I. German branch
Each foreign legal entity is entitled to set up a branch in Germany. The requirements are fit in with German Corporate Law. Typical characteristics for a branch are:
- Own rooms of the branch;
- Organizational independence;
- The branch carries on equal business as the main establishment;
- An executive, who is empowered to act on his own.
A German branch has got no own legal capacity. The asset of the branch is part of the main establishment´s asset. The branch can not be party of a lawsuit, this is always the main establishment. Legal transactions between the branch and the main establishment are invalid due to German Civil Law. Bookings between the branch and the main establishment do not legitimate any claims. In fact, these bookings only mean internal positions.
Usually the branch does not trade under an own name. It uses the name of the foreign main establishment.
2. Application of the branch to the German Commercial Register
If a branch in Germany exists, it has to be applied to the German Commercial Register. Competent is the district court, where the branch is seated (in your case Frankfurt am Main). The application form has to be signed by the managing director of the main establishment and has to be legalized. It is possible for the managing director of the main establishment to sign the application form before a local notary abroad, who certifies the signature. Afterwards the documents have to be legalized by local authorities by so called Apostille.
The following documents have to be enclosed to the Application Form:
- Statutes of the main establishment with translation into German, certified and legalized;
- Certified and legalized copy of the shareholder resolution, that appoints the managing director of the main establishment;
- Certified and legalized copy of the extract from the Commercial Register of the main establishment.
3. Managing Director
The branch does not have a managing director on its own. Usually the company employs an executive in Germany, who is empowered to carry on the business of the branch.
An office is regarded as a "Permanent Establishment" by German tax authorities. So the complete income related to the business of the permanent establishment in Frankfurt has to be taxed in Germany. Regarding the type and the rate of taxation, please find the relevant information below in Point II. 4.
The difference to a registered German branch is, that the branch is entitled to reclaim paid VAT from the local authorities like a German company. For this reason the refund of VAT will be much easier to arrange.
The costs for setting up a branch will be about 2.500,00 to 3.500,00 EUR net. This amount already includes the notary fees. This amount includes the services for the usual procedure of the establishment. If additional services should become necessary, we will charge 175,00 EUR per hour for these services.
II. German company with limited liability (GmbH)
1. In General
The German GmbH is a legal entity and therefore has its own legal capacity. Please note the characteristics of a GmbH
- The liability of the shareholder is limited on the paid in share capital;
- The minimum share capital is EUR 25.000,00. At the time of incorporation at least EUR 12.500,00 have to be paid in on account of the company. The remaining amount of EUR 12.500,00 may be paid in later;
- Shareholder of a GmbH may be any German or foreign person or company. One shareholder is sufficient;
- The GmbH may have any legal purpose;
- The GmbH trades under its own name. The abbreviation "GmbH" has to be added.
2. The establishment of a GmbH
The German GmbH becomes established by signing of the settlement documents before a German notary.
For the act of establishing the GmbH, the following documents are necessary:
- Settlement deed;
- Articles of Incorporation;
- List of shareholders;
- Application Form to the Commercial Register;
- Bank receipt, showing the payment of the share capital.
The settlement deed has to be signed by the shareholder(s). It is possible to empower a person in Germany to establish the company. For this purpose, the main establishment may grant a power of attorney, which has to be certified by a local notary and legalized by local authorities.
The Articles of Incorporation are the statutes of the GmbH. No signature is necessary.
The list of shareholders has to be signed by the appointed managing director of the new GmbH. The signature is unaccompanied by any forms.
The appointed managing director ...
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