Establishing Business in Germany

Establishing Business in Germany

31 October 2014

Considerations when establishing a business in Germany


Two of the most significant considerations in setting up a business in Germany involve personal liability and taxation.

In order to avoid personal liability, we recommend that a limited liability company called a “GmbH” (Gesellschaft mit beschränkter Haftung) be set up. The GmbH will be treated as a separate entity, apart from its shareholders and will allow its shareholders to avoid personal liability for the debts of the company.

Taxation levels in Germany will depend on whether the shares of the GmbH are held personally by an individual shareholder or whether these are in turn held by a Canadian corporation. Withholding taxes and capital gains taxes will be higher if the shares in the GmbH are held by an individual. Trade taxes will also be an important factor as these vary from city to city or town to town in Germany.