71–80 of 113 posts
Germany is probably bad option within EU. I would recommend Bulgaria: flat tax rate 10% on corporate income and capital gains. Considerably cheaper office and accounting cost.
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 themselves; AND it's not so easy to find good accountants/tax consultants, once you found one you are locked-in and they happily charge you for every extra things; the pricing is regulated but still they find ways to get all your money
2. 'Protection money', you have to pay to IHK which should help business owners (but they nothing) and to ARD/ZDF which are Germany's public TV stations; the costs depend on your headcount and are not that high but once ARD/ZDF have your name they never ever again let you out, so it's impossible to cancel this 'subscription' and you might pay additional fees for you 'personal self'; it's a mafia which creates additional mental clutter and mail
1. + 2. Just the operating costs of a limited which doesn't make any money is €2,500 to €3,000
3. Germany has probably the most friendly labor law; at the end of the day employees have in Germany super powers; e.g. if you have more the ten headcount it's impossible to lay off people (there are many, many more, I could give you 20 more examples); 30% of your time is spend on how to work around German labor law with German lawyers at €300/h
4. They try to get everybody to pay into their social system, once you are under 49% shares you must join them leaving most of your personal salary to the state; the only benefits is an ok health system and an ok unemployement insurance
4.a) Having freelancers is risky because the state always suspect you to circumvent their social system; one mistake and the freelancer can blackmail you
5. Super strong consumer protection but which is applicable to all European countries; consumers get it all (money-back guarantee, ...)
6. Setup of the limited is unnecessary slow and bureaucratic, takes 6 to 8 weeks and all the momentum out of the founding team
7. You need at least €12,500 share captial for the GmbH, forget about the UG, doesn't have any reputation and to migrate to a GmbH later is a PITA
8. Taxes are cluttered, you have VAT, corporate tax and 'Gewerbesteuer'
9. German labor is ok but not as good as e.g. US labor; non-tech labor is in general too expensive and education is limited, especially English skills are not on par with other Northern European countries, still better than southern European countries; tech labor is good but expensive compared to rest of Europe, but cheap again compared to the US; still it's very hard to find affordable native German devs so people look for foreign tech talent which are good and easy to attract in bigger cities (Berlin)
10. Political situation is ok and stable compared to US and UK but could tip with elections in summer, right wing is strong but not as strong as in other countries
Some more:
11. Shutting down your limited takes one year
12. Insolvency is covered in its own law and is super complicated, don't apply to early, don't apply to late
13. In general all German laws are very cryptic written and even for native German hard to understand without experts; even simple tax stuff is hard to grok and other countries have much more accessible laws (just look at gov.uk as an example); calling your tax guy helps here and there but costs money; researching stuff yourself takes days
14. You have to save documents and even mail which led to business for 10 (!!!) years; after few years you need to rent a space just for all the folders
Who knows about better options in Europe? Happy to hear alternatives, also from a relocation perspective, so which country is founder-friendly AND nice to live?
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?
What you can gain by filing your company in Estonia is less bureaucracy. The talk is that Estonia is a lot in e-government, so I suppose that means you can do a lot of filing stuff very conveniently on the Internet. Or if you employ people in Estonia, the employment laws may be less strict than in a country like Germany.
If you plan to operate out of Germany, I don't think you'll gain much by registering a company in Estonia. If you want to move to and operate in Estonia, it may be well worth a consideration.
As mentioned, in the past people filed companies in the UK to avoid the 25000 Euro investment required for a GmbH. But that's gone with the UG.
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…
I want to emphasize on the "less than 2000 Euro" part. There is a good amount of people who literally start with 1 euro, pay the notary and have to file bankruptcy because the 1 euro can't cover the notary fee.
Bank accounts are tricky as well. Only some banks allow accounts for companies and they usually cost a lot more than normal ones. Internet banks recently changed that so definitely go with something like Fidor. (Again, careful that the bank account fee doesn't get your company bankrupt)
Then papers papers and papers. Don't attempt to file the entire stuff by yourself unless you are 100% sure you know what you're doing. Even tax exemptions for smaller businesses you have to explicitly pick on the first documents otherwise you will be treated as a normal company. I forgot to file some and almost got fined thousands of euros.
Then be aware of scammers. The register is public so a lot of companies just send mass scary letters to everyone that look like they come from the government. Once you sign one (which naive me did) you have to get a lawyer. You will almost always win against them but still need to pay the lawyer.
Lastly if you completely screw up, you can apply for "deletion" of your company if you have no money debt to any entity and your company is officially without money (a balance around 0 euro, but not under since this means you have to file for bankruptcy). This skips the long and tedious liquidation process and gets rid of the company immediately once the court confirms it.
Earlier quoted context omitted.
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.
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…
If you have your "real seat" in Germany, in my view, it makes sense to go for GmbH, instead of registering in UK/Estonia, because the corporate law differences are not that big.
The question if you should decide to build a company in Germany is another discussion.
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…
This might be attractive if for example you made some extra money this year which would raise your tax rate. If you know that you will make less money next year you can shift the extra money into the next year, reducing the total tax burden. Whether this is legal if you do not really plan to invest, IANAL. How would they prove it?
Earlier quoted context omitted.
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 reve…
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 complicated, especially for owner-loans.
> 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.
Funding with physical good ("Sacheinlage") is however only allowed with a proper GmbH. This rule makes it sometimes a little bit interesting to convert an existing, fully liable, business into a limited liability corporation if if all the goods and money don't add up to 25,000 Euro.
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.
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.
EDIT: more data, here is a report from 2013 with the data I mentioned above (table at page 8) http://www.ey.com/Publication/vwLUAssets/EY-G20-country-repo...