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Incorporating a limited company in Germany

thomas.skowron.biz

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Re: Incorporating a limited company in Germany

#101

Post by hhstartuper »

Anyway, I don't understand what I do wrong, if: 1. I have a job in Germany and live in Germany 2. I have opened a company in Estonia (owner) 3. I do consultancy through USA services (like Upwork) for USA or UK clients and money is earned by a company in Estonia 4. How an estonian's company income (not a income of a person) be taxed by germany? 5. If i want to get money from company - it will be dividents with taxation in Estonia and rest in Germany

Is something wrong in this situation?

Re: Incorporating a limited company in Germany

#102

Post by hhstartuper »

crypt1d wrote: post #100
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 live in Germany and pay yourself a salary from an Estonian company, then you will only pay taxes in Germany and no taxes in Estonia. The 20% Estonian corporate tax does not apply to salaries for non-residents, but for things like dividends. P.S. Leapin is a company that specializes in accounting for online businesses looking to establish a presence in Estonia. You can find some more info on this stuff on their…

If you work on your own estonian company, but don't pay yourself money (all money are keeps on company's account) Is it a way?

Re: Incorporating a limited company in Germany

#103

Post by charlesdm »

realityking wrote: post #79
matt4077 wrote: post #47

Earlier quoted context omitted.

"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 reve…

> 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. You have to deal with it as soon as you can not meet a obligation. ("Zahlungunfähigkeit") If you give your own company a loan, then you can meet your obligation and you're fine on this side. You also have to keep an eye on your debt level but that's more c…

Is this really seen as a problem for a consulting business or a tech business without significant capex?

Most jurisdictions have similar laws, and as long as you put money in through loans when you need it, you're fine, since you will be able to service your liabilities.

Re: Incorporating a limited company in Germany

#104

Post by charlesdm »

king_phil wrote: post #83
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…

One more comment that saves quite a lot of money in the phase where you are building your company: DO NOT APPLY FOR VAT TAX EXEMPTION! If you are in the initial investment phase and you have more bills than earnings, you'll get 19% of the bills back from Finanzamt. You'll pay 19% of your invoices, too, but if thats less, you're saving. If you're starting to earn, the Finanzamt will remove the exemption anyways. Don't…

Having a VAT exemption can be interesting in some cases though. Say you sell goods to EU consumers through an entity, you can sell them legally without VAT. That's quite a competitive advantage when getting started.

Re: Incorporating a limited company in Germany

#105

Post by charlesdm »

thibaut_barrere wrote: post #80
tobltobs wrote: post #34

I incorporated a Limited in the past in Switzerland, Germany and France. Switzerland is a snap, Germany is unnecessary time consuming. France is hell. Clarification: Setting up a SARL in France is comparable to Germany, but the red tape to run it is hell.

Curious to know when you incorporated in France exactly? It didn't seem too hard to me when I did it, and sites like https://www.legalstart.fr/fiches-pratiques/creer-sa-societe/ mention that you need 5 admin procedure and 7 days to start one, where the average of the G20 countries is 7.6 admin procedures and 22 days on average. So I really wanted to know more about when and how you incorporated etc, out of curiosity.…

Belgium is probably similar. One "trick" I've discovered for bureaucratic countries is that certain lawyers will be able to set up entities blazingly fast, in comparison to doing it all yourself.

That's because they have the contacts to get it all done (bank account, notary visit, required reports, etc) in a day or two, instead of 1-2 months.

Re: Incorporating a limited company in Germany

#106

Post by helge5 »

hhstartuper wrote: post #101

Anyway, I don't understand what I do wrong, if: 1. I have a job in Germany and live in Germany 2. I have opened a company in Estonia (owner) 3. I do consultancy through USA services (like Upwork) for USA or UK clients and money is earned by a company in Estonia 4. How an estonian's company income (not a income of a person) be taxed by germany? 5. If i want to get money from company - it will be dividents with taxatio…

Nothing about that seems wrong at all.

1. doesn't matter. It sounds like this is your day job unrelated to the hypothetical company.

2. this is OK, you can do that.

3. this is where it becomes a little more difficult. since you are presumably working from Germany, the value is created in Germany and therefore is going to be taxed there. sounds like the obvious (and fair) thing to do to me.

4. income is taxed where it is created, not where you originate from. Consider it like this: If I'm a German and live more than 6 months in the US, my primary taxation point is the US. My origin doesn't matter, it is where I live (and in essence whose state services (what taxes pay for) I use). The same goes for companies. If the company is registered in Estonia, fine, you can do that. But if the company is actually _operating_ in Germany, well, you have to pay taxes over there _just for the business you do over there, NOT for business you do from Estonia_.

5. yes, this is personal income. You'll pay taxes in Estonia which you can match up to your taxes in Germany. In no circumstance you pay twice. Again sounds very correct to me.

To be honest I'm not entirely sure this is the actual situation, but nothing about it seems wrong :-)

Re: Incorporating a limited company in Germany

#107

Post by helge5 »

realityking wrote: post #81
blsquare wrote: post #72

Germany is one of the worst options in Europe to incorporate, except you reside in Germany. My top 10 list of why not to incorporate in Germany: 1. Yearly accountant costs of a limited (UG/GmbH) is around €2,000; you need this accountant, he is kind of an API to the German tax system which is super complicated and even native Germans wouldn't be able to handle its requirements or to file in all the paperwork themselv…

Agree with some, disagree with some but this one surprised me: > and to migrate to a GmbH later is a PITA I've never done it myself but what I know it should just be a short trip to the notary, they take care of the rest. Did you have a different experience?

This is exactly how it works and I've done precisely this in real live, a UG to GmbH conversion. It is a non-issue.

In fact the whole UG thing is setup towards this exact goal, conversion to a full GmbH (you even have to sideline profits to accomplish that).

There are indeed some valid things in that comment, others seem just wrong.

Re: Incorporating a limited company in Germany

#108

Post by helge5 »

sparkling wrote: post #90
Atropos wrote: post #77

Earlier quoted context omitted.

You need to differentiate between where your company has its "real seat" (= place of business activity) and your "legal seat" (=incorporated as GmbH or LLC or ...). If your office building is in Berlin and you employ a local team (your "real seat"), it does not matter if your company is a GmbH, a UK Limited or an Estonian e-company - you are still under German tax, employment, insolvency, consumer protection law... I…

Forgive me if im wrong, but as long you don't receive a salary (or money transfers in general) from the Estonian company entity, you should not be paying any personal taxes in Germany since all the money remains in the company?

This is absolutely right, you don't have to pay personal taxes in Germany if the money remains in the company (it may be a little more difficult, but in essence this is correct).

The company however would have to pay company taxes in Germany.

Re: Incorporating a limited company in Germany

#109

Post by helge5 »

dx034 wrote: post #59
pmoehring wrote: post #48

Earlier quoted context omitted.

... 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.

€100 Hm? 10k = ~10.000+. I'd consider that an angel investor (10..100k).

Re: Incorporating a limited company in Germany

#110

Post by kintamanimatt »

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…

Could you please elaborate on why you think Estonia is a "dodgy" country to incorporate in? I'm not sure of the reasoning behind your assertion!
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