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Which is the best legal structure when entering the German market?

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Which is the best legal structure when entering the German market?

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Germany is an attractive location, which can be gauged from one figure: 1,124 projects - never before have foreign companies invested so much. In 2017, the amount of net direct investments amounted to around 70 billion Euros, a record figure. According to the EY ("Europe Attractiveness Survey 2018"), there are various reasons for this: qualified specialists, a good infrastructure, a stable legal and political environment.

One topic is particularly crucial when it comes to entering the German market: the choice of the appropriate legal form. Why is that? If you choose the wrong legal form, you might have higher costs and possibly higher risks.

You should precisely analyse in advance which legal form is most suitable for your entrepreneurial activity.

The Federal Ministry of Economic Affairs and Energy lists twelve aspects which should be considered when choosing a legal form:

  1. Entrepreneurial independence
  2. Formalities
  3. Liability
  4. Taxes
  5. Image
  6. Accounting
  7. Duty of public disclosure
  8. Obligation to carry out audits
  9. Minimum capital
  10. Start-up costs
  11. Capital procurement
  12. Entry in the commercial register

The expansion into Germany can also be effected by means of a domestic subsidiary, a branch office, a permanent establishment or by a representative office.

The legal forms can be divided into three categories: partnerships, corporations and other legal forms.

A limited liability company (GmbH) is the most frequently chosen legal form. An alternative can be the ‘Unternehmensgesellschaft’ (UG) which is also referred to as "Mini-GmbH".

BASCH Consult

Berlin, Germany

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