Vergleich GmbH - Zweigniederlassung

I. German branch

1.In General

Each foreign legal entity ... entitled ... set up a branch ... Germany. ... requirements are fit ... with German Corporate Law. Typical characteristics for a branch are:

  • Own rooms of ... branch;
  • Organizational independence;
  • The branch carries ... equal business as ... main establishment;
  • An executive, who ... empowered ... act ... his own.

A German branch has got no own legal capacity. ... asset of ... branch ... part of ... main establishment´s asset. ... branch can not be party of a lawsuit, this ... always ... main establishment. Legal transactions between ... branch ... the main establishment are invalid due ... German Civil Law. Bookings between ... branch ... the main establishment do not legitimate any claims. ... fact, these bookings only mean internal positions.

Usually ... branch does not trade under an own name. It uses ... name of ... foreign main establishment.

2. Application of ... branch ... the German Commercial Register

If a branch ... Germany exists, it has ... be applied ... the German Commercial Register. Competent ... the district court, where ... branch ... seated (in your case Frankfurt am Main). ... application form has ... be signed by ... managing director of ... main establishment ... has ... be legalized. It ... possible for ... managing director of ... main establishment ... sign ... application form before a local notary abroad, who certifies ... signature. Afterwards ... documents have ... be legalized by local authorities by ... called Apostille.

The following documents have ... be enclosed ... the Application Form:

  • Statutes of ... main establishment with translation into German, certified ... legalized;
  • Certified ... legalized copy of ... shareholder resolution, that appoints ... managing director of ... main establishment;
  • Certified ... legalized copy of ... extract from ... Commercial Register of ... main establishment.

3. Managing Director

The branch does not have a managing director ... its own. Usually ... company employs an executive ... Germany, who ... empowered ... carry ... the business of ... branch.

4. Taxes

An office ... regarded as a "Permanent Establishment" by German tax authorities. ... the complete income related ... the business of ... permanent establishment ... Frankfurt has ... be taxed ... Germany. Regarding ... type ... the rate of taxation, please find ... relevant information below ... Point II. 4.

The difference ... a registered German branch is, that ... branch ... entitled ... reclaim paid VAT from ... local authorities like a German company. For this reason ... refund of VAT ... be much easier ... arrange.

5. Costs

The costs for setting up a branch ... be about 2.500,00 ... 3.500,00 EUR net. This amount already includes ... notary fees. This amount includes ... services for ... usual procedure of ... establishment. If additional services should become necessary, we ... charge 175,00 EUR per hour for these services.

II. German company with limited liability (GmbH)

1. ... General

The German GmbH ... a legal entity ... therefore has its own legal capacity. Please note ... characteristics of a GmbH

  • The liability of ... shareholder ... limited ... the paid ... share capital;
  • The minimum share capital ... EUR 25.000,00. At ... time of incorporation at least EUR 12.500,00 have ... be paid ... on account of ... company. ... remaining amount of EUR 12.500,00 may be paid ... later;
  • Shareholder of a GmbH may be any German ... foreign person ... company. One shareholder ... sufficient;
  • The GmbH may have any legal purpose;
  • The GmbH trades under its own name. ... abbreviation "GmbH" has ... be added.

2. ... establishment of a GmbH

The German GmbH becomes established by signing of ... settlement documents before a German notary.

For ... act of establishing ... GmbH, ... following documents are necessary:

  • Settlement deed;
  • Articles of Incorporation;
  • List of shareholders;
  • Application Form ... the Commercial Register;
  • Bank receipt, showing ... payment of ... share capital.

The settlement deed has ... be signed by ... shareholder(s). It ... possible ... empower a person ... Germany ... establish ... company. For this purpose, ... main establishment may grant a power of attorney, which has ... be certified by a local notary ... legalized by local authorities.

The Articles of Incorporation are ... statutes of ... GmbH. No signature ... necessary.

The list of shareholders has ... be signed by ... appointed managing director of ... new GmbH. ... signature ... unaccompanied by any forms.

The appointed managing director has ... sign ... Application Form ... the Commercial Register, which includes a notary instruction of a managing director. ... Application Form has ... be certified by a notary. ... case ... managing director ... abroad, ... document has ... be legalized with Apostille additionally.

Before these documents become submitted ... the Commercial Register, ... share capital has ... be paid ... a bank account of a German bank. ... bank account has ... be set up ... the name of ... new company.

When all necessary documents are submitted ... the Register Court, ... company ... be registered usually after a few weeks. From this moment on, ... limitation of ... liability ... in effect.

3. ... managing director

The GmbH must have at least one managing director. He/She ... appointed by shareholder resolution ... has ... be registered ... the Commercial Register. He does not need a German nationality ... residence ... work permit. He ... authorized by law ... represent ... company ... all respects ... any restrictions imposed ... him are valid only internally, they have no effect with regard ... third parties.

4. Taxes

As a legal entity ... GmbH ... a tax subject ... it's own. ... following taxes have ... be considered:

  • Corporate income tax;
  • Trade tax;
  • Value added tax.

The corporate income tax rate ... Germany ... currently at 25 %.

The trade tax ... a local tax. ... the rate varies due ... the seat of ... company.

The current rate of value added tax ... 16 %. ... GmbH ... entitled for deduction of value added tax, ... it can reclaim paid taxes ... all purchases of a business.

5. Costs

The costs for setting up a GmbH ... be about 3.500,00 ... 5.000,00 EUR net. This amount already includes ... notary fees. This amount includes ... services for ... usual procedure of ... establishment. If additional services should become necessary, we ... charge 175,00 EUR per hour for these services.

III. Establishment of a UK Ltd.

In order ... evade ... strict rules of German company law, there ... another option; ... establishment of a UK Ltd., which ... the counterpart of German GmbH.

The establishment of a UK Ltd. ... cheaper ... takes less time than setting up a German GmbH. Important ... this context is, that for a UK Ltd., there ... no minimum share capital required.

When ... UK Ltd. ... registered ... England, it ... possible ... move ... seat of ... company ... Germany. According ... the latest jurisdiction of ... Court of Justice of ... European Communities, ... company has ... be treated like a British company, although it ... seated ... Germany.

This procedure has become an option after ... latest jurisdiction of ... Court of Justice of ... European Communities. For this reason, ... German market does not have any experience with UK Ltds. ... it ... to expect, that a UK Ltd. ... not receive ... same reputation as a German GmbH.

Should you request further information about a UK Ltd., please do not hesitate ... contact me.

IV.Comparison ... recommendation

The German GmbH ... a solid, tried ... tested corporate form. One argument for ... GmbH ... of course ... limitation of its liability.

On ... other hand, ... GmbH ... subject ... German company law, that sets high standards for ... company with regard ... formal duties. ... every change of ... company's statutes has ... be applied ... the Commercial Register by ... managing director. For many economic ... personnel decisions, a formal shareholder resolution ... necessary.

Contrary ... a branch ... GmbH needs ... appoint a managing director. ... managing director, carries ... risk of personnel  liability, e.g. ... case of bankruptcy of ... company.

From ... economic point of view, ... setting up of a GmbH requires quite a lot of expenditure. There are strict formal requirements ... the establishment. Furthermore, at least 50 % of ... share capital of EUR 25.000,00 has ... be paid in.

If ... GmbH shall become winded up, a formal procedure of liquidation ... required, that includes a ... called blocking period of one year. Contrary ... that a branch can easily become shut down by shareholder resolution.

Compared ... that, ... setting up of a branch ... easier ... deal with ... causes less costs. Since ... branch ... part of ... main establishment ... Finland, there ... no need for own statutes of ... branch. Furthermore no share capital ... necessary. It ... sufficient ... have an employee, who ... able ... empowered ... carry ... the business of ... branch.

After weighing up ... above mentioned arguments, we recommend you ... establish a German branch.

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Rechtsvergleich GmbH-Zweigniederlassung

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