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Routes to Market in Germany

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Routes to Market in Germany

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Germany Routes to Market

So you've decided to expand your business in Germany and researched your market. Now it's time to decide how you will register and set up the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when expanding a business into Germany:

Company with limited liability

This type of business can be set up by one person or more and they are not personally responsible for any company debts that may occur. The share capital must be at least €25,000. Then notarial agreement must be drawn up between the shareholders and the company being set up. The company comes legally in existence only when it is entered into the Register of Companies.

Shares in this type of company are not embodied in a certificate and cannot be quoted on stock exchanges. However they may be transferred through properly notarial documents. The company can have one or managing director. That director may also be shareholder of the company and will be the only person entitled to represent the company.

Joint-stock company; public limited company; corporation

When expanding a business into the German market you may consider this type of business. This type of company needs one or more people to set it up. They may be the only shareholder. A share capital of € 50,000 is required; the shares may be listed on the stock exchange. This type of company will become legally existent once it has been entered into the Register of Companies.

The company is broken down into:

  • A board of directors decide all matters of operation and management.
  • Directorate appoint the board of directors.
  • Shareholders exercise their power at regularly scheduled general meetings.

General Partnership

When considering if to start up a business in the German market, you may consider this. This type of company is unlike the public limited company and the limited liability company as it has unlimited liability. This means that every partner is legally obliged to participate actively in operating the business unless the articles of partnership otherwise provides.

Limited Partnership

This type of company provides limited liability on behalf of some of the partners when setting up a business in Germany.

There are two types of partners:

  • The general partner who has unlimited liability
  • The limited partner whose liability extends only to the amount their have invested in the company.

Limited partnership with a limited liability company as general partner

This type of company combines a limited liability company with a limited partnership. This is done by making the company the sole general partner of the partnership. The limited partners are only liable to the extent of their registered holdings.

Subsidiary

This type of company is actually a separated company from the parent company, and has a certain degree of independence. It usually has its own management, accounting system, balance sheet procedures and business assets.

Mittelstand

There is one type of business that is hard to define and has no satisfactory English translation. This is the Mittelstand and it makes up most of Germanys business. In a nut shell a Mittelstand is a small and medium-sized company. The Mittelstand firms are often family-owned with a dominant founder or manager. In the past most of the Mittelstand firms business was conducted locally, and relationships with the customers were close and importance on quality than on price.

A firm employing less than 500 persons and having an annual turnover of € 500 million or less is a widely accepted approach of a definition. It is estimated that there are 3,3 million Mittelstand firms in Germany, producing 57 percent of the gross national product, employing 70 percent of the work force and training 80 percent of the apprentices.

These types of firms tend to be concentrated in;

  • Commerce
  • The skilled trades,
  • Professions
  • Construction
  • Transport
  • Retailing
  • Hotel
  • Restaurant

Licensing

Licensing is the permission for someone else to use your intellectual property rights in Germany: either a patent, trademark, trade secret, or copyright. Different types of license include:

Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

Patent License - The allowance of another party to use your patented product, design or process.

Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In Germany

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Germany include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.
Disadvantages of franchising a business in Germany: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

Germany, like many EU countries, it is relatively straightforward when it comes to franchising. This is just one benefit of being part of the EU. For advice and help in franchising in Germany it may be worth while joining the DFV The Deutsche Franchise-Verband e.V (German Franchise Association)

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