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Incorporating a limited company in Germany

thomas.skowron.biz

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Re: Incorporating a limited company in Germany

#41

Post by ringtail »

charlesdm wrote: post #22
ringtail wrote: post #14

Is there a reason to not go BVI/Nevis IBC route for a small online startup ? The no accounting/record-keeping requirement should look appealing to many, beside 0% tax :).

Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason. Second, if you play by the book (and a lot of people who use these entities don't), you can't control said entity directly from an EU jurisdiction. You need to fly there (or somewhere else with no corporate tax) and do board meetings there. There are cases where it's worth it, but it al…

Any real world success & failure stories I can read upon ?

> Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason.

Even if the company is not tax resident of said countries ? Mind pointing me to the laws/countries.

> doing it right also requires a great deal of additional paperwork (+ extra overhead expenses)

Any estimate ?

This is very informative. Thank You.

Re: Incorporating a limited company in Germany

#42

Post by kennell »

jankotek wrote: post #32
JPLeRouzic wrote: post #27

Earlier quoted context omitted.

Interesting, is there some kind of e-residency as in Estonia?

To run corporation you should have physical presence in Estonia as well.

Others in this thread have suggested that no physical presence is required.

Re: Incorporating a limited company in Germany

#43

Post by adventured »

loxs wrote: post #37
LanguageBarrier wrote: post #26

I would not recommend Bulgaria, Estonia or any other "dodgy" countries to form a limited company alas you yourself are from that country. For a lot of big businesses simply looking at a company address where the country has no to bad rep is already a red flag. So you will have to do a lot of convincing work to do if you want to get funding. Even a UK limited is the running gag in upper management since it needs next…

I wonder how did you come up to put Bulgaria and Estonia in the same bucket. The two countries have almost nothing in common. I am a Bulgarian native and for my current endeavor I seriously consider creating an Estonian company.

The parent's comment ("dodgy") definitely doesn't seem to make sense. Estonia ranks fairly well internationally in terms of being non-corrupt and safe to live and do business in. It's at least on par with highly developed nations such as France or Japan and is better than most of Europe.

eg: http://www.transparency.org/news/feature/corruption_percepti...

Re: Incorporating a limited company in Germany

#44

Post by i_don_t_know »

harperlee wrote: post #33
retromario wrote: post #31

A couple comments (having started both an UG and GmbH): - I don't recommend starting an UG with less than 2k capital. If you do the minimum (1 euro), you won't have anything to pay your startup bills and it costs extra money (and a trip to the notary) to change your company's investment capital. - While a GmbH requires 25k capital, only half has to be paid into the company. The rest is marked as a liability on the sh…

Can't you just donate money to the company? Would that entail tax?

It might subject you to gift tax. If you give more than 20k€ to a private person over the course of X years, you have to pay 20% gift tax on the amount above 20k€. Something like that, the numbers may be wrong. I don't know if there are similar rules when you give money to a company.

Re: Incorporating a limited company in Germany

#45

Post by charlesdm »

ringtail wrote: post #41
charlesdm wrote: post #22

Earlier quoted context omitted.

Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason. Second, if you play by the book (and a lot of people who use these entities don't), you can't control said entity directly from an EU jurisdiction. You need to fly there (or somewhere else with no corporate tax) and do board meetings there. There are cases where it's worth it, but it al…

Any real world success & failure stories I can read upon ? > Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason. Even if the company is not tax resident of said countries ? Mind pointing me to the laws/countries. > doing it right also requires a great deal of additional paperwork (+ extra overhead expenses) Any estimate ? This is very in…

You could write a whole book on that first question. In fact, books have been written about it. It depends on the laws of your country of residence.

One UK example: http://bit.ly/2kAqV7r

> Even if the company is not tax resident of said countries ? Mind pointing me to the laws/countries.

Yes. Broadly this falls under CFC ("Controlled foreign corporation") related laws. Taxation of the foreign entity could exist at either the corporate level (i.e. some domestic entity owns a low tax subsidiary in some tax haven), or the shareholder level (i.e. you own shares of a company in some tax haven).

> Any estimate?

Depends on the business. Some things you can't run through a low tax entity, others you can. If you sell an app on the app store, that would be relatively easy, for example. But you'd have to fly to the jurisdiction to sign the contract + probably have a local director.

The problem with these structures is not the set up cost. It's the cost of defending it in court if the tax authority of your residence country comes after you. And they do.

If you can't afford to defend yourself, you might as well not set it up.

Re: Incorporating a limited company in Germany

#46

Post by therealmarv »

crypt1d wrote: post #25

Not sure if there is a specific benefit in incorporating in Germany vs some other EU country. If there isn't, I'd suggest looking into Estonia and their e-residency program. They have a fixed 20% corporate tax which you only pay when you take the money out of the company (as opposed to paying on income). I've recently applied and the bureaucracy has been a breeze so far. You can find some more info at https://bkpk.me…

In my opinion this is only great if you live outside the EU and want to have a financial place in the EU. One example: Imagine you live in Germany. When you create this company in Estonia good luck in describing to German tax authorities why you have founded it there and not in Germany! You probably also have to pay more taxes in total (to Estonia and Germany) if you are transferring money to yourself.

Re: Incorporating a limited company in Germany

#47

Post by matt4077 »

harperlee wrote: post #33
retromario wrote: post #31

A couple comments (having started both an UG and GmbH): - I don't recommend starting an UG with less than 2k capital. If you do the minimum (1 euro), you won't have anything to pay your startup bills and it costs extra money (and a trip to the notary) to change your company's investment capital. - While a GmbH requires 25k capital, only half has to be paid into the company. The rest is marked as a liability on the sh…

Can't you just donate money to the company? Would that entail tax?

"Donate" sounds strange, but yes, you can pay any bill from any account – including your personal one, or cash in your wallet. Technically, this would be regarded as a loan to the company, and you can later pay it back to yourself. As long as it's a business-related expense and the company's name is on the bill (above a certain threshold), you can claim those expenses on the business' taxes if you later make any revenue.

What may make this a bit complicated (and make the advice given above sound) is that one of the condition triggering bankruptcy is having more liabilities than assets. If you start the company with 1 Euro, and then go for coffee with the notary spending 10 Euros with the intent to claim it as a business expense, you're 9 Euros underwater. Not sure if this is something you have to monitor throughout the year or if it only becomes relevant when you actually do the bookkeeping at the end of the year.

Contrary to popular opinion (and the article) this stuff is quite easy to sort out as long as it doesn't involve real money, so I wouldn't worry about it. I know some people start companies with a bit of money for this reason, or even use something physical (i. e. their notebook) as an initial deposit into the company.

And just in case people are wondering "but why": these rules are supposed to protect vendors. Limited liability companies shield the founders from financial responsibility, so the rules are written in such a way that founders/owners are on the hook for at least 25,000 Euro (GmbH), or – nowadays – that the risk is clearly communicated to vendors. You can start a personal company much easier (basically a form with an address field and three questions) if you don't need limited liability.

Re: Incorporating a limited company in Germany

#48

Post by pmoehring »

thomasbachem wrote: post #38

And there's the BAFA INVEST program ( http://www.invest-wagniskapital.de , German language only) that refunds/grants 20% to any EU-based angel investor who invests in German startups. It's actually a really great and pretty unbureaucratic program.

... if you invest more than 10K. But yes, it's a good setup.

Re: Incorporating a limited company in Germany

#49

Post by velcro »

jcrei wrote: post #11

Estonia, simple forms, simple tax system (even a layman can understand it and can do their own taxes or small biz taxes). No need to visit to open a company or bank account if you have an e-resident card. E-residency cards are available to citizens of most nations.

have always wondered on the benefits of forming a company in Estonia - I'm not an expert - but wouldn't you still need to pay personal taxes in your country of residence (where you spend 6+ months in a year) in addition on what you pay in Estonia?

Re: Incorporating a limited company in Germany

#50

Post by stefano »

danmaz74 wrote: post #20
wukerplank wrote: post #13

Earlier quoted context omitted.

There is/was quite some founding tourism from EU countries with more complicated laws to the UK. I wonder how the Brexit will affect them.

I did that from Italy, wouldn't do it now because of the uncertainty related to brexit. We'll see in the near future.

Don't you need to have physical presence in the UK to open a company?
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