Here in Germany there are a few things to be aware of:
- not incorporating doesn't mean you are not a company. The second you shake hands with someone you have effectively incorporated and this can get you into a lot of legal trouble if you are not aware. Things like taxes, ownership, etc. all become applicable. Fine as long as there are no conflicts or liabilities but it's a good reason to incorporate sooner rather than later.
- German bureaucracy is a PITA. It's neither free nor fast and absolutely everything is complicated. There are low cost options (like an UG) but what nobody tells you is that there are all these little costs that add up. Plan on spending around 3000 euro in your first six month on just getting set up with a legal entity. There are notaries, accountants, tax offices, registries, and none of that is for free. And you need a bank account with funding to pay for all this and some reserves for future bills. And that bank account is also not free. Plan for the process to take up to four months end to end. Faster is not impossible but you really need to be on top of everything for that. I've done it twice. Four months is what it took between all the gotchas, chicken egg problems, people not being responsive, etc.
- If you are going to do business, you need to have completed this process. Things like invoices, investments, etc. all require this. Also paying for stuff is a lot easier if you have a company bank account. And you don't want to mix business and private financials and liabilities.
- If there are multiple people involved, take care of things like intellectual property, NDAs, share distribution, etc. These are all potential points of conflict if things go south. Make sure you have signed agreements. If you don't, the law simply assumes some defaults. And you probably won't like those. And let's be honest, your startup will likely fail and that usually involves a level of founder drama. Write it down ASAP.
- Limited liability in Germany is very limited. You are personally liable for a lot of things. Like making sure your company is run properly. Germany has lots of lawyers and they'll go after you if they smell money. Things like imprints on websites are important or GDPR or privacy.
- The only thing that's harder than incorporating in Germany is getting rid of your legal entity in case it fails. Nobody talks about this but of course most start ups fail and this is as much as a PITA as starting your company.
- The tax office assumes you are profitable even when you are not. So, you are potentially on the spot for a lot of stuff unless you get very pro-active on this. Things like tax pre-payments, salaries, social security, etc. This really sucks if you have no funding yet.