Choice of legal structure

Business people [Gewerbetreibende] register their business with the trade office for a fee of about EUR 50 per founder.

Business people [Gewerbetreibende] and members of the liberal professions [Freie Berufe] register their self-employed activity with the tax office and there is no fee. Are you not sure if your activity is a business or a liberal profession? Learn more on here.

In the case of civil-law partnerships (GbR), it is advisable to prepare a written partnership agreement. As of January 1, 2024, the GbR can be registered in a special company register on a voluntary basis. Its corresponding legal form suffix will be “eGbR” or “registered partnership under civil law”. Registration requires the involvement of a notary public resulting in notary and company registration fees. The eGbR ist also subject to transparency registration. The Chambers of Commerce and Industry (IHK) provide an overview as well as detailed information on the new rules. The Chamber of Commerce and Industry for Munich and Upper Bavaria offers its (future) members free consultation. If you plan to have the GbR entered in the new register, please use the Chambers free service to have the GbR’s company name checked and also make sure that it has not been registered as a trademark.

The company or business name makes it easier to assign the company to a specific owner in business transactions. In many cases, the full postal address is also required in addition to the company name in the external presentation. This applies, for example, to:

• Letters and e-mails
• Offers, invoices and order confirmations
• Advertising and marketing documents (in the case of specific advertising with prices)
• the imprint or legal notice of the website

In the case of sole proprietorships that register with the trade office, the full first name and surname must be mentioned in the company name. According to the Institute for Liberal Professions (PDF 116 KB), the family name is sufficient for sole proprietorships that are categorized as a liberal profession. Learn if your planned self-employed activity is officially classified as a trade-like business or a liberal profession.

In the case of a civil law partnership (GbR), the first and last names of all partners must be stated in the registration. Exceptions may be possible in the case of a very large number of shareholders. However, the requirements arising from the Service Information Obligation Ordinance and VAT law remain in place.

You may supplement the company or business name with an imaginary name, industry name or trade name. Additional industry names that refer to the products or services are also permitted. These additions must not be misleading, for example with regard to size and importance in the industry, location or region.

Before starting your own business, it is important to check whether the desired name is already registered as a company or trademark or is already being used by other companies in the same or a similar way. The sector and geographical area of activity can play a role in the assessment. Trademark and competition law risks as well as company law and naming law risks must be ruled out. The local IHK Chamber of Commerce and Industry offers its prospective members a free search service for identical and similar registered trademarks in the IHK library by email or via the service portal or by calling +49 89 5116-1219.

Businesses that are entered in the commercial register may use their full personal name as their corporate name, but do not have to. If you plan to have your sole proprietorship business or civil-law partnership (GbR) entered in the register, please use the IHK Chamber of Industry and Commerce’s free service to have the company’s name checked and also make sure that it has not been registered as a trademark.

IHK Frankfurt “Company name law“, information in English

Advice and information

If you plan to register your business with the trade office, you can obtain free further information from the local IHK Chamber of Industry and Commerce or HWK Chamber of Skilled Crafts. If you plan to register a liberal profession with the tax office only, you should contact the Institute for Liberal Professions for initial information.

For individual legal advice, a specialist lawyer is the right point of contact. We have put together various search options for experts for you in our feature Support for young businesses.

Partners in unincorporated firms are fully liable with all the private and company assets.

Single-entry bookkeeping (i.e. preparing a net income statement) is sufficient up to annual revenues of EUR 600,000 and annual profits of EUR 60,000. However, if your business exceeds either of these limits, the tax office will notify you that you must use double-entry bookkeeping (with annual balance sheet and income statement) and prepare a balance sheet. Single-entry bookkeeping is easier and less expensive, whereas double-entry incurs much higher running costs for tax consultation and accounting.

Get an overview of taxes and accounting on our website

Starting as a civil-law partnerships (GbR)? The Munich Chamber of Commerce and Industry provides information and free advice.

Good to know:
Even as a sole proprietor you can employ staff.

Have you decided on a legal structure and know whether to start as a business or a liberal profession? Learn how to register your self-employment with the Trade Office and Tax Office.

FAQ How do I register my business?

FAQ How do I register my liberal profession?

Please check, if you are obliged to register with other institutions and authorities such as the social insurance agencies, if you require any offical licenses or permits and which rules and regulations might be important when running your business.

Compared to an unincorporated firm, the cost of setting up a limited liability company (GmbH/UG haftungsbeschränkt) is relatively high. The costs include notarial certification of the partnership agreement and entry in the commercial register, plus any fees paid to lawyers to draft the partnership agreement. A limited liability company also requires capital stock of at least EUR 25,000, of which at least 50% (i.e. EUR 12,500) must be paid in when the entry is made in the commercial register. Once this entry has been made, you are free to work with this capital.

IHK Leitfaden: Wie lange dauert die GmbH-Gründung und welche ‎Kosten entstehen?‎

IHK Leitfaden: UG-Gründung – welche Kosten kommen auf Sie zu? 

As a rule the company’s name needs to possess sufficient distinctive power. It may contain information about the enterprise’s commercial activity or branch, the name of one (or more) partner(s) or fantasy designations. You must add a suffix for the legal form showing the enterprise’s liability situation, for example “GmbH”. Your company’s name may not contain any additions obviously suited to deceiving. Make sure that an identical or very similar (confusable) corporate designation has not already been entered in the Register of Commerce in the same town or district.

We recommend you coordinate the planned company’s name with the the Chamber of Commerce and Industry for Munich and Upper Bavaria (IHK). You may use their free services

• to have your company’s name assessed for entry in the Register of Commerce.
• to have your company’s name checked for a possible conflict with registered trade marks. Contact this service by phone at +49 89 5116-1219 or by email at ihkbibl@muenchen.ihk.de

IHK Frankfurt “Company name law“, information in English

Advice and information

You can obtain free further information from the local IHK Chamber of Industry and Commerce or HWK Chamber of Skilled Crafts.

For individual legal advice, a specialist lawyer is the right point of contact. We have put together various search options for experts for you in our feature Support for young businesses.

At incorporated firms, liability is limited to the company assets. However, if due diligence requirements are violated, liability is no longer limited and and recourse can be made to the manager’s private assets, too. One issue is frequently underestimated: Where bank loans are taken out, the need for collateral often leads to personal liability, for example if the partner gives personal guarantees. This can also apply to rental contracts.

Double-entry bookkeeping (with an annual balance sheet and income statement) is always compulsory for incorporated firms, regardless of their revenue and profit levels. That means higher running costs such as for accounting and tax advice on top of higher start-up expenses.

Learn more about taxes and accounting

In order to establish a GmbH or a UG haftungsbeschränkt in Germany, at least one shareholder (private individual or legal entity) is required. The involvement of a German notary is required for the incorporation.

The articles of association for both the GmbH and the UG haftungsbeschränkt company must be notarised. Registration with the German commercial register (Handelsregister) via a notary is mandatory.

In addition, legal persons governed by private law, registered commercial partnerships and trustees are subject to the transparency obligations pursuant to the German Anti-Money Laundering Act (GwG). They are obliged to notify their beneficial owners to the registrar for entry in the transparency register.

For a standardized formation, model articles of association for set-ups by cash subscription with a maximum of three shareholders and one managing director are provided. These articles must still be notarized, but for a reduced fee. In addition, sample deeds are also provided by the chambers of commerce and industry (Industrie-und Handelskammer, IHK).

From August 2022 onward, online formation of a GmbH or UG (haftungsbeschränkt) by way of cash contribution will be possible – enabling a remote and faster incorporation procedure. The online notarization takes place in a video conference between the notary and the parties involved. The German Federal Chamber of Notaries provides a video communication system with a two-step identification procedure that requires an electronic proof of identity (eID).

Once registered in the commercial register, the GmbH or the UG haftungsbeschränkt become a legal entity and the limited liability exists.

Before business operations are started, you need to register the company with the local trade office and tax office.

Please check, if you are obliged to register with other institutions and authorities such as the social insurance agencies, if you require any offical licenses or permits and which rules and regulations might be important when running your business.

Find a notary in Munich

Five-step formation process

IHK-Leitfaden: Welche Schritte sind für die GmbH-Gründung ‎erforderlich?‎

 

IHK-Leitfaden: UG gründen: die 9 Schritte bis zur ‎Anmeldung