and a half (they did a similar stunt for 2023) has become unbearable - I am threatened with personal bankruptcy and jail time for taxes I don’t even owe - and I often consider the easy way out.

I recently had to appear, in person, at the tax office (I reside on the other side if Europe now, but was forced to make the trip). There are no options to send a representative. You must make declarations in person, like its 1734.

Living in Germany and running a business there is turning out to be the biggest mistake of my life.

I'm very happy to be living and building business in Estonia instead. Establishing the company is easy and everything else except KYC meeting in bank can be done online. Also in Estonia companies don't pay any taxes on yearly profits. Almost all of the government officials speak fluent English except in the case where I wanted to have company owned car. Would highly recommend this option for others too if you can relocate easily. They even changed the rules in 2023 and now even 1€ initial capital is enough.

Most of the described steps are also necessary for a Delaware incorporation, and I found the process of incorporating a nothingburger.

1) The choice between a limited liability construct or a pass-through construct exists everywhere. My advice was always: Separate the biz from you personally, always use the non-pass-through option unless you really know what you're doing. Complexity and pain of a GmbH is identical to Delaware corp.

2) picking a new name that isn't in any dictionary is generally good advice, no matter what your jurisdiction is. We originally incorporated as SABRE Security, then years late got into a trademark dispute and had to change names. The fact that the Handelsregister can reject particularly poor names shouldn't be an obstacle.

3) I find getting riled up about the share capital a bit weird. I have never seen anyone struggle with that.

4) we can debate the utility of the notary public system in Germany, but this is hardly an obstacle.

5) Setting up a bank account with a GmbH iG in Germany is easy and quick with any of your local savings banks. These are non-profit banks with the explicit charter to help local businesses. Not sure what the author did wrong.

6/7/8) yes you need to pay in the share capital and prove you've done so, and get the reply from the Handelsregister.

9ff) yes you need tax and VAT IDs. Yes you need someone to do your books and taxes. True in Delaware, true in Germany, true in Switzerland.

All in all, the article reads super-whiny. I mean the author even complains that the notary uses your passport to authenticate you (?!).

I have been through a German GmbH, a Swiss AG, and a Delaware C-Corp with VCs, and I can tell you: The bureaucracy is pretty similar. And you will need help with taxes, accounting, legal compliance etc. And yes, it'd be nicer if all of this was simpler, fewer middlemen and lawyers involved, etc. - but this article paints things that are the absolute basics in any of the big jurisdictions as nefarious obstacles.

A normal simple Einzelunternehmen is trivial. I needed about 2h just to avoid the trap of the Gewerbesteuerpflicht (tip: system software counts as freies gewerbe, application software development not!), went to the "Steuerbehoerde" (local tax office) and that was it. No "buchhalter", just Online Elster 4x a year for the USt, and 1x a year for the ESt. Same as in the US or every other state. I did that in 3 countries so far. The US was easiest.

An engineering office is more complicated because of additional mandatory expensive IHK insurances and membership fees. TKK (Techniker Krankenkasse) is always better

The most depressing thing is that EU citizens don't even see any problem with that.

Apparently if you want to contact the pension insurance (Rentenversicherung) and you don't want to call them (Maybe because you don't speak german), or send a paper letter you'll have to sign up for this "secure email, but not really email" (https://en.wikipedia.org/wiki/De-Mail) service. It costs a small fee to set up (10 Euros), or a bit cheaper if you are listed in the "public de-mail phone book" (6 Euros) and you have to verify yourself through a government ID.

If you are not a german citizen you of course don't have this ID card and can't do the verification online, that means that you now have to go to one of the few places in the city where you can verify yourself for the service. Some of them are just small corner stores that usually also do postal services.

Very bizarre experience, just to get some simple answers related to your pension.

In Sweden, you can get this done in a matter of days, where you sell the shares of your corporation for the net value minus a fee of about $1000.

If we put Germany on one end of the scale and put Estonia on the other end, most of Europe is going to be placed near Germany. Germany isn't the outlier, Estonia is.

Also one would be mistaken to believe that these bureaucratic processes produce a better result - there's already numerous examples where weaknesses in these systems have been exploited. One recent example exploits the requirement for applicants to supply their own photos. In this case people who looked somewhat alike used computer graphics to merge facial features to produce a mid-point headshot, resulting in one identity that worked for two individuals.

This isn't an optimisation and doesn't matter unless I'm misunderstanding what is being suggested. Multiplication is commutative so it doesn't matter if you pay the taxes before or after accruing returns, as long as your goal is to get that money to you.

$100 * 0.5 (for 50% income tax) * 2 (for 100% investment return) = $100 whichever order you do the multiplication.

1. these kind of stores are technically owned and legally run by somebody who just made the paperwork and gave the finances. The people working there dont do any paperwork, and of course they cannot as they often (like in the vietnamese produce stores) dont speak german on a level that would allow to fill out paperwork.

2. Lots of smaller business actually didnt fill out anything, and surpprisingly it somehow works for them, sometimes for years, even in busy areas, i mean they serve hundreds of customers per day but never filed any invoices, only accept cash, nobody speaks german and they dont have any documents. It's fascinating. There are a lot of rules in Germany (of course) when you serve food or alcohol or operate at night or have tables and chairs, and i can tell you it's not even legal to NOT have toilet or to not have prices on the menu, but well, they still run the business, probably without even knowing all the rules.

We can learn from them I think, just SHIP IT!

Then I moved to Spain and started a company there.

Germans, your country has NOTHING on Spain when it comes to pointless, confusing bureaucracy.

Your country, your laws and rules and the application of them are BLISS compared to Spain.

>. International “startup” banks like Wise generally don’t support this, so don’t even try! You’ll lose multiple days going back and forth with their support, like I did. You can open a Wise bank account later when you’re properly incorporated.

The real optimization is not using Germany companies to begin with.

I'm a US citizen and US resident, I had some German limited partners in a small hedge fund several years back. The offshore feeder was in the Cayman Islands, alongside the Master Fund. Both had bank accounts only in US banks. (All forms with IRS and other regulators filed no problems there, good to have a business bank familiar with these things.)

Now to those particular investors, wiring money to a foreign bank with foreign transaction needs was too much for them. The US being a foreign bank from their perspective. They just wanted to use SEPA transactions and transaction instructions that they are familiar with, which are (potentially) instant.

This US citizen was able to sign up the Cayman Islands feeder into Wise for an EU bank account no problem, had SEPA details no problem. Makes it super easy to swap over to USD with few fees and wire it to the primary bank account.

Its also important to note that Wise has high transaction limits. Like $1,000,000 per transaction is the limit, its not a daily limit. so even if you get a large LP its not really a limit just multiple transactions. Not perfect, but way better than many other fintech app solutions for casual use.

Before Wise it was nearly impossible for an American to get real Eurozone banking easily after FATCA treaty was ratified. But with Wise it was pretty quick maybe 1 business day with support in their business sign up.

One point against Wise is that their Terms of Service are very restrictive. There are lots of legal activities you're not supposed to do with them.

Yes I know we can register a UG, but in the end you don't. And it is not just the share capital that is annoying it is everything else.

It literally costs 10x more to do the bookkeeping for a German company vs a UK one. Plus getting investors is much more difficult because of the notary requirements.

We used a SPV for our first round, but even that is annoying. I had some angel investors pull out purely because we are a German GmbH.

Another much closer and cheaper to run option is Hungary where company profit tax is 9% and personal income tax is 15%, still providing up to 2x higher net personal income on same revenue vs Germany.

Starting their bank accounts was another matter though as they wanted the pdf from above and Articles of Incorporation and/or an Operating Agreement, neither of which was required by the state. But the document itself wasn't important as my banker googled to find a one-page version, emailed me the link, I filled in my details, and printed it. :|

Now once a year, I have to go online and report my annual revenue. And because I fall under the minimum, the rate is 0% unless I file it late, then it's a $50 late fee.

Any recommendations what would be the best place to found a company for someone who's living in Germany?

> Estimate your revenue at 0€ for now unless you have real reason to believe otherwise (do you have paying customers lined up already? probably not). That way, you only have to pay corporate tax at the end of the year based on your actual profit (vs. having to prepay tax every quarter).

This is funny. I tried to set my revenue to 0 in the beginning and the tax authority simply set it to 60k (they couldn't even tell me where this number came from). After a couple of harsh phone calls (from their end, they were yelling) they simply kept it and told me I could file a "Verwaltungsklage". Of course, they (and IHK) derive the quarterly pre-taxes from that and didn't give a rats ass if I actually made any revenue. I got my money back a year later (which got worse and worse over time). Simply kills you, If you have to pay the bills and try to route your little boat through the stormy seas. Several times I spontaneously had to credit 2-3k EUR to get my customers to shorten the term of payment.

> IHK: Domains are not allowed.

This is funny as well because my company name was a domain name. IHK noticed that and I told them (on phone w/o any proof) that it's mine and they were okay.

The rest, I'd say is batshit crazy bureaucratic but somehow manageable. Germany is just not a good spot for "some SaaS idea" or maybe not even for bigger ideas as well anymore. At least not until they radically streamline their bureaucracy (which depends on radically professionalized politics which is not realistic at this time).

PS: Founding a company made me stop believing in "Social Market Economy" (German self-label) since the taxation system and social systems allow for amazing things once you're out of the employee system.

Edit: Typos and grammatical mistakes.

I currently have to change our address. Need to go to the notary. ~500€ for that. WTF...

The holding company doesn't have to be a German one

(and neither does the operating company, but you could follow this tutorial and have a holding company elsewhere)

Okay, alright, there are a lot of EU countries that are quite a bit better in this regard. More generally: Do your research, shop around, and move to opportunity!

Always get a lawyer to represent you when the Tax folks start an audit. Never tell them anything over the phone or email. Always ask for a letter and provide explanations via letter. Do record all communications with them. Never say anything they did not ask for.

Don't get me started on founding a company and then getting necessary loans (all while the loan market changes and suitable houses might vanish from the market). Some proper investor is probably now renting out a multi unit house we would have bought, making nice profits while we would have aimed at boosting our pension in a few decades.

But well: That's the way it's meant to be, else the rules would be different, or would they?

(We got an old SFH instead, and slashed energy consumption by ~80-90%. That's not even accounting for PV. It's nice to profit from that now and later in life, but I still believe that we, as a society, would have benefited more from improving a MFH and sharing the lower energy consumption with some tennants)

I see this over and over and over again.

If you hit a bureaucratic wall in Germany you often can get over it, not by paying money like in some countries, but by paying with time from your own short life, and with your nerves trying to bend the system to your will. Is it worth it? No. Not in my opinion.

The whole system is designed for slavery. Never question anything here, just obey the rules, give up your individuality and live without a soul.

The new European way of freedom is not building your own life; you must let government take care of you, and in return you do what they ask. The best part is they think they are free and afraid of their privacy.

If freedom is not thinking for yourself and building your life, then what it is? The answer is; partying, drugs, alcohol, orgies. And complaining about other countries issues. Textbook cult patterns.

German news are full of other countries’ problems, they will discuss racism in US for weeks and months meanwhile Nazis are burning Turkish families once a year alive, murdering ordinary people. You’ll see how they write the softest article about burning immigrants alive in 2024 their own country but they will happily go out to the streets and protest for US or Ukraine.

How are you going to convince any immigrants to live here and work with you? None of the immigrants who live here say good things about Germany or Germans.

Investment scene is also pretty much depends on your race. Unless you’re already profitable or white european, they won’t fund your startup. They rather fund some grow-carrot-in-balcony startups instead of investing in your company.

I’m hoping to get out of this shit show soon and almost everybody around me consider the same.

1. *Choose Your Business Structure*: Decide whether you want to establish a sole proprietorship (Einzelunternehmen), a partnership (Gesellschaft bürgerlichen Rechts - GbR), a limited liability company (Gesellschaft mit beschränkter Haftung - GmbH), or another legal form.

2. *Business Name*: Choose a unique business name and check its availability. You can do this through the German commercial register (Handelsregister).

3. *Articles of Association (Gesellschaftsvertrag)*: Draft and notarize the articles of association if you're forming a company with others.

4. *Capital Contributions*: Determine the initial capital required for your business structure. For example, a GmbH requires a minimum share capital of €25,000.

5. *Register Business*: Register your business with the local trade office (Gewerbeamt) if it's a sole proprietorship or partnership. If you're forming a GmbH, you'll need to notarize the articles of association and register the company with the local commercial register (Handelsregister).

6. *Taxation Registration*: Register your business for tax purposes at the local tax office (Finanzamt).

7. *Obtain Necessary Permits and Licenses*: Depending on your business activities, you might need specific permits or licenses. Check with the relevant authorities.

8. *Social Security*: If you plan to employ people, you'll need to register with social security agencies.

9. *Employment Contracts*: Draft employment contracts if you're hiring employees.

10. *Open Business Bank Account*: Open a business bank account to manage your finances.

11. *Insurance*: Consider necessary insurances such as liability insurance, health insurance, etc.

12. *Data Protection Compliance*: Ensure compliance with data protection regulations, especially if you're handling personal data.

13. *Employer Obligations*: Understand and fulfill your obligations as an employer regarding taxes, social security contributions, etc.

14. *Ongoing Compliance*: Stay compliant with ongoing obligations such as filing annual reports, tax returns, etc.

Remember, these steps may vary depending on the type of business you're starting and your specific circumstances. It's advisable to consult with legal and financial professionals to ensure compliance with all legal requirements.