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Incorporating a limited company in Germany

thomas.skowron.biz

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Re: Incorporating a limited company in Germany

#51

Post by helge5 »

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?

What do you mean by 'donate money to the company'? Why/for what purpose? There are various ways to bring money into the company, e.g. you can increase the share/base capital of the company. You can also give the company a credit, but careful, it needs to be on conditions you'd give a similar 3rd party. Probably a topic for your tax accountant. If we are talking low-profile, say a UG w/ 1000 Euro base capital, you'd usually increase the baseline capital steadily up to the 25k Euro and turn it into a regular GmbH (though that doesn't really matter a lot unless you want to take on regular credits).

Re: Incorporating a limited company in Germany

#52

Post by matt4077 »

Loic wrote: post #28

For the context: 7 years running a UK limited from outside the UK (until 2014) and 3 years running a GmbH from Germany (now). In both cases, I am a chemical engineer and I am doing mostly programming/consulting work[0]. At the end of the day, it costs basically the same if you are in UK or in Germany because your cost will be your salary and if you read the advices here you are anyway to small to run some special tax…

Do you feel that any of the bureaucracy creates an undue burden – or one that could possibly thwart a company which would otherwise achieve scale?

I'm asking because the article seems to buy into the narrative that these rules and regulation create an actual obstacle to ventures such as google ever being founded in Germany, and having gone through the process a few times, I can neither find any step of the process that I would consider completely unreasonable (except the chamber of commerce), nor could I imagine it being more than an irrelevant nuisance to any dedicated team.

I also think the 2000 Euro/year you're citing is true only for a company actually doing a fair amount of business and having employees. I'm sure it's less than half that if you're just maintaining the legal structure, or are a single founder before launch – VAT reporting, for example, has threshold below which reporting happens only quarterly or yearly.

Re: Incorporating a limited company in Germany

#53

Post by atemerev »

alternize wrote: post #35
atemerev wrote: post #3

The same story in Switzerland, perhaps even worse. Any company here generally requires a full-time administrator to handle the paperwork (and salaries here are huge). Or you can outsource it to the agency, but it will cost at least $10k/year, even for the smallest operations (cheaper than hiring a full-time administrator, however, agencies tend to miss things).

huh, where does your experience come from? currently running two small swiss it companies (3 and 6 employees), and ran several more in the past. none had a "full-time administrator". founding costs (notary, fees etc) were always around €2000 for GmbH and €5000 for AG. our yearly expense for an external accounting expert to do our end-of-year accounting and taxes is around 1k to 2k per company (i.e. 1 to 2 man-day).

Which canton are you incorporated in? My experience is with the canton of Geneva, where I have made multiple beginner's mistakes.

Re: Incorporating a limited company in Germany

#54

Post by matt4077 »

adventured wrote: post #43
loxs wrote: post #37

Earlier quoted context omitted.

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...

The dodgyness ("caninety?") in this case may actually be a result of their non-dodginess ("felinity?"):

Estonia is big on e-government and have apparently made the process of registering an llc really easy. That attracts all sorts of people for whom it makes a difference if the process costs $100 or $110. And that is – as a group – self-selecting for people you can't necessarily trust as much as others. The same mechanism is at work with British LLCs. Those became somewhat famous (being first in this market) because they were often used by people who couldn't start a company in their native country – most often because of messy bankruptcies that can get barred from trying again for certain periods.

Re: Incorporating a limited company in Germany

#55

Post by senorjazz »

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 :).

Things have changed a lot in the last year with FATCA and other tax laws. Regardless of where the company is incorporated you will be taxed on where you do business (so if you live in Europe then your local tax office with ignore the fact the company is incorporated in an off shore tax haven and tax you as if it was local.

The next problem is getting a bank account, if you get a bank account in the offshore tax haven, it is hard for people to go business with you (paypal, payment processors). You could try and get a merchant account with your tax haven bank but this can be complicated and payments you put through may be rejected by the customers bank.

Thus you can try and get a bank in a better jurisdiction , however still paypal / payment processors won't touch you as want to know why your business / bank and you are all in different countries.

There are ways around this, but you need serious money to make it worthwhile.

As well, if you are from the US, things get even more complicated due to the IRS taxing US citizens in any way they can find out how to :)

Re: Incorporating a limited company in Germany

#56

Post by helge5 »

therealmarv wrote: post #46
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.

If you want to keep it simple it very likely makes sense to found the company where you reside. If you don't mind complexity, lookup `Double Irish With a Dutch Sandwich` :->

If you want to move to Europe (which I think was part of the idea of the article), it may indeed make sense to consider where to move. Germany (and one of its startup hubs, like Berlin or Hamburg) is probably not the worst place to be for various reasons, but I've also heard good things about e.g. Estonia.

I don't have backup readily available but I think your statement about the taxes is just plain wrong. Generally I think income is taxed where it is produced and Europe has (no)double-taxation treaties with pretty much any country. Personally I'd still avoid the extra complexity for a startup :-)

Re: Incorporating a limited company in Germany

#57

Post by dx034 »

therealmarv wrote: post #46
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.

Within the EU you shouldn't have to pay tax twice. There are agreements in place, worst case the tax from Estonia would be deductible. You will end up paying less than with an all-German company.

And as they get the information from Estonia, I don't think German authorities will have an issue that the company is abroad. They're used to deal with a lot of UK companies (especially when the UG didn't exist yet), it's not new topic.

Re: Incorporating a limited company in Germany

#58

Post by matt4077 »

atemerev wrote: post #3

The same story in Switzerland, perhaps even worse. Any company here generally requires a full-time administrator to handle the paperwork (and salaries here are huge). Or you can outsource it to the agency, but it will cost at least $10k/year, even for the smallest operations (cheaper than hiring a full-time administrator, however, agencies tend to miss things).

If you actually look at the meat of the article you'll notice that all it takes for the setup is about an afternoon with a notary and 500 Euros. Yearly expenses are mentioned by the author somewhere in this threat, and he says 2000 Euro pa, but note that they're talking about a business that must do at least 6-figures revenue (otherwise VAT reporting wouldn't be on a monthly basis). For a minimum shell company, you can easily get by with a few hundred, and the burdens scale at below O(n), so it never becomes economical to chose a different jurisdiction for for the administrative burdens.

Re: Incorporating a limited company in Germany

#59

Post by dx034 »

pmoehring wrote: post #48
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.

I wouldn't consider someone who gives €100 to a startup an angel investor.

Re: Incorporating a limited company in Germany

#60

Post by tornadoboy55 »

helge5 wrote: post #56
therealmarv wrote: post #46

Earlier quoted context omitted.

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.

If you want to keep it simple it very likely makes sense to found the company where you reside. If you don't mind complexity, lookup `Double Irish With a Dutch Sandwich` :-> If you want to move to Europe (which I think was part of the idea of the article), it may indeed make sense to consider where to move. Germany (and one of its startup hubs, like Berlin or Hamburg) is probably not the worst place to be for various…

Please don't put a smile after that. Corporate tax evasion is a blight on society and people facilitating it are scum. Pay your dues, just like the people of a society have to.
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