How to Set Up a Company in Germany for English-Speaking People
blog.datacircle.io
blog.datacircle.io
The tl;dr version is US citizens can get a residency permit (2 years, renewable indefinitely, considered a non-temporary purpose of stay so you're eligible for permanent residency after 5 years) to start a business in the Netherlands with very few restrictions and very little in the way of capital requirements (€4500 in the business account.) Plenty of attorneys in the Netherlands can take care of the necessary paperwork for €1500, give or take, but lots of people manage it themselves too.
A few blogs and guides of the many out there:
https://daftvisa.wordpress.com/step-by-step-guide/ https://survivingdaft.tumblr.com/ http://passthesourcream.com/daft/
Furthermore, US taxpayers have crazy FBAR/FATCA reporting requirements about any money you have signatory rights outside the US, even if it isn't their money - to the point that having e.g. a CFO with a US citizenship -- even if they never set foot in the US -- is becoming a serious liability for a company.
E.g. I decided against Estonia for my SaaS business because Stripe is not available there (among other reasons), since that alone probably creates more hassle than founding the company there saves.
In Europe right now and maybe 25-75 on just pulling the trigger... who knows if our so-called president ends up doing something stupid that blows up this treaty? No other easy paths to residency in the EU as far as I’m aware!
If you're a US citizen another temporary option (but among the easiest) is to get a working holiday visa for Ireland. I believe it's the only EU nation offering working holiday visas to the US. I probably wouldn't bother with it if the DAFT were an option - when I got one it was much earlier in my career.
Not sure how the residency requirement is a bad thing? NL is pretty nice as I understand it. Incidentally, this blogger did the DAFT and describes their experience: http://shawnindutch.com/
If you want to spend 4-6 months a year there for kicks just go as a tourist; you can spend up to 90 days at a time in Schengen twice a year.
Of course, you can also just buy your way in if you have cash. Malta sells EU passports.
https://www.ft.com/content/6f98892e-fbf3-11e5-b3f6-11d5706b6...
Essentially all you need is a normal IT job above a certain threshold
01 Netherlands
02 Denmark
03 Sweden
04 Norway
05 Finland
06 Singapore
07 Luxembourg
Now I live in Japan and most programmers I meet do not speak English at all (leading them to be pretty poor programmers).
Proficiency is not equally distributed.
"Today, the Dutch are on average the tallest people on the planet. Just 150 years ago, they were relatively short. In 1860, the average Dutch soldier in the Netherlands was 5-foot-5. American men were 2.7 inches taller."
https://www.seattletimes.com/nation-world/why-the-dutch-beca...
If you'd like to have yourself heard/understood in the EU, even though English should generally suffice, German is another contender. In Italy its quite well understood (esp the north) and many Eastern European countries as well. Though perhaps Russian even better, I don't know.
As for Germany, the Germans living in cities like Berlin and Munich speak excellent English.
Also, her job in a hospital means she needs to speak the local language "unless--" .. which probably means unless they have a specific need for a native english speaker who does not have to know the local language, or if it's an American military hospital, or...
If you wanted to serve a largely German speaking clientele, then you could reasonably expect to get a decent number of applicants in the Netherlands in my experience, especially in the border regions. The kids here are still learning German and French in school, and while they might speak it less, there are still plenty that go there regularly.
- Denmark
- France
- Italy
- Netherlands
- Spain
- Portugal
- Lithuania
- Estonia
- Austria
- Sweden
I've been in SV for 3 years, but never went for the green card. The US won't let me stay, so I guess I'll have to go suppress wages somewhere else.
Looking more into this, looks like there is a special 50k gbp if the money is coming from local VC's or government grant.
In my case I have a side product that is fielding licensing inquiries, and I'm looking to bootstrap (figure that's just as time consuming as fund raising).
I don't have 200k gbp in the bank, and I'm not willing to nor see the need to gamble with family and friends' money. So to me the UK scheme falls into the category of "major capital requirements".
Founding a GmbH is not only relatively expensive, it also takes time. Many founders avoid incorporating themselves but prefer to buy a new GmbH. This is actually a business here, there are companies that keep a pool of fresh GmbHs and sell them to founders. Search for 'Vorratsgesellschaften' if you are interested in going that route.
The primary issue is that you can't just take money out of an GmbH/UG/AG (Kapitalgesellschaft). The act itself requires a shareholder meeting (easy if you're alone) and a balance sheet is required (less easy). You can't take money that would put the balance of the company below the required minimum, ... Basically, the money placed into the company is frozen, you mostly can only access the earnings.
You can, however, pay yourself a regular wage, but this wage needs to be treated like a normal wage: needs to be paid monthly, needs to be fixed, ... This will likely become an issue if the company has no established cashflow. You can also take shares of the earnings (Tantieme) as part of your wage, but that also requires a balance, so it's usually done when the yearly taxes are filed. They'd be taxed like your regular income and the company would not pay any extra tax on those (simplified, they're treated as wages paid, so regular costs that reduce the earnings).
- Sooner or later you will have to convert your UG into a GmbH anyways - Most banks don't offer bank accounts for UGs, and those that do often under really shitty conditions
Bank accounts for UGs are available at the same conditions as for a newly formed GmbH (no credit line, no credit card, ...). Generally speaking, bank accounts for newly formed businesses have shitty conditions.
Germany has a strong culture of entrepreneurship - being not employed but "selbstständig" (occupationally independent) is held in high regards. In my experience, while burocracy can be complicated, officials are very willing to help (I haven't made the jump myself, but I know from others). And one thing that is nicer in Germany / Europe is that it seems less litigious than the US. I would be constantly afraid to get sued or to break some unknown law in another US state, whereas here if you get a good accountant and avoid a few common pitfalls, you are pretty safe.
[1]: https://de.wikipedia.org/wiki/Kleinunternehmerregelung_(Deut...
> As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person
This is false. The conditions is that business volume [1] including taxes has not exceeded 17500 EUR in the previous year and at the same time is not expected to exceed 50000 EUR in the running year. If you're a newly founded company you need to file an estimate of your business volume with the tax authorities and if the estimate exceeds 17500 EUR you can't take advantage of the Kleinunternehmerregelung. Also note that the 17.500 EUR limit applies to the sum of all companies you own, you can't have two companies with a volume of 17500 EUR each.
It's really only good for a side business and in some narrow circumstances where you sell mostly to private customers.
If you want to bootstrap, you're much more likely to benefit from filing your VAT (anything you buy will be discounted 19% effectively, you can have your VAT filed by an accountant from the saving of buying a single expensive computer).
A fairly good summary (in german) with a handy flowchart at the bottom is here http://www.kleinunternehmer.de/kleinunternehmerregelung.htm
[1] minus VAT-free services etc. ...
If you take no outside money (yet), have no employees (yet), and don't buy many goods, you don't really have any benefit of either not paying VAT, or getting limited liability. This is for people who have a side-business of "making websites". You can register a simple business ("Gewerbe") when you have to write an invoice, or start making regular income.
Of course, if there is real capital investment involved, or once this is not just a side business, you have to do more.
You also need to file the registration with the tax authorities before you write your first invoice (you need a tax number for a correct invoice).
As a general rule of thumb: You don't simplify when it comes to taxes.
(Side note: This is still unrelated to registering a company or even registering with the Gewerbeamt which may or may not be required depending on what exactly you do. Members of the Freie Berufe for example don't need that.)
It get's more complicated once you have employees, but even that's not relevant compared to almost any other aspect of a business. I think we're paying EUR30 per quarter for managing the employees taxes and various benefits.
If you're doing GAAP accounting, you're 95% done with taxes as well. And since these standards have converged over the years, the only difference in bureaucracy that remains is people's enduring stereotypes.
My business has been around for 10 years this year, so who knows wtf you’re on about.
Which means that unless you're in the business of flipping LLCs, "way easier" seems like a made-up concern to me.
You can also sign up for taxes online in a few clicks.
Can't they simply set up an LTD in Ireland and "use" it in Germany?
I know some Germans who did this for tax reasons, but I could imagine that Ireland formalities are easier to understand for English speakers.
Registering a British LtD used to be common when the UG didn’t exist and you’d need at least 25k for a GmbH to get limited liability, but it’s fallen a bit out of fashion since then.
I went this route, using an accountant recommended by a trusted friend. Bought an existing "off the shelf" company and have a Maltese business bank account, all without leaving the comfort of my desk.
People need to understand this: there is no free lunch. If you think you can be classified as a Maltese company, sitting at a desk in <insert random European country here>, you are dead wrong in 99.9% of the cases. Get proper tax counsel (not an accountant, a lawyer -- accountants are generally sloppy with details, and details matter, e.g. a word in a contract can matter).
Technology and internet based businesses have some unique opportunities to optimise taxes, but the line between fraud and optimization is quite thin.. get good counsel, or prepare for a dispute where you take your (local) tax authority to court.
Source: a decent knowledge of corporate and tax law and plenty of tax disputes, which I've mostly won.
In addition, (Maltese) social security might be due on salaries received, or could be exempt.
I notice that you have not mentioned the word “lawyer”. Instead you said accountant and professional. I’m going to write the rest of this on the assumption you have not spoken to a tax lawyer.
You’ve set up a structure for years, and are likely investing tens or hundreds of thousands in equity.
A consultation with a good tax lawyer can be had for $100-$200 in most cases, or even free sometimes.
Your situation might be 100% correct! In which case, you have spent very little.
But if your situation is wrong? You risk the total destruction of your business, tens of thousands in penalties and legal fees, and possibly jail.
Speak to a lawyer, if you haven’t.
Incidentally, I had the same idea as you: Canadian business, international clients. Could I incorporate abroad and save? My tax’s lawyer’s answer was no, the local revenue authorities would not see it that way.
You’re in another jurisdicion, so the plan may work. But, you will spare yourself the possibility of ruin by checking with a tax lawyer in the jurisdiction you live in.
She's knowledgeable and is clearly aware that the advice being given by her current accounting office is much worse (and often incorrect) in comparison to the advice given by people at her previous job.
They're excellent at handling accounting, but not good at structuring (non local) things and avoiding tax.
A wealthy family with a company that employs 1000+ people will generally get away with more than a lone wolf with no political connections (not that I'm saying you're a lone wolf, just saying it's not always clear cut). Best of luck!
right, all $200/yr worth of work.
anyway, Europe is full of little hamlets that offer convenient incorporation services.
And the whole purpose of GmbH or LTD is to limit liability if something goes wrong - but I wouldn't want to have to defend myself or liquidate my company in a irish or maltese jurisdiction...
Makes the company more trustworthy for potential partners since they won't face closed doors from one day to the next, but otherwise makes little difference: a company in liquidation is really low maintenance if the paperwork is in order.
The caveat is this though: You and your partners will be personally liable for the company's liabilities. In most cases however this doesn't matter as much as is often presumed. This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners.
First of all, as long as it's just you and potential partners, who put in their own time there usually isn't a whole lot of financial risk involved anyway. That changes once you decide to hire employees. At that moment you quite likely should incorporate.
Secondly, in many cases even with a GmbH or UG you will be held personally liable as a managing director anyway (for example when taking up a loan).
That level of risk is nuts. Most companies would never get started, or lots of founders would get screwed.
I agree the system is far from perfect but in my experience the people who commonly complain about the risk of setting up a partnership on one hand or the high cost and the bureaucracy that comes with incorporating in Germany on the other hand often don't really want to found a company in the first place but rather find a convenient reason not to.
After all, it's a matter of risk assessment. If your proposed business is inherently risky, you have to hire right from the start or you're looking for equity financing then by all means do incorporate. Doing so is a one-time effort (or rather a once-per-year effort when including the additional requirements for annual accounts). In a company's lifetime that effort really doesn't matter all that much.
I only hope you don't fail to deliver and get sued, misuse client data and get sued, get accused of patent infringement et al.
Seen all of these happen.
Misusing client data is a criminal offence under European data protection laws. Doing so not only makes you liable for damages no matter if you're a sole proprietor or 'merely' a managing director of an Ltd-style company but it can also land you in jail.
Finally, there are no software patents in the EU so if you run a software startup you're fine in that respect.
On a secondary note: Germany is the worst country to incorporate: bureaucratic, expensive, tax offices are expensive and stuff is complicated, worst privacy regulation to come (from a company perspective), Labour is expensive compared to their skill level and English skills.
One good thing though: since share transactions are done with state notaries there is more safety when doing them and less need for lawyers for simple transactions. For more complicated transactions with higher funds it gets expensive again. The Articles of Association must be German, the rest can be in English.
Now an UG is young in comparison to GmbH, it is slowly being accepted.
I think the registration cost another ~€150.
You can actually spend the money on things after the court verified the capital is present with your corporate bank.
If the UG or GmbH goes belly up, am I in any way personally responsible?
Personal liability is a bit a complicated topic. If you’re a pure shareholder, your liability ends with the value of the shares. If you’re at the same time the only shareholder and the CEO and only employee you can be liable for quite a few things. (Social security, taxes, damages for your personal actions, anything that constitutes fraud, ...)
Now, there are many ways to value something, and there is generally some room for interpretation on how much to charge exactly. But you will need to find a way to justify the price at which a transaction was concluded.
With IP it gets a bit blurry (e.g. you might own some trademarks you want to transfer to your new company), but again, there are a ton of perfectly acceptable ways to value something and not face the wrath of your local tax collector. Just make sure you have a reasonable valuation, based on objective facts, and you'll (mostly) be fine.
Not as long as you did everything lawfully.
Some people form a GmbH/UG as a sole owner/ceo with the goal that it shields them personally from liability, but never intend to take on investment or have employees. Personal liability tends to creep in in a lot of places, piercing the shield. Many rental contracts for example will stipulate a personal liability for the owner/ceo in such a case. A credit line for the company might as well, even something as simple as a credit card for the company does. The CEO is personally liable for quite a few things that are not as clear cut as it seems at first glance: You may be liable for correct tax filing and in taxes, many things are judgment calls with a thin line between what's considered a valid way to reduce taxes and tax fraud. Personal liability may creep in from declaring insolvency too late in the hope that the next contract will save the company. Haven't filed the taxes because you need to bring in money? Company can't pay the taxes right now? A common thing when companies go down, but personal liability. It might creep in by entering contracts that the company cannot reasonably fulfill and the CEO should have known, but looked the other way because they hoped that things will just work out fine.
True, if you did everything lawfully, then you're probably shielded, but despite best efforts, most people and companies slip up sooner or later.
There are many reasons to form an LLC, but the hope of shielding yourself personally as a single developer/consultant is often in vain.
The ones dictated by law are certainly tricky, because those apply to you by default and you might not know about them. I wouldn't throw credit line/rental into that same mix though, since those are contracts you enter willfully and those contracts explicitly state that you are personally liable if the company can nlt meet its obligations.
If you want to be a sole trader (enskild näringsidkare/enskild firma) you need zero capital and the registration cost is zero (costs about €100 to register a company name but that's optional) and everything can be handled online, although if you're not a Swedish resident you'd need a temporary personal number from the tax agency first.
Don't start a company in Germany. Don't take it from me, take it from the World Bank, which ranks Germany 114th in the world for ease of starting a business. Just narrowly edging out the Dominican Republic.
It sucks.
Then I encountered the bureaucracy in the US. It's even more forms, more officials that get a say about everything (Different sales tax at all levels down to the county, wtf?), they're slow to deal with even for non-complex matters (the reason why Zootopia's DMV employs sloths totally went over the heads of most of my [German] acquaintances), and with little organization.
On a tangent (since it's not "public" bureaucracy per-se): You get a corporate bank account with credit line within a day in the US. That's wonderful. Now try to send money to an account at a different bank within the country, within a day. I'll wait.
So yes, Germany has a huge bureaucracy. But work with them and they'll work for you (I got tons of useful advice, for free, when I asked them how to approach whatever it is I went to them in the first place) - and compared to many other places bureaucracy seems highly efficient here.
I wouldn't call setting up a GmbH especially difficult or complicated, just slow (2-4 weeks). Your tax advisor/accountant and notary can help and advise you in case there are questions.
Because then you have an LLC in the US.
The article opens with "A quick google search of 'How to setup a company in Germany' yields numerous results". Its target audience is likely the sizable expat community in Berlin.
Simpler advice; buy a ticket to Bratislava and take it from there.