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Company Formation in Germany

Overview :

Germany is one of Europe’s most important markets. 35 % of the European Union’s GNP is generated in this country. Germany is the fifth largest national economy in the world, quality “Made in Germany” is still well known worldwide. Germany’s location in the middle of Europe offers great business opportunities. There are many options available for a German company formation.


Advantages
  • Germany is Europe’s leading economy and one of the world’s largest economies.
  • It offers a large domestic market and furthermore an easy access to the growing markets in the enlarging European Union.
  • Germany is still the world’s number one exporter.
  • The German economy is based upon a free market economy, combined with regulative measures from the state
  • For years, Germany proved to be one of the top regions for foreign investors.
  • Germany is one of Europe’s most cost-effective production locations and still keeps its high productivity rates and quality standards
  • Its central position in Europe as well as the sophisticated energy, communication and
  • Transportation infrastructure make Germany Europe’s number one logistics market.
  • Entered into DTAA with various countries.

Tax Regime
  •  The corporate tax applies to for-profit corporate entities. Companies incorporated under German law are taxed on profit distributed to stockholders at a rate of 36% and undistributed profits at a rate of 50%. Branches of foreign corporations are taxed on the total profit derived from sources within Germany at a flat rate of 46%. Other forms of standard corporate taxes and tax deductions are included in the tax process.
  • Foreign nationals are not given any special tax preferences on income derived from businesses operating in Germany.
  • Non- residents are taxed only on income derived from within Germany.
  • A value-added tax (VAT) is levied at 15%. A reduced rate of 7% applies for specific goods such as basic food items, books, newspapers, and antiques. There is no special rate for luxury goods.

Types of Entities :

Sole Proprietorship :

A sole proprietorship is the form of business entity with the least amount of legal formalities. In a proprietorship, the owner assumes sole responsibility for the operations and finances of the business, including profit and loss. In the proprietorship form of business entity, the owner’s personal property is tied directly to the business; therefore, the owner assumes unlimited risk of his personal assets.


General Partnership :

General Partnerships require an agreement between two or more individuals or entities to jointly own and operate a business. Profit, loss and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. Partnerships do not pay tax, but must file an informational return, while individual partners report their share of profits and losses on their personal return. Short term partnerships are also known as joint ventures.


Limited Partnership :

A limited partnership is a form of business organization that offers some of the partner’s limited liability. It consists of a general partner who organizes and manages the partnership and its operations, and limited partners who contribute capital but have limited liability and assume no active role in day-to-day business affairs.


Limited Liability Partnershipx :

LLP’s are organized to protect individual partners from personal liability for the negligent acts of other partners or employees not under their direct control. LLP’s are not recognized by every state and those that do, sometimes limit LLP’s to organizations that provide a professional service, such as medicine or law, for which each partner is licensed. Partners report their share of profits and losses on their personal tax returns. Check with your Secretary of State’s office to see if your state recognizes LLP’s and if so, which occupations qualify.


Limited Liability Company :

A Limited Liability Company (LLC) is a combination of the corporate and partnership forms of business. In an LLC, parties control shares of the company and like corporations, their liability for the operations of the company is determined by their level of investment. However, like partnerships, income tax is not paid at the LLC level, but rather it is “passed through” and taxed at the shareholder level. This somewhat complicated form of business entity should be discussed further with an attorney or accountant to determine if it will fit your needs.


Time Period

It usually takes 15 days to incorporating a business in Germany.