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The Minimum Share Capital in Germany

The Share Capital in Germany

Updated on Thursday 21st February 2019

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Germany offers different types of legal structures allowing foreign companies to choose the legal forms for their businesses. The main types of German companies that require share capital are the limited liability company (Gesellschaft mit beschränkter  Haftung or GmbH) and the joint stock company (Aktiengesellschaft). There is also an option to open a mini GmbH, the type of company that requires the smallest minimum capital amount but does have a set of conditions for reaching a target share capital and different taxation principles. 
 
Entrepreneurs who wish to invest in Germany can receive assistance from our team of German lawyers who can provide detailed information about the German legislation applicable to foreign investments.
 
Below, we describe the two types of corporations that require a minimum share capital and offer more information on their characteristics as well as other incorporation costs.
 

The German limited liability company (Gesellschaft mit beschränkter Haftung, GmbH)

 
The German limited liability company (LLC) is the most common type of business because it can be set up by one person that can act as the owner and shareholder at the same time. A LLC in Germany must have at least one director, who isn’t required to be a German citizen. At the same time, the local legislation allows partners in a LLC that are legal entities. 
 
The LLC is recommended for various types of companies, from small businesses to large corporations. 
 
The minimum share capital of a German limited liability company must is EUR 25,000. At least EUR 12,500 must be placed in a bank account when registering the company with the Register of Commerce in Germany. Furthermore, the directors of the company should sign the relevant documents when registering at the Commercial Registry in front of a public notary. 
 
The shareholders can contribute with different amounts of money to the minimum share capital but the share contribution must be of at least EUR 1. The share contribution can be made up of different amounts of money as stated above, but it can also be made up of other forms of contributions in kind, such as movable or immovable properties. The shares of the GmbH are not certified and cannot be publicly traded.
 
In the case of a German entrepreneurial company which is a mini GmbH, the minimum share capital is EUR 1. In order to compensate for this low initial share capital, the company has to retain a quarter of its annual turnover until it has accumulated the usual 25,000 EUR for a LLC. Once this target amount is reached, the accumulated profits are converted into share capital and the mini GmbH is transformed into a regular GmbH. Another advantage in terms of costs for the mini version is that the articles of association can be notarized for a lower fee and the total costs for opening a mini GmbH are reduced.
 
Our team of German attorneys can offer more details on the registration of a LLC
 

The German joint stock company (Aktiengesellschaft, AG)

 
The German joint stock company is a public limited liability company that can be listed on the stock exchange. The minimum share capital for a joint stock company in Germany is EUR 50,000, while the statutory capital is set up as EUR 12,500. The German joint stock company can be set up by a shareholder but it requires a supervisory board made of at least 3 members and a management board made of at least one member.
 
The joint stock company in Germany is governed by the rules and regulations of the German Stock Corporation Act, which provides a comprehensive framework related to the incorporation of this legal entity, its activity, management and the rights and obligations of the shareholders. We do recommend getting in touch with one of our lawyers in Germany for the purpose of drawing up the company’s articles of association. 
 

Business forms in Germany without share capital

 
The private limited liability company and the joint stock company are popular business forms because of the clear distinction between the shareholders or founders and the company itself. The corporation is a legal entity that has certain legal capacities (such as entering into agreements in its own name) and the shareholders are only liable up to the extent of the invested capital.
 
While other business forms do not share these characteristics, it is true that they do not require a mandatory minimum share capital to be subscribed at the time of the incorporation. These are the partnerships and the sole trader and our attorneys in Germany list their characteristics below:
 
  • The German civil law partnership: is not a very used type of company in Germany but it can be used by enterprises that need to associate for a joint purpose; can be suitable for start-ups as it allows for businesses to launch their ideas in collaboration with other parties. All of the partners are jointly liable.
  • The German limited partnership: has the attributes of a limited liability company and it is made up of at least one general partner who is wholly liable for the business’ operations and a limited partner liable up to the value of his or her shares in the partnership. It can be suited for medium-sized businesses.
  • The German general commercial partnership: a classic partnership that can be suited for small and medium-sized businesses and it is similar to the civil partnership.
  • The sole trader: the simplest business form, it is business run by a single individual who is fully liable for the debts and obligations of the business; it is considered the riskiest business form, however, like the partnerships it does not require a mandatory minimum share capital.
 
In order to set up a partnership, it is recommended to draft and sign an agreement in this sense. The legal entity will have to be registered at the Commercial Registry by all the partners. At the same time, application for the Commercial Registry should be notarized by a public notary in Germany. 
 
The partnerships and the sole trader presented above are not separate legal entities but associations. Entrepreneurs in Germany need to consider this trait very carefully when choosing a business form based on whether or not it requires a minimum share capital.
 
Although they do not require a capital readily available, the partnerships will also need to be registered with the local trade office and this will include a number of costs. Entrepreneurs can expect to incur costs related to preparing the partnership agreement, document translation costs for foreign investors, notary fees for the certification that needs to take place in front of the notary and others. The total expenses needed to open a partnership will vary; however, an estimated amount would be less than 500 euros for a general commercial partnership. You can reach out to the team of experts at our law firm in Germany if you need specific details.
 

What to take into consideration when doing business in Germany 

 
Investors in Germany need to observe a set of regulations and procedures when starting a business. The minimum share capital is only one of these applicable requirements while others have to do with choosing a unique business name and preparing all of the other documents (apart from the proof of payment for the capital) for the purpose of entering the company in the Commercial Register in Germany.
 
The ongoing expenses of a company, once it is incorporated in Germany, will include the taxes, those on profits as well as those applicable for other purposes. Some of the main taxes for companies include the following: the corporate tax rate of 15.825% including the solidarity surcharge to which a municipal trade tax applies amounts to an actual value of 33 to 33%. Other taxes for companies include the withholding tax on dividends, interest and royalties, the real property tax, the social security tax, the value-added tax with two rates, a standard one of 19% and a reduced one of 7% as well as an exemption from the tax for certain types of transactions. Our team of tax lawyers in Germany can provide investors with detailed information about the ongoing tax compliance in the country.
 
Investors should have complete information about the business climate as well as the business start-up costs, including the minimum share capital, when deciding to open a company in Germany. This is why we recommend that investors, both local and foreign, should get in contact with one of our lawyers who specialize in company formation matters. Entrepreneurs who want to start a business in Germany and need legal assistance can contact our law German law firm