GmbH formation in Germany – setting up a German limited liability company
Overview GmbH formation in Germany
Aims of GmbH formation
The German GmbH has been preserved in transactions across decades. This applies to business partners and customers in Germany, as well as to your business relations in the EU. Due to its high share capital requirements of €12,500 or €25,000, the founder is assumed to have a good credit rating.
As a founder of a GmbH, you benefit from the limitation of personal liability with your assets. You receive a Gesellschaft mit beschränkter Haftung, which is generally liable for its own liabilities with its own assets
Completely excluding your personal liability means forming your company in a legally secure way. To this end, the entire formation process is handled by a lawyer, from advice on formation and the drafting of bespoke articles of association, to entry into the commercial register. This ensures that legal errors, which could cost you a lot of time and expense later, are avoided.
Forming a GmbH with us allows you to skip most of the formalities of the formation process. Our team of lawyers is at your disposal during the entire formation process
Vorbereitung der GmbH Gründung
Forming a GmbH in 9 steps – Process step by step
Course of GmbH formation
Advantages and disadvantages of GmbH formation
Duration of GmbH formation
Taxes and share capital of the GmbH
A GmbH is subject to corporation tax, solidarity surcharge, trade tax, VAT and wage tax.
The shareholder is subject to capital gains tax.
The most tax-efficient way to profit from the GmbH’s revenue is to pay out a managing director’s salary. The owner-manager’s salary is only subject to individual income tax. Attention is generally paid to ensuring that the GmbH’s articles of association is structured in such a way that it is compatible with social security.
The tax on the GmbH’s income is called corporation tax. It currently stands at 15%. The low rate of corporation tax relative to income tax makes the GmbH favourable if you wish to retain profits in the company, in order to invest them in the future. Unlike a sole proprietorship or GbR, for example, they are not subject to income tax from year to year. In combination with the usual skimming of profits in the GmbH’s managing director’s salary, the GmbH thus offers the advantage of a favourable revenue reserve option.
The solidarity surcharge is 5.5% of corporation tax. This is 0.825 percentage points.
It should be borne in mind that trade tax often has to be paid in addition to the relatively low corporation tax rate. The amount of the trade tax depends on the location of the GmbH’s registered office. For example, the assessment rate for trade tax is 475% in Cologne and 410% in Berlin.
Value added tax
If the GmbH does not make use of the small business exemption (which is permissible), it will pay 19% value added tax (VAT). In some cases, the VAT will be 7%.
If the GmbH hires employees subject to social insurance contributions, it also pays the wage tax. This may be supplemented by church tax.
Capital gains tax
Even though the GmbH’s “income” has already been subject to corporation tax, solidarity surcharge, etc., any profits distributed to shareholders are subject to capital gains tax (25%). When the solidarity surcharge is added, this amounts to 26.5%. As long as the profits are not distributed, no capital gains tax need be paid.
Tax-efficient skimming off of profits in the managing director’s salary
The fiscally advantageous way to participate in the GmbH’s profits is by paying a managing director’s salary. This is only subject to income tax. This is a more favourable arrangement for the GmbH managing director than withdrawing profits as a shareholder. And since the managing director’s salary reduces the GmbH’s profits, the GmbH pays less tax overall. When designing the GmbH’s articles of association, attention is paid to the design of a blocking minority for the managing partner, in order to enable the managing director’s salary to be paid without social insurance contributions.
Your formation team
General question about „GmbH formation“
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