Legal forms

Legal, financial and tax implications

The legal form provides the legal framework of a company. It tells how the company is structured, its legal basis and its entrepreneur. The intended legal form must be selected at the beginning of business operations, but can also be changed in the course of the operations.

Not every legal form is suitable for a business. The differences are, inter alia, in the liability, the required start-up capital and the founding expenses. The legal form to be chosen when starting a business depends on many factors: including the available capital, tax considerations, the corporate objective and also the number of founders.

Advice on choosing the appropriate legal form

When deciding on the legal form in the process of business establishment and registration of trade, Start-up Centres of the Chambers of Industry and Commerce and the Chambers of Crafts, the Chamber of Tax Consultants and management consultants specialising in business establishment or lawyers specialising in corporate law may be of assistance.
(These links lead to ranges of information that are only available in German)

An overview of different types of legal forms under German law is provided by the Federal Ministry of Economics on its website.
(This link leads to a range of information that is available in German, English, French, Italian, Russian and Turkish)

An overview of the legal forms with limited liability in Europe is offered, for example, by the "European legal forms" website of COWEDIS GbR in Kiel.
(This link leads to a range of information that is only available in German)

For more useful information on this subject in the European context, see Your Europe - The European Company and Your Europe - Mergers with foreign companies.

Using the legal forms of other EU Member States

Even if you want to be active only in Germany, you may also set up a company in another EU Member State under local law. Thus, founders in Germany are free to establish, for example, a limited liability company under English law, whose administrative headquarters is located in Germany. However, you must note that a company with a foreign legal form is subject to the law of the relevant country for the entire term of its existence.

Problems might arise when it comes to liability: German liability rules may be applied even when using the legal form of a foreign limited liability company to start a business in Germany. Thus, it is useful to inform oneself thoroughly!

European legal forms in Germany

Just as freedom of establishment is true for EU citizens within the EU, legal forms of enterprises or companies, which were established under the legal provisions of a Member State, have their central administration or principal place of business within the Community, may be used in other EU countries. Thus, a company that is legally founded and exists in an EU member state has the same rights in all other Member States which it would have in its country of formation.

The EU Services Directive prohibits imposing a specific legal form to service companies, which establish themselves in another EU Member State.