Company registration in Germany
10 challenges for a foreigner
We are often contacted by foreign clients who tried to register a company in Germany but got stuck in the middle of the process. In this article we are going to talk about the main hidden traps and challenges that foreign entrepreneurs encounter on their way of company registration in Germany. And why the procedure of registering a company in Germany that is relatively simple for a German citizen often fails in case foreign shareholders try to open a company.
Over 20 years of operation we have helped more than 7000 clients. Besides company formation in Germany we can fully establish a business for you: from a trade company to a global manufacture. If your project is beneficial to Germany, we can assist you with participation in government programs, incentives, financing as well as help you with obtaining the German residence permit because of business.
Challenge 1: Share capital
We spoke about the share capital for company registration in Germany in one of our previous articles. Basically, for the company to be registered, you need to deposit the share capital on the bank account of the company that is in the process of being registered.
Here is how it works:
After the founding documents of the company are notarized you need to open a bank account for the company that is under incorporation based on these notarized documents. Once the account is opened, you need to transfer the share capital of the company on it. Only after the notary receives a confirmation that the share capital has been deposited on the account can the notary apply for the registration of the company. Failing to transfer the share capital in a certain time leads to failure of the company formation.
For Germans opening such an account is usually simple. However for foreigners opening a corporate bank account for a company with foreign shareholders and managing directors from non-EU countries is almost impossible in many cases.
For some reason many service providers do not inform foreign customers about this crucial issue. However around 90% of the cases of registering a company in Germany as a foreigner fail exactly because of the impossibility of opening a bank account.
Challenge 2: Bank account
Even if you found a way to complete company registration in Germany without a bank account, you’ll need one for your further business activity. You might think that it is unfair not to open accounts for German companies just because they are owned by non-EU citizens, and we feel you.
We’ve brought up this issue many times with a number of authorities on different levels. Unfortunately, many of them are aware of it however can’t influence the banks. There are several reasons for banks to decline opening such accounts. This is a topic for another article. And if service providers don’t tell you about this problem, you really should pause to think if they actually have experience of working with non-EU clients.
Watch our video about the challenges of company registration in Germany:
Challenge 3: Registration address for registering a company in Germany
Not everyone understands that it is not sufficient for registering a company in Germany to have just a PO box or a virtual address. The registration address has to meet certain requirements: for example, the provider has to provide an official rent contract, be responsible for obtaining your mails, be able to give you access to a real working place if required. Otherwise there might be an issue with company formation itself or the business registration or especially with the tax office that might decline issuing you tax numbers.
When you register a company in Germany through us we help you select a business address that meets all the requirements for company registration in Germany.
Challenge 4: Anti money laundering laws
Usually foreign shareholders need to provide a statement explaining where the funds for the share capital come from. There are also certain third countries that are considered high-risk countries in regard to money laundering. In such a case the shareholders have to fill out additional forms before the process of company registration in Germany can be started.
Challenge 5: Remote company registration in Germany
If you register a company remotely, without a personal visit to Germany, it is often required to prepare over 200 pages of documents. Some of the documents will require either an apostille (in case the country is a member of the Apostille Convention) or an even more complicated procedure of legalization. There are some other solutions as well, however they are available not in every country. It’s important to know that apostilled documents are required from each of the shareholders as well as managing directors. The sequence of steps to be taken is an important matter as well.
Even those service providers that offer company formation for foreigners are often confused by the steps and formalities of remote formation. Our company has a huge experience in registering companies both with personal visits of the entrepreneurs and remotely. That is why the process of registering a company in Germany with us is as safe and smooth as a journey accompanied by a presidential motorcade. And if you still have doubts, check out some of our cases.
Challenge 6: Tax and VAT numbers
We previously explained in detail the difficulties of getting the tax and VAT numbers for companies with foreign shareholders and managing directors. Please watch our video above to find out more: minutes 7:18-8:13.
As you can see, obtaining the tax and VAT numbers without the assistance of a qualified tax adviser who is familiar with the specifics of work with foreigners might be impossible. If you choose company registration in Germany through us, our experienced tax adviser takes care of the whole process: filling out application forms, applying for the tax number, communication with the tax office.
Challenge 7: Registering a subsidiary
We often get contacted by foreign entrepreneurs who want to register a subsidiary in Germany. So when registering a company in Germany they want the shareholder of the German company to be another company. There are a lot of offers on the internet saying that this can be done quickly and easily. However if the subsidiary is to be formed with a foreign company as the shareholder there are many difficulties connected to the process.
Here we mention just some of them:
- You need to provide the documents of the parent company. What documents exactly are required depends on the country where it’s registered, the structure of the company (number of shareholders, managing directors) etc.
- Often the documents need to be apostilled and translated into German by a certified German translator, which can be quite costly and time-consuming.
- As per the anti money laundering regulations, the beneficiary owner of the foreign company has to be identified. It means that if the shareholder of the company is not a private person but another company, you need to “unchain” the structure of the company until it is clear who the final beneficiary owner, a physical person, is behind the company.
- -From our experience, opening a bank account in Germany for such subsidiaries is almost impossible.
So, the procedure of registering a company in Germany having a foreign company as a shareholder is complex and time-consuming. It requires a lot of planning, coordination and the work of a whole team of experts. Our team of experts has been put together one by one from all over Germany: business consultants, notaries, tax advisors, lawyers and other specialists work together on your project. The preciseness and effectiveness of the process is guaranteed because the whole process is guided by certified Project Management Professionals (PMPs).
Challenge 8: Cost of company registration in Germany
As you can already see, there are a lot of nuances when it comes to registering a company in Germany as a foreigner, and a lot of work has to be done. When you see cheap offers, you need to understand that, as a rule, they don’t include notary costs (that can reach up 1500-2000 euro for a GmbH depending on the situation), registration and other fees. And quite often they do not consider specifics of work with foreign people. At the end the final price can turn out to be 4-5 times higher that the initially offered one and the project may not be fulfillable at all.
We explained about it in detail in one of our previous video. When you choose company registration in Germany with Nexus-Europe GmbH we carefully estimate your situation, develop the course of actions and provide you with an individual and absolutely transparent solution. Without any hidden information and without hidden costs.
Challenge 9: Changing requirements
Government authorities regularly change the requirements to the documents for foreigners. A person not familiar with the procedure of company registration in Germany wouldn’t even know how and where to look for those updates.
Challenge 10: Residence permit
Many foreigners think that having a company in Germany automatically grants you the right to obtain a German residence permit. Unfortunately it’s not that simple. There are several requirements that have to be fulfilled for the entrepreneur to be eligible for a residence permit. We have a number of articles on this topic.
Our company has developed and successfully implemented our own technology: the 5-step Nexus Smart Immigrate Technology. It was developed especially for foreign entrepreneurs to essentially increase the chances for getting the German residence permit.
We mentioned only the main aspects.
If the registering a company in Germany as a foreigner is so complicated, is it worth registering a company in Germany at all?
Of course. Germany offers a lot of benefits. We spoke about them in numerous of our articles. And difficulties in formation stages can easily be overcome by delegating the task to professionals who know the specifics of work with foreign people.
Over 20 year of operation our company, Nexus-Europe GmbH, has helped more than 7000 clients. If you don’t want to study all the details and nuances, we register a company on your behalf or even launch a ready-to-operate business for you: from a trade company to a global manufacture. If your project is beneficial to Germany, we can assist you with participation in government programs, incentives, financing as well as help you with obtaining the German residence permit because of business.