And even in Germany hiring someone for that would probably amount to paying 500-1000€ for the whole registration of the company instead of doing everything yourself and only paying the 100-200€ notary fees. It's not as bad as you might think.
> I will never try it in my home country.
May I ask, where would you try it? As I understand it, it's not really possible to found in a different European country while you're still living in Germany.
I’m not sure if you’ve ever tried founding a business or fundraising in any other non-Germany country, but this is an insane thing to say imo.
Is this why Germany has no globally relevant software (or hardware tbh) companies founded in the last 40 years?
Are we sure we want to be holding up this model as an example of “a good one”?
> The company is the largest non-American software company by revenue and the world's third-largest publicly traded software company by revenue. As of December 2023, SAP is the largest German company by market capitalization.
SAP and Salesforce are pretty much in the same bucket imo. The reason there is no Hubspot for SAP is that most smaller companies don't really need an ERP system.
AUTOSAR alliance is an organization based in Germany defining automotive ECU software architectures. Most automotive SW development is happening in Germany.
Its a bad sign if you have to go back over 50 years.
In the US, people also tell you pay an expensive lawyer to deal with government paperwork.
I have incorporated (s-corp), created a couple LLC's and briefly used a sole proprietorship with a DBA filed in my county - this one was by far the most annoying, time consuming, and confusing one. The state filings took maybe 10-15 minutes of filling out straight forward online forms, $1 (at the time for a name search) and $300 to file. Soon after I was the paper owner of a legal corporation (or LLC's). The most complicated part was understanding taxes, but the application of taxes is separate from starting the company (assuming you understand the best tax structure for what you are doing). If anything, an Accountant is way more important imo.
(1) > but I also think hiring someone for [government paperwork] would be the wise choice in most places anyway.
(2) > I’m not sure if you’ve ever tried founding a business or fundraising in any other non-Germany country, but this is an insane thing to say imo.
My point was that it's not an insane thing in the USA (non-German country) to hire someone for government paperwork.
Germany sounds way more difficult.
It’s not that it’s strictly required, but it’s so beneficial that it’s often chosen.
Ableton, Native Instruments, SoundCloud, TeamViewer
They are the industry standard around the world, no one even comes close.
I’m from Sweden and live in Switzerland. I know many people who have their own companies, and I was looking to start one myself before moving to Switzerland. It is SUPER EASY.
I’ve helped my wife become self employed in Switzerland. I do most of the admin work for her. Again, very straight forward.
Not much more crazy than tax returns or internal accounting you need to do in any jurisdiction.
But yes, running any organization is a lot of work.
But in general, not really. I also just founded a GmbH in Germany, and the paperwork really isn't that crazy, and for the more complicated parts you'll generally will want to have a tax advisor you are going to have a long-term relationship with (rather than a one-off founding service). I considered using a founding service, but ultimately, most of the "hard parts" about the process is in understanding what agency you have to talk to for what parts, which you'll have to learn anyways if you want to run a business in a way that doesn't land you in jail, so the benefits of such a service are marginal.
The only real way to streamline it would be to deregulate the process (e.g. getting rid of notary requirement).
[0]: https://www.firma.de
That being said, I do think the process could be simplified drastically. Not necessarily by getting rid of the notary requirement but 1) through digitalization and 2) by streamlining (possibly centralizing) the whole back and forth between notary (official incorporation & signing of articles of incorporation), bank (getting a business account + obtaining proof you actually put the money in that account that you're claiming to have during incorporation), local court (registering the company, including articles of incorporation), tax authorities (getting a tax ID and sales tax ID), local authorities (getting a business permit), local chamber of commerce (paying dues for mandatory membership), Federal Gazette / federal company register (submitting your initial balance sheet).
There is a reason why we have so much bureaucracy in Germany (1. because we like it) and second because it is supposed to provide trust, trust that every company I deal with is legit, trust that the system knows who is participating. Without trust nobody would make business or business would be very hard, because you would have to price in the risk of not having trust.
The downside for founders is that you have to divulge your address, unless you take additional steps to give yourself a mailbox address, but this can also be illegal if you're not careful. You can also rent an office of course, but for indie devs and freelancers, this is usually not financially viable.
I believe a freelancers wouldn't file employee tax forms. They frequently roll their filings into their personal taxes.
[edit: this is for a C corp]
An LLC setup as a passthrough can get away with filing personal returns, but that only works for small freelance operations. Once you've got payroll or investors it's constant paperwork hassle.
S Corp filings are drop dead simple. The tax return may take a CPA’s help if your structure is complicated or you want to get the absolute best tax breaks possible.
Yes it could be simpler - jurisdictions like Estonia figured this out.
But can we get back to the original thing here? Creating an LLC in the US is trivial and does not require accounting.
1) India. Lots of conflicting laws. Lots of conflicting paperwork. And as a foreign company you'll probably pay more in bribes ("voluntary non-disclosed payments to ensure success") than you would in taxes, because the alternative is that they send the police after your local employees and maybe try to have the local court seize your property.
2) EU. The VATOSS is straightforward, but the income tax systems are not. Within the EU, France is the worst, followed by Belgium, Denmark, and Germany. Portugal and Ireland are very chill about tax returns. For the bad countries, there is lots of paperwork. Literally every transaction must be documented. On both sides. And they will ask for the documents when they audit. And they will challenge any cross-border transaction that results in reduced local income.
3) Africa. I've only dealt with South Africa, Nigeria, and Egypt. South Africa was the easiest to deal with, and Nigeria was surprisingly business friendly other than the constant requests for bribes. Egypt should have been straightforward (and there is a bit of language barrier), but the bribes were not optional, even to file basic tax returns.
4) South America. There's a lot of it. So much of it. In Brazil, you need certified letters just to send and receive money...including tax payments. And there's a lot of requests for bribes in other countries. But once you get past the language barrier and the logistical hassle, it's actually quite straightforward and logical. If not for the military dictatorships and drug gangs, South America would be a good place to do business (from a compliance perspective).
5) USA. Lots of laws. Lots of jurisdictions. But all relatively straightforward. It only gets complicated if you choose to minimize your tax burden (or maximize your refund) by taking advantage of the many, many complications. If your only source of income is W2 income, you could finish your tax return in 15 minutes.
6) Canada. Even Quebec, which insists on doing everything in French.
7) Australia. It's the least complicated tax system I've dealt with, and the easiest to work with as a taxpayer. The ATO is also quite easy to reach...I'm almost always able to get a human on the phone within 5 minutes.
Quebec would be the one place in Canada where you’re expected to do business in French. Maybe New Brunswick? Even right across the river in Ottawa you’d have no reason to use French in any official capacity.
Sure, you might want a FR/EN selector at the top of your site since Quebec is a big market (within Canada).
It often literally is that easy.
Also free on H&R Block now. They can scan your W2's with your phone camera, too, if they can't pull it. Then, direct deposit it into your bank account. It was great.
Of course, it helps if you have a bit of an idea of legal concepts and accounting, but to be honest, that also makes sense, since you are starting a business.
This is not to say that we should not work to make it less bureaucratic in Germany (and other countries).
I agree that applying to loan and grant programs within Germany, and especially EU, are a super pain in the ass. I definitely see some potential there.
Anyway, the benefits go beyond how easy it is to open, the most important things are moving forward with things like stock options, issuing shares, creating preferred ones, etc, etc, taxes access to funding, etc..
It isn't a particularly worse arrangement with founders, and, again corporate law in Europe is really behind, making things like attracting talent for equity much more difficult.
You can also create a GmbH in Germany by downloading a few free templates from the internet and making an appointment with a notary. It's a bit more expensive than creating an LLC, but not significantly (maybe a few hundred dollars).
Especially since most of the cost come from running the business (tax filings, accountings, business registrations) and not the initial founding costs.
That's been one hurdle I've seen when trying to found a business outside your own country.
The other hurdle was requirements for local directors (New Zealand, Cayman Islands)
The states hasn't yet devolved into separate countries (I'm not sure what advantages California gets from the union. But a Brexit is clearly a costly move).
https://www.chamberofcommerce.org/how-to-start-an-llc-in-mis...
How does that compare to Germany?
It's just everything else that's dreadful.
Had a startup in the UK before; that was a walk in the park in comparison.
Go to your hometown administration, pay 35 Euro and leave 15 minutes later with a "Gewerbeanmeldung" which enables you to start doing business right away.
The Gewerbeanmeldung typically registers you as a sole proprietor (Einzelunternehmer) or GbR (partnership). Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG. Those require notarized founding documents, minimum capital requirements (€25,000 for GmbH), and a commercial register entry (Handelsregister)
The simple Gewerbeanmeldung structure is problematic for venture capital because most VCs require a corporate entity structure (GmbH/UG) and converting from a simple structure to a proper corporation later can trigger tax consequences.
At each investment round all shareholders must appear before a notary or provide notarized power of attorney, the entire investment agreement must be read aloud by the notary, changes to company documents require notarization, and each notarization costs thousands of euros and creates delays.
Major decisions which are likely to affect shareholders require formal shareholder meetings with proper notice periods. Unanimous consent is often required for key decisions. Capital increases must be executed through complex formal processes. Registration with the commercial register takes weeks. Minimum nominal values of shares restrict flexibility. Required reporting to tax authorities is extensive. I can go on and on. And don't even get me started about German employee stock option plans.
Meh, do they really? Only if they want to go the VC route. But in this topic we're talking about more healthy ways to build and grow a company and for that you don't need a GmbH or GbR to start.
I think it's wise to have, just in case, but even in lawsuit happy America where I have had to fire multiple clients mid-project due to various reason. I've never had blowback or even the treat of a suit. We all just went our separate ways.
I believe Germany is generally heavy on liability and light on ways to avoid it. If you damage someone's property, there may be a procedure to confirm that you damaged their property, and then you must pay the value of the damage - as well as the court fee because you didn't just pay it upon asking. No ifs or buts. You cannot avoid paying it in any way, including the clever use of paperwork to avoid paying it. That's why there's a high bar to form a GmbH. As you correctly pointed out, good insurance can also limit your effective liability. I think such business liability insurance products are very common in Germany.
After reading that, for all the talk the USA has about "personal responsibility", it doesn't seem that serious about it, does it?
I haven't been sued either, and I live in Germany. I did pay someone $100 to replace something I accidentally broke, and walked away with the broken thing. No court was involved there and I didn't bother to claim insurance.
Limited liability is something you should always want, and if it merely costs a $30 filing fee and some forms, you should get it, but it's obviously jurisdiction-specific and in Germany, with the much higher requirements, it's obvious that they really only want medium to large businesses to have it (though this isn't a direct rule, I think).
From this thread I just learned about the Unternehmergesellschaft (haftungsbeschränkt) which is apparently a GmbH that can be formed for less than $25,000, but instead, you have to set aside 25% of your profit until you have $25,000, at which point you can convert to a normal GmbH.
That’s how insurance works. You don’t need it often and maybe not even your entire life, but if it happens and you aren’t covered it will ruin your life.
If this description is not accurate for the situation then you probably don’t need insurance.
Undercapitalization is a big one that people don't often realize - going without insurance an not enough funds to cover a claim will usually pierce the veil.
Same goes with little things that typically don't matter to the owner of a one person company, like failing to keep board/member annual meeting minutes and sending them to the state body that requires them, and the biggest one for most small businesses - commingling funds and "alter ego" doctrine - the company is not you, the company's money is not yours.
There are a lot of ways that limited liabilities vanish - especially for smaller businesses like OP is describing.
> Meh, do they really? Only if they want to go the VC route.
Funnily enough, a German friend of mine and his buddy got accepted into YC some years ago and apparently YC handed them the funds before they had even incorporated or anything, so at least from the point of view of German law they were essentially a partnership (GbR). Not sure how that even worked, especially in terms of delineating what the entity actually was that they and YC owned together. Did YC own 7% (standard deal) of… them? (Without incorporating you are personally liable after all.)
Anyway, from what my friend told me they had a whole bunch of cash lying around on a personal account for quite some time lol
Then again, this was before covid – money was incredibly cheap back then.
My landlord and greengrocer want hard cash, not stocks of a startup that may collapse next month.
And this was just to freelance as a developer. In my case I was allowed to start while they were processing the registration. But had it been something that would require their permission, I'd have to wait several months before I could start my business, while they wave through a form that basically says "I'll be selling goods".
I'm not one to blindly hate on all bureaucracy. But in this case it feels unnecessarily complex.