Step by step to your own business: The path to professional self-employment does not always seem easy. Formal, legal and personal questions are often unanswered.

Are you not sure which legal form suits your business? Or which official procedures are necessary?

Here follows Part II of our series. You can find Part I here.

The Actual Business Founding Process

If you do not wish to pursue a freelance activity, you must register with the Trade Licensing Office. It depends on your choice of legal form whether registration with the commercial register is necessary. In any case, you must register your business with the tax office and apply for a tax number.

Permits or Other Bureaucratic Requirements

Before starting your actual business activity, you may need to apply for permits, licences or approvals for your business. There are activities that require a permit and activities that do not require a permit and can be carried out without a permit.

You can immediately register activities that do not require a permit with the trade licensing office. Which activities are subject to a permit requirement is defined in the Trade, Commerce and Industry Regulation Act. Businesses that require an increased need for customer protection or must meet higher ethical standards (gambling halls, private health insurance companies and travel businesses) are generally subject to a permit requirement.

Further formalities that may be required are, for example, permits related to the activity (bar permit in the catering industry) or from the building authority, health authority or trade supervisory authority. The Federal Ministry of Economics has an authority finder that helps you find the competent authority for your permit.

Registration With the Tax Office

In any case, you must register your business with the tax office. This also applies to freelancers. You do this at the relevant tax office. In order to get a tax number, you must first fill out a questionnaire from the tax office, which asks for some information. If you need help with this, you can book one of our start-up packages.

Finding a Name for Your Business

Giving your company a name is one of the most important steps on the way to setting up your business. Once you have found a name, it is advisable to take a look at the commercial register to find out whether your company name has already been taken. If this is not the case, it may make sense to secure the domain that matches the name and register it with the German Patent and Trademark Office.

If you want to be on the safe side and have the name protected, you can book one of our trademark packages.

The Legal Form

After you have clarified all the basic questions, you should think about which legal form suits your business. In Germany, there are various forms: GbR, OHG, KG, GmbH (including the UG (haftungsbeschränkt)), AG and many more. These legal forms are each associated with different legal regulations, obligations and certain structures in the company.

Basically, it is important to understand what the difference is between sole proprietorships, partnerships or corporations. Sole proprietorships and partnerships are characterised by the fact that they do not provide for a minimum capital. On the other hand, the sole proprietor or partner is liable for the company's debts with his or her personal assets. Corporations have the advantage that they have a limitation of liability. The partners or shareholders are only liable up to the amount of their contributions.

So when choosing a legal form, you should consider what start-up capital is available to you at the time of founding and what type of liability is suitable for you and your company.

Digitale Gründung is happy to support you in choosing a legal form and will work with you to find a solution that suits you and your company.

The Notary Office

For the formation of a corporation, i.e. in particular a GmbH or UG (limited liability company), the formation must be notarised. It is no longer necessary for all founders to be present at the notary's office. It is also possible to found a company online. You can find more information on online incorporation here.

Preparation of Articles of Association and List of Shareholders

The articles of association define the rights and duties of the partners as well as the organisation and structures of the company and are thus the legal basis of your business. The list of partners includes all partners and provides information on which shares they hold in the GmbH or UG (limited liability company). This list must be submitted to the commercial register.

What must or should be stipulated in the articles of association?

1. Basic data of the new company

• Company (name)
• Object of the company
• Registered office of the company

2. Naming of the share capital

• In the case of a GmbH formation, the share capital is at least 25,000 euros
• In the case of a UG (haftungsbeschränkt) the share capital is lower

3. Partners and shares

• Shareholders can be natural persons or another company, i.e. also another company
• The nominal amount and the number of shares per shareholder must be determined

4. Shareholders' meeting

• When is the partners' meeting quorate (how many partners must be present)?
• With what majority can resolutions be passed?

The Appointment of the Managing Director

In the context of a GmbH or UG formation, the appointment of the managing director (or several managing directors) must then take place. The appointment of the managing director is carried out by means of a shareholders' resolution at the shareholders' meeting. The dismissal or appointment must always be reported to the commercial register.

Payment of the Share Capital

In the next step, you must open a business account at the bank of your choice, which is in the name of the company. The share capital is paid into this account proportionately by the partners. The deposit slip is presented to the notary.

The share capital of a GmbH amounts to 25,000 euros. When the company is founded, at least half of it must be paid into the business account or be in the form of contributions in kind.

In the case of the UG (haftungsbeschränkt), it is not possible to pay in the share capital via contributions in kind. The share capital must be paid in full at the time of formation.

Read on in Part III!