What corporation to choose living in Germany?

[segsv]

I've read MJ's books and want to pursue entrepeneurship. In The Millionaire Fastlane, he speaks about which types of corporations are ideal, discussing their (dis-) advantages. Unfortunately, I don't live in the US, so I'm still kinda clueless. Are there any german people or even better people who run a business in Germany that can tell me which business model they used to get started? I'm not planning on working with someone else, just by myself, creating an Internet business.
As I said, I'm still quite new to the forum, so I apologize if my question has been answered before.

 

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[theag]

I've read MJ's books and want to pursue entrepeneurship. In The Millionaire Fastlane, he speaks about which types of corporations are ideal, discussing their (dis-) advantages. Unfortunately, I don't live in the US, so I'm still kinda clueless. Are there any german people or even better people who run a business in Germany that can tell me which business model they used to get started? I'm not planning on working with someone else, just by myself, creating an Internet business.
As I said, I'm still quite new to the forum, so I apologize if my question has been answered before.

There is a lot of bureaucracy. You will find a bunch of articles explaining all this on Google. The IHK (chamber of commerce) is a good source, I think they also do free consulations. German tax system is complicated, so once you get serious (meaning real revenue), you should definitely talk to a tax consultant (Steuerberater).

In the beginning you don't really need a business entity and can operate as sole proprietor under your own name. It costs like 20€ to register at the local commercical office (Gewerbeamt). Your sole proprietorship can be converted into a limited liability company later.

But having a business entity has benefits, mainly limited liability and being taken more serious by business partners. The usual legal entity with limited liability in Germany is the GmbH. You need 12,500€ to start one, which is done through a notary public. The money isn't lost, as its the capital of the business so you can use it for operations.

If you want a GmbH, but don't have the 12,5k you can create an "UG (haftungsbeschränkt)", which is basically the same but with reduced capital requirements (minimum 1€). The UG can later be converted into the full GmbH by converting accrued profits and/or putting in more capital yourself.

There are benefits in using a holding structure (one Holding GmbH owns the Operating GmbH) from the beginning, because this allows you to sell the operating GmbH 95% tax free, but this also doubles all your costs, not just founding but also yearly expenses.

Both these routes require you to apply for a business tax id and possibly VAT id, and a bunch of other stuff.

 

[Timmi]

Because of tax reasons you should go with a UG. It is the pre face of a GmbH. It is quite hard to transition as a "Einzelunternehmer" to a GmbH.

 

[segsv]

There is a lot of bureaucracy. You will find a bunch of articles explaining all this on Google. The IHK (chamber of commerce) is a good source, I think they also do free consulations. German tax system is complicated, so once you get serious (meaning real revenue), you should definitely talk to a tax consultant (Steuerberater).

In the beginning you don't really need a business entity and can operate as sole proprietor under your own name. It costs like 20€ to register at the local commercical office (Gewerbeamt). Your sole proprietorship can be converted into a limited liability company later.

But having a business entity has benefits, mainly limited liability and being taken more serious by business partners. The usual legal entity with limited liability in Germany is the GmbH. You need 12,500€ to start one, which is done through a notary public. The money isn't lost, as its the capital of the business so you can use it for operations.

If you want a GmbH, but don't have the 12,5k you can create an "UG (haftungsbeschränkt)", which is basically the same but with reduced capital requirements (minimum 1€). The UG can later be converted into the full GmbH by converting accrued profits and/or putting in more capital yourself.

There are benefits in using a holding structure (one Holding GmbH owns the Operating GmbH) from the beginning, because this allows you to sell the operating GmbH 95% tax free, but this also doubles all your costs, not just founding but also yearly expenses.

Both these routes require you to apply for a business tax id and possibly VAT id, and a bunch of other stuff.

Thank you for the long answer, I'll look into it!

 

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[haitham]

There is a lot of bureaucracy. You will find a bunch of articles explaining all this on Google. The IHK (chamber of commerce) is a good source, I think they also do free consulations. German tax system is complicated, so once you get serious (meaning real revenue), you should definitely talk to a tax consultant (Steuerberater).

In the beginning you don't really need a business entity and can operate as sole proprietor under your own name. It costs like 20€ to register at the local commercical office (Gewerbeamt). Your sole proprietorship can be converted into a limited liability company later.

But having a business entity has benefits, mainly limited liability and being taken more serious by business partners. The usual legal entity with limited liability in Germany is the GmbH. You need 12,500€ to start one, which is done through a notary public. The money isn't lost, as its the capital of the business so you can use it for operations.

If you want a GmbH, but don't have the 12,5k you can create an "UG (haftungsbeschränkt)", which is basically the same but with reduced capital requirements (minimum 1€). The UG can later be converted into the full GmbH by converting accrued profits and/or putting in more capital yourself.

There are benefits in using a holding structure (one Holding GmbH owns the Operating GmbH) from the beginning, because this allows you to sell the operating GmbH 95% tax free, but this also doubles all your costs, not just founding but also yearly expenses.

Both these routes require you to apply for a business tax id and possibly VAT id, and a bunch of other stuff.

would starting a sole proprietorship also require registering at the tax office and obtaining a business tax id or would my personal tax id suffice ?

 

[Marco L]

would starting a sole proprietorship also require registering at the tax office and obtaining a business tax id or would my personal tax id suffice ?

You don't need to get a second tax ID. You only need this for corporations. Revenue for a sole proprietor is just another income stream (Einkommensart).

 

[Marco L]

Because of tax reasons you should go with a UG. It is the pre face of a GmbH. It is quite hard to transition as a "Einzelunternehmer" to a GmbH.

Why is that? Could you expand on this?

 

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[SpinnerRedPenny]

German tax system is complicated, so once you get serious (meaning real revenue), you should definitely talk to a tax consultant (Steuerberater)

I'm not sure why they make it so complicated to take nearly all of your income, but they figure it out, don't they?

@theag is right on the money. A good Steuerberater is worth his weight in gold.

@Marco L: As you go farther down the road, expect to have to register with the Allgemeine Ortskrankenkasse (AOK) for your geographical area. They take care of confiscating debiting you to pay for Germany's [less-efficient] version of social security (Rentenversicherung); unemployment (Arbeitslosenversicherung); and accidental, health, and long-term care insurances (Unfall-, Kranken-, und Pflegeversicherungen). If you have private health insurance, you'll have to show proof of that to your AOK, but you can be exempted from the health insurances and it will save you a substantial sum from your total social taxes. If you start picking up employees, registering with AOK will be a must. If your employees have private health insurance, they can be exempted from the health insurances. . . and you as the employer will not owe the co-pay on those insurances--you can add that to their salaries if they warrant it (my wife enjoys this feature at her current law firm); or you can add it to your bottom line the way one of my prior employers did.

The only silver lining is that Germany ditched the Solidaritätszuschlag (solidarity tax) a year or so ago, so that will be about €2k you no longer have to pay.

 

[Ing]

It all depends on what you get.
Do you have tha vage plan to become entrepreneur or is your business nearly existing.

If you just gamble around, a UG or GMBH will be too expensive.

As a Einzelunternehmer, you just pay taxes to your personal i come %age.

For a GMBH you should be seriously in business.