In Germany, foreign-invested companies are treated the same as domestic companies, meaning there are no special investment laws.

There is no separate registration system for foreign-invested companies, and there is no distinct reporting system for investments in retained earnings.

However, both Germany's central and local governments are actively pursuing strategies to attract investment and stimulate economic revitalization.
At both the central government and local government levels, incentives such as cash support and low-interest loans are provided to enhance the local economic structure, irrespective of whether the investment is domestic or foreign.

The German government's investment support policy primarily targets manufacturing and specific service industries.
It aims to offer increased incentives to industries that can establish more stable sources of raw materials and energy supplies, aligning with the prevailing global economic and political conditions.

In Germany, foreign and domestic investors are basically treated equally, so general support for investment companies can be applied as follows regardless of domestic and foreign companies.

1) Cash Support System

The 'Joint Task for Improving the Regional Economic Structure' (GRW) program was first introduced in 1969 with the aim of reducing regional imbalances and elevating underdeveloped local economies to an equal level nationwide.
The current program is scheduled to be implemented from 2022 to 2027.

The highest incentive ratio provides subsidies of up to 45% of expenditures for small businesses in eastern Germany and 25% for large companies.
In comparison, small businesses in the western region can receive subsidies of up to 35%.

The state has jurisdiction as an investment support agency under the federal state government and serves as a federal state support agency.
Various support services are implemented in close coordination with federal state and city-specific investment support agencies.

Companies seeking incentives should verify the industries and investment types supported by the GRW program and apply before commencing their projects.

GRW grants can be combined with other financing methods, such as public loans or guarantees, but investments using 25% of the total investment itself (or external funds) must precede.

Subsidies are determined based on actual investment costs (real estate or machinery) and wages expected to be incurred over the next two years.

Investment projects primarily encompass the expansion of new or existing facilities, diversification of production, process changes, and more.
Subsidies may also be obtained under specific conditions in the case of acquisitions of companies facing closure.

2) Financial Support System

At both the federal and state levels, low-interest loan support is provided through public investment support banks (KfW banks or Förder banks in each federal state).
The European Investment Bank (EIB) also offers attractive conditions for investors in Europe, including Germany.

Foreign investment companies in Germany can utilize loan applications from these investment support banks in the same manner as German companies.
In such cases, the interest on the loan is below the average market level.

KfW is the national operational and developmental bank of the Federal Republic of Germany and operates various loan programs and mezzanine investments.

State-run development banks focus on investing in startups and growth companies.

The European Investment Bank, in cooperation with private banks, implements low-interest and long-term loans for investment projects in the EU, particularly in economically disadvantaged sectors such as the economy, technology, environment, and finance.
In principle, the EIB can lend up to 50% of the total project cost.

The Public Guarantee Program is a financial system designed to offer loans to newly established companies through both public and commercial banks.

The program's availability depends on the required funds, the enterprise's size, and the investment area.
It can generally be applied to financing or corporate liquidity loans for implementing investment projects.

The typical maturity period is 15 years for fund loans and 8 years for corporate liquidity loans.
These loans can be obtained at fixed interest rates during the loan period.

The Federal Public Development Bank of Germany provides guarantees of up to 1.25 million euros for small and medium-sized enterprises, and public guarantees provided by individual state governments can cover up to 80% of the loan amount.

Applications must be submitted to the bank before investment, and the National Guarantee Commission conducts the review.

Various funds and capital investments are made in projects in Germany, irrespective of whether the companies are domestic or foreign.

As part of its economic development program, KfW invests in technology-led startups through the High-Tech Gründerfonds (HTGF - 'High-Tech Start-up Fund'), providing investments of up to 2 million euros per company.

Additionally, KfW's Coparion GmbH & Co. KG directly invests up to 10 million euros in early-stage innovative companies.

Public venture capital firms at the federal level invest up to 5 million euros per company in innovative startups related to ICT, life sciences, and new material development.

The Mittelständische Beteiligungsgesellschaften (MBGs - 'Public-Private Equity Companies for Small and Medium-Sized Enterprises') program is operational to facilitate additional investments by mid-sized companies.3) Investor support through investment attraction support organizations.

• Germany Trade and Investment Agency (GTAI) GTAI is a German trade and investment promotion agency (TPO and IPO) established on January 1, 2009.

• Its headquarters are in Berlin and Bonn, and it has 50 branches around the world.
  GTAI is responsible for attracting potential investors and projects in close cooperation with government agencies and other related organizations, including the German Chamber of Commerce and Industry (AHK), which operates about 140 offices in 92 countries worldwide.

• GTAI offers project management support (including market and business potential analysis, market entry strategy planning support, and network construction support), investment location advice (covering investment location searches, cost analysis, and location due diligence support), and settlement services (addressing project-related legal and accounting issues, funding and incentive counseling support).

• Application website: https://www.gtai.de/gtai-en/meta/contact

• Each local government, including the federal states of Germany, is individually engaged in investment attraction activities.
  Many local governments have separate economic development projects.
  In general, when investment demand is received through GTAI, the institution selects and contacts the most suitable local government.
  The local government then maintains an organic cooperative relationship by providing services and support that meet the investor's requests.

Hessen Trade & Investment (Hessen Federal Trade and Investment Administration, hereinafter referred to as HTAI)

• Hessen Trade & Investment (HTAI), a Hessen trade and investment promotion agency, was established in November 2012.

• Its headquarters are in Wiesbaden, the capital of Hessen, Germany.
  HTAI provides tailored investment location information to investors interested in the Hessen region.
  It arranges visits to investment locations and supports various licensing procedures through close cooperation with GTAI.
  Additionally, the institution provides information on the current economic indicators and market conditions in Hessen Province.
  It offers various corporate establishment and settlement services, such as consulting on commercial sites, taxes, stay or labor laws, and financial support programs.

• Furthermore, HTAI supports the operation of joint booths at German and overseas exhibitions.
  It also facilitates networking with the federal government, institutions, companies, associations, and economic organizations

Germany welcomes foreign direct investment and upholds the principle of freedom in foreign trade and payment transactions, in accordance with the German Foreign Trade Act (Außenwirtschaftsgesetz) and the Foreign Trade Ordinance (Außenwirtschaftsverordnung).
However, the German federal government retains the authority to examine and restrict transactions that violate monopoly rules or involve foreign investors from outside the EU and EFTA regions during the acquisition of German companies.

1) Restrictions on Foreign Direct Investment via Amendments to the Foreign Trade Ordinance (AWV)

The German government approved the 17th amendment at the federal cabinet on April 27, 2021, which came into effect on June 23.

• The 'safety' list was expanded to include vaccine and antibiotic manufacturers, medical equipment, and manufacturers of treatments for highly contagious diseases.
  If these companies are acquired or more than 20% of their shares are obtained, the acquiring entity must report to the Ministry of Economic Affairs and Climate Action (BMWK).

• Starting from June 2021, new reporting obligations were introduced for investments in advanced future technology sectors, encompassing artificial intelligence, semiconductors, quantum technologies, aerospace, robotics, autonomous driving, and nuclear power.

• The requirement to report foreign direct investments has been extended, including cases where more than 10% of shares related to security infrastructure are acquired.

• Acquisitions of companies involved in military equipment are expected to be treated with heightened sensitivity.

2) Restrictions on Investment to Prevent Monopoly

The German Competition Restriction Prevention Act (Gesetz gegen Wettbewerbsbeschränkungen) establishes restrictions to prevent monopolies when acquiring German companies and does not differentiate between domestic and foreign investors.

According to the law, if a buyer can directly or indirectly exert significant competitive influence on other companies by acquiring more than 50% of assets or 25% of voting rights, and if the economic size of companies involved in mergers and acquisitions exceeds the following criteria, an investigation will be conducted to prevent a monopoly.

A company participating in a merger or acquisition has global sales of more than EUR 500 million in the previous year, with one of the participating companies achieving sales of more than EUR 50 million in Germany, and the other participating company of EUR 17.5 million; or If the above conditions are met, and the acquisition amount is more than 400 million euros, with the acquiring company focusing on business in Germany.

In essence, companies participating in mergers and acquisitions are obliged to report in advance to the German Federal Cartel Authority (Bundeskartellamt) in case of potential monopoly violations.
Companies subject to sale must adhere to the pre-reporting obligation when selling more than 50% of assets, 25% of voting rights, or significant corporate assets.

The German Federal Cartel Authority may initiate a monopoly investigation within a month of receiving an application from a company seeking a merger and acquisition investigation.
It also possesses the authority to prohibit mergers and acquisitions under the German Competition Restriction Prevention Act.
The results of the examination will be communicated to the applicant company within five months of receiving the application.
If there is no notification after five months, the merger and acquisition case will be considered approved.

Mecklenburg-Vorpommern

• Area: 23,295㎢

• Population: 1.61 million

• Led by Schwerin (www.schwerin.de )

• Official website: www.mecklenburg-vorpommern.de

• Major industries: possessing excellent technologies in agriculture, machinery, energy technology, food and biotechnology, medical devices, aviation and space

• Special matters

  • GDP IN 2022 IS ABOUT 53.4 BILLION EUROS, 1.4% OF GERMANY'S TOTAL GDP

  • one of the least populated German states and the least industrial

  • Unemployment: 7.8% (as of April 2023)

Niedersachsen

• Area: 47,710㎢

• Population: 8 million

• Leadership: Hannover (www.hannover.de )

• Official website: www.niedersachsen.de

• Major institutions: Federal Physical Technology Center

• Major industries: automobiles (Volkswagen, Continental), steel (Saltsgitter), chemicals, food, machinery, exhibitions

• Foreign companies: Solvay (Belgium), Tulip Food (Denmark), Baker Hughes (USA), etc

• Special matters

  • 2022 GDP AT AROUND 339.4 BILLION EUROS, MAKING 8.8% OF GERMANY'S TOTAL GDP

  • Unemployment rate: 5.7% (as of April 2023)

  • The Hannover Messe, Germany's second-largest federal state and the world's largest exhibition hall, is held annually with more than 200,000 participants (held online in 2021 due to the COVID-19 outbreak)

Nordrhein Westfaren

• Area: 34,112㎢

• Population: 17.93 million

• Capital: Duesseldorf (www.duesseldorf.de )

• Official website: www.land.nrw

• Major Industries: Machinery, Automotive (Ford, Opel, Daimler), Electronics, Chemical (Bayer, etc.), Energy (EON, Solarworld), Steel (Tuchenkrupp)

• Four of the world's top 100 companies (EON, Metro, Deutsche Telekom, Aldi) are headquartered in North Rhine-Westphalia.

• Other major foreign companies: Toyota (Japan), Ford (U.S.), UPS (U.S.), Vodafone (U.K.), 3M (U.S.), Citroen (France), etc

• Special matters

  • 2022 GDP AT ABOUT 793.8 BILLION EUROS, REPRESENTATING 20.5% OF GERMANY'S TOTAL GDP

  • Unemployment rate: 7.2% (as of April 2023)

  • Germany's most densely populated state, traditionally the center of the coal and steel business, has been in crisis since the 1960s, but is recovering due to the development of the machinery and automobile industries

Rheinland Pfalz

• Area: 19,858㎢

• Population: 4.1 million

• Capital: Mainz (www.mainz.de )

• Official website: https://www.rlp.de

• Major Industries: Chemicals/Pharmaceuticals (BASF, Böhringer Ingelheim), Liquor (Wine), Automobiles (Daimler, Opel), Food (Bitburger, Grisson)

• Foreign companies: Novo Nordisk (Denmark), Kimberly-Clark (USA), BorgWarner Turbo Systems (USA), etc

• Special matters

  • GDP FOR 2022 AT ABOUT EUR 171.7 BILLION, CONTAINING 4.4% OF GERMAN GENERAL GDP

  • Unemployment: 4.9% (as of April 2023)

  • Large number of small and medium-sized enterprises, with 46% of GDP exports, the highest in Germany

  • White wines such as Riesling are famous all over the world

Saarland

• Area: 2,572㎢

• Population: 980,000

• State: Saarbrücken (www.saarbruecken.de )

• Official website: www.saarland.de

• Major Industries: Automotive Parts, Steel, Ceramic, Computer Engineering

• Foreign companies: Michelin (France), Korea Institute of Science and Technology (Korea), etc

• Special matters

  • 2022 GDP AT EUR 38.5 BILLION, REPRESENTING 1% OF GERMANY'S TOTAL GDP

  • Unemployment: 6.8% (as of April 2023)

  • Historically, it was ruled alternately by France and Germany, and in 1957 a referendum decided to join Germany

  • One of the smallest federal states in Germany

Sachsen (Sachsen)

• Area: 18,450㎢

• Population: 4.04 million

• Lead: Dresden, www.dresden.de

• Official website: www.sachsen.de

• Major industries: automobiles (Volkswagen), machinery, electronics, publishing (Leipzig)

• Foreign companies: Dow Chemical (USA), Hitachi Automotive Systems (Japan), Transcom (Luxembourg), Magneto Automotive (Italy)

• Special matters

  • 2022 GDP stands at 146.5 billion euros, accounting for 3.8% of Germany's total GDP

  • Unemployment rate: 6.2% (as of April 2023)

  • It is a former East German region, but it is an active and industrialized region with foreign investment attraction

  • The German government mainly developed Leipzig and Dresden, making the neighborhood the richest in the former East Germany

  • Few villages are more than 15km away from railway stations due to the highest population density and advanced transportation infrastructure in the former East German region

Sachsen Anhalt

• Area: 20,464㎢

• Population: 2.17 million

• State: Magdeburg (www.magdeburg.de )

• Official website: www.sachsen-anhalt.de

• Major industries: chemistry, machinery, food, tourism, biotechnology, etc

• Foreign companies: Solvay Chemicals (Belgium), Polytec Plastics (Australia), Hanwha Q Cells (Korea), Coil Aluminium (Belgium)

• Special matters

  • 2022 GDP AT EUR 75.4 BILLION, REPRESENTATING 2% OF GERMAN GENERAL GDP

  • During the East German era, the unemployment rate rose to 21% as chemical companies went bankrupt after 1990, but the unemployment rate fell to 7.6% (as of April 2023) through economic development in the 2010s

  • However, it is still one of Germany's poorest states, and its population has continued to decline since the 1990s.
    East state population likely to decline by 30% by 2025, according to Saxon Anhalt State Statistics Office

Schleswig Holstein

• Area: 15,804㎢

• Population: 2.92 million

• Lead: Kill (Kiel, www.kiel.de )

• Official website: www.schleswig-holstein.de>/a>

• Major industries: tourism, agriculture, shipping

• Special matters

  • GDP FOR 2022 AT ABOUT 112.8 BILLION EUROS, REPRESENTING 2.9% OF GERMANY'S TOTAL GDP

  • Unemployment rate: 5.6% (as of April 2023)

  • It is one of the weakest states in the former West Germany, with few industries and developed agriculture and tourism in areas other than Hamburg

Thuringen

• Area: 16,202㎢

• Population: 2.11 million

• State: Airfurt (Erfurt, www.erfurt.de )

• Official website: www.thueringen.de

• Investment location information: http://www.invest-in-thuringia.de/en

• Major industries: precision equipment (Carl Chai's, Yanoptic), auto parts (Bosch), food, electric/electronic, glass

• Special matters

  • 2022 GDP AT ABOUT 71.4 BILLION EUROS, REPRESENTATING 1.8% OF GERMANY'S TOTAL GDP

  • The unemployment rate is 5.9% (as of April 2023) in the most advanced East German region

Baden-Württemberg (Baden Wuertemberg)

• Area: 35,748㎢

• Population: 11.2 million

• Leadership: Stuttgart (www.stuttgart.de )

• Major institutions: the Supreme Court and the Federal Constitutional Court (based in Karlsruhe)

• Major industries: automobiles (Daimler, Porsche, Bosch), machinery (Trump, Festo, Voight, etc.) oil refining industries (Karlsruhe), software (SAP), etc

• Special matters

  • 2022 GDP AT 572.8 BILLION EUROS, 14.8% OF GERMAN GENERAL GDP

  • The economy has the highest level and the most developed, including Bayern

  • Unemployment: 3.8% (as of April 2023)

  • A number of automotive/automotive parts industry clusters are located around Karlsruhe University

Bavaria (Bayern)

• Area: 70,542㎢

• Population: 13.18 million

• Leadership: Munich (www.muenchen.de )

• Major industries: automobiles (BMW, Audi, MAN, etc.), IT (Siemens, Microsoft, Infineon, etc.), defense industries (EADS, Kraus-Mapai, etc.), tourism (mountainous, hilly, lake, first national park in Germany)

• Foreign companies: Foreign companies such as Adobe (U.S.), Microsoft (U.S.), Johnson Controls (U.S.), Faurecia (France), Fujitsu (Japan), etc

• Special matters

  • GDP FOR 2022 AT ABOUT 716.8 BILLION EUROS, REPRESENTING 18.5% OF GERMANY'S TOTAL GDP

  • The economic level was the highest and most developed, and the unemployment rate was 3.3% (as of April 2023), the lowest among German federal states

  • Germany's economy is the most developed, with more than 200 of Germany's 1,000 largest companies located in Bavaria

  • Bayern capital Munich prices are among the highest in Germany

  • The latest to join the German Empire (1871) has strong pride in traditional culture, food, and clothing, and the world's largest beer festival, Oktoberfest, held in October (Munich)

Berlin

• Area: 891㎢

• Population: 3.68 million

• State: Berlin (www.berlin.de )

• Major institutions: the Bundestag and the Bundestag Government (Bundesregierung)

• Major industries: start-ups (Jalando, Rocket Internet, etc.), media (Axelschrinker), tourism, information and communication, and development of transportation systems

• Foreign companies: Vattenfall (Sweden) and Philip Morris (USA) enter the market

• Special matters

  • 2022 GDP AT EUR 179.4 BILLION, 4.6% OF GERMAN GENERAL GDP

  • Unemployment rate: 9.2% (as of April 2023)

  • Berlin, one of the hubs of European startups, has a very well-established startup community, and numerous unicorn companies such as Jalando, Rocket Internet, Hello Fresh, N25 and Auto 1 are founded in Berlin

Brandenburg

• Area: 29,654㎢

• Population: 2.54 million

• Leadership: Potsdam (www.potsdam.de )

• Official website: www.brandenburg.de

• Major industries: agriculture, steel, wind, bio, etc

• Special matters

  • 2022 GDP stands at 88.8 billion euros, accounting for 2.3% of Germany's total GDP

  • Unemployment: 5.9% (as of April 2023)

  • In the past, agriculture and steel were mainly produced, but recently it has changed to a service industry-oriented one.
    With 160 bio-companies located in the Potsdam area, it is one of Europe's largest bio-clusters.

Bremen

• Area: 419㎢

• Population: 680,000

• Leadership: Bremen (www.bremen.de )

• Major industries: marine transportation, aerospace, automobiles, food, electricity, steel, etc

• Foreign companies: Mondelez International (US), ArcelorMittal (Luxembourg), Univeg (Belgium), etc

• Special matters

  • 2022 GDP AT EUR 38.7 BILLION, REPRESENTING 1% OF GERMANY'S TOTAL GDP

  • The unemployment rate is 10.7% (as of April 2023), the highest in Germany

  • Two European cities (Bremen, Bremerhaven) are Germany's smallest federal state in terms of composition, area and population, and the smallest economy

Hamburg

• Area: 755㎢

• Population: 1.85 million

• State: Hamburg

• Website: www.hamburg.de

• Major industries: service industries such as shipbuilding, oil refining, import processing trade, aviation/space, consumer goods and tourism, renewable energy, life science, etc

• Foreign companies: Airbus (France), BP (Netherlands/UK), AstraZeneca (UK), Cosco (China), etc

• Special matters

  • 2022 GDP AT EUR 144.2 BILLION, 3.7% OF GERMAN GENERAL GDP

  • Unemployment rate: 7.3% (as of April 2023)

  • Hamburg, the third largest port in Europe, has the world's 20th largest container port.
    Germany accumulated great wealth through trade from the Middle Ages, with 92 of the 1,000 richest people living in Hamburg

Hessen

• Area: 21,116㎢

• Population: 6.3 million

• Leadership: Wiesbaden (www.wiesbaden.de )

• Official website: www.hessen.de

• Major institutions: ECB, German central bank

• Major industries: finance, chemical/pharmaceutical, aviation/railroad, automobiles, electrical equipment, machinery, etc

• Foreign companies: Sanofi (France), Procter & Gamble (U.S.), Goodyear (U.S.), Hewlett-Packard (U.S.), Clariant (Switzerland), BNP Paribas (France), Samsung Electronics (Korea), Hyundai Motors (Korea), etc

• Special matters

  • GDP FOR 2022 AT ABOUT 323.4 BILLION EUROS, CONTAINING 8.4% OF GERMANY'S TOTAL GDP

  • Unemployment rate: 5.2% (as of April 2023)

  • With the European Central Bank located in Frankfurt and Germany's largest stock market, it serves as a European financial center along with London

  • Located in central Europe, it is an important transportation hub due to geographical conditions

  • Frankfurt Airport, Europe's No. 1 Air Cargo and No. 3 Passengers

Overview

When a foreign company establishes a subsidiary in Germany, the subsidiary becomes legally independent of the parent company.
Therefore, German regulations apply to business reporting and commercial registration.
Even if the entity establishing the company is foreign, German law applies fully to the company's establishment, business declaration, and registration in the business register.
Additionally, since a local corporation possesses independence, it must submit a registration report to the Handelsregister of the competent court.
This report must be notarized by a notary and provided in written form.
In principle, the parent company is only liable within the scope of the company's invested capital.

Features

A corporation can perform all tasks, including business activities, without limitations.
It must maintain accounting books and financial statements in compliance with German tax law.
Financial statements need to be disclosed in the Electronic Federal Register (Bundesanzeiger) annually.
As an independent entity separate from the parent company, the liability of the parent company is limited to the capital it invested as a shareholder.
In the event of the corporation's bankruptcy, the parent company would only incur losses on the invested capital and wouldn't be obligated to repay debts beyond that.

It should be noted that while the parent company in the home country is liable only within the scope of the company's capital, its subsidiaries' operations in Germany often require financial support from the parent company for a significant period.
Furthermore, even if a limited liability company is established and the establishment process is completed, the CEO remains personally responsible until the company's commercial registration is finalized.
The personal liability of the CEO or employee is relieved only after the issuance of the commercial registration number.
With recent changes in the law, the CEO of a limited company in Germany can choose a different country of residence as their primary location, meaning the CEO of a subsidiary doesn't necessarily have to have an address in Germany.

Establishment Procedures and Costs (Based on Limited Liability Companies)

To establish a local corporation, several procedures must be followed, including mutual company decision-making, preparation of shareholder resolutions and articles of association, appointment of corporate representatives, opening a bank account, and submitting a certificate of capital payment.
Articles of incorporation are particularly significant.
Under German tax law, expenses incurred prior to corporate registration completion are recognized, but only expenses after the articles of association's signing date are acknowledged.
Therefore, if numerous items need to be purchased for the new corporation, advancing the signing date of the articles of association is crucial.

For a limited liability company, a minimum capital of 25,000 euros is required, with at least half, or 12,500 euros, needing to be transferred to a bank account upon company registration.
After preparing the necessary documents, registration of the commercial register must be applied for through a local German notary, followed by the registration process with the Gewerbeamt.
If the corporation's head is a foreigner, additional residence and labor permits must be submitted.
If the visa application copy submitted to the Foreign Office is under review, registration may be recognized at the discretion of public officials.

After notary registration, it takes about two weeks to be registered in the commercial register, but this duration may extend to four to six weeks based on the document preparation process.
Presently, registration and notarization fees vary depending on capital size, costing at least 1,039.84 euros.
Detailed cost items are as follows:

• If capital exceeds 30,000 euros, establishment costs will increase.

• Many companies entering the market often employ agencies due to the complexity of establishing a German corporation.
  In such cases, additional service fees are incurred, which vary among companies.

Once the business report is completed, the Commercial Transaction Registry sends information to the Tax Office and the Chamber of Commerce.
The tax office will then request the new corporation to submit a tax registration and application for a tax number.
Chamber of Commerce membership is mandatory in Germany.
The company will receive a subscription number for membership and an annual notice to pay membership fees.
This is also a legal obligation of the corporation and must be remitted on time.

Overview

Branch offices are broadly divided into "Zweigniederlassung," which requires commercial registration, and non-registered branches that can be established solely with business registration at the competent city hall (described in more detail as the liaison office below).
Since the branch is considered a part of the parent company, it is subject to foreign laws applicable to the parent company, and the branch has an obligation to the parent company for debts.
In principle, the branch office should share the same company name as the parent company, with the location's name potentially added to the branch office name.
When establishing a branch, essential documents such as the parent company's business registration card must be attached.
As there is no "Gesellschaftsvertrag" (articles of association), the parent company's articles of association must be translated into German and submitted.

Registered branches established in Germany can engage in commercial contracts, including issuing invoices.
Non-registered branches, on the other hand, can conduct business on behalf of the parent company, but invoices must be issued under the name of the parent company.

Features

In the case of a branch office, since the parent company bears all business responsibilities, there is no need for the parent company to invest capital at the time of establishment.
The branch is obliged to maintain records and prepare financial statements, but it is not required to disclose these financial statements.
Furthermore, economic gains and sales generated by the branch are subject to taxation (corporate tax, business tax, and value-added tax) in Germany.

Establishment Procedures and Costs

Establishing a branch office is accomplished through registration in the German commercial register, obtaining a registration number, similar to the process for a corporation.
The application to the authorities must be signed by all directors of the parent company before being notarized.
If the document is signed in a foreign country, it must be translated by a translator recognized by the German court and notarized.
Currently, there may be fees for registration, notarization, and translation.
Costs associated with legal representation and other procedures are akin to those for establishing a corporation, but the exact amount can vary considerably based on the size of the parent company (including its sales, etc.).
Like establishing a corporation, creating a branch takes approximately one to two weeks from the notary's application for registration to the actual registration.
Note that a separate duration is required for document preparation before applying for registration.

Overview

The concept of Repräsentanzbüro does not exist in German commercial law, and the non-registered branch (non-independent workplace) conforms to the concept.
The liaison office is an organization that is limited to market information necessary for business, such as industrial and business information research, which is limited to Tätigkeiten vorbereitender Artoder Hilfstätigkeiten.

Features

The liaison office does not need to register with the commercial registry office, pay capital, and prepare accounting books and financial statements.
The liaison office shall not issue invoices, engage in activities to attract customers, or perform letters or signatures related to the receipt of product orders or contracts from customers.
Therefore, the liaison office is not obligated to pay corporate tax and business tax, but it must report salary income tax and additional tax that occur regardless of profits.
If it is regarded as conducting business activities in the form of a liaison office, it is identified as a branch office (Zweigniederassung), which can lead to additional taxes such as corporate tax and business tax.
In particular, if the maintenance period of the liaison office exceeds 5 to 10 years and the number of employees of the office increases above a certain size, the tax office may conduct a tax investigation on the judgment that the liaison office on the document may actually be a branch.
If corporate and business taxes are confirmed as a result of a tax audit, taxes will not be generated from the time of the tax audit, but most of them will be accumulated for several years retroactively, so be careful.
Therefore, it is desirable to maintain the form of a liaison office in the early stages of entering Germany, and then switch to a branch or corporate form to avoid tax risks and improve the efficiency of local operations and reliability of customers when realizing sales of more than a certain size in the European and German markets.

Establishment procedures and expenses

The liaison office can be established only by registering with the Gewerbeamt without notarization and registration procedures in the commercial register.
Currently, documents such as a business registration card of a foreign parent company, a power of attorney for the representative of the liaison office, and a residence permit are required, and the cost varies from region to region, but is usually around 20 to 40 euros.
When registered with the Commercial Exchange Registry, the company's registration is automatically notified to the local tax office, the Chamber of Commerce and Industry, and other administrative agencies even if the company does not file a separate report.

Features

needed through the stock market.
When a corporation transfers its operating stake, there's no need for a notary to document the process.
It's relatively easy to transfer shares of a company listed on the stock exchange.
Regardless of changes in shareholders, the existence of the stock company remains guaranteed.
Therefore, establishing a corporation is a preferred option when intending to list on a major company or the stock market.
Compared to limited liability companies, corporations are relatively complex during the establishment process, and all related laws and regulations remain stringent even after establishment.
However, if organizational and financing issues are adequately addressed, operating a corporation can provide significant advantages through its reliability and expertise.
Moreover, stock companies can quickly sell shares or increase their capital through the stock market, ensuring financing stability through equity capital.

Establishment Requirements

A corporation can be established by one person (small corporation) or multiple persons and requires one or more directors and at least three audit committee members.
The articles of incorporation include the company name, location, capital size, minimum cost of stocks, total number of issued stocks, type of stock (ordinary or preferred stocks), type of stock issuance (unnamed stocks or registered stocks), number of board audits, and public announcement.
The legal minimum capital for establishing a corporation is 50,000 euros.
Capital payments necessitate opening a bank account and transferring at least 12,500 euros to the account before commercial registration.
A certificate issued by the bank must also be submitted.

Features

Limited liability companies (GmbH) are the most common form of corporation in Germany.
The management of a GmbH is handled by one or more corporate heads specified in the articles of incorporation or entrusted by the investor.
The location of the corporate head during registration does not necessarily need to be in Germany.
In principle, a GmbH is only responsible for the company's assets and not for the personal property of the corporation's head or employees.
However, in cases of damages due to violations of management rights by the corporate manager, illegal embezzlement, or various documentation and reporting obligations required by German laws, the corporate manager's personal assets may be liable, potentially leading to additional legal proceedings.
It's important to note that even after establishing a limited liability company, the head of the corporation or employees bear personal responsibility before commercial registration is completed.
Once the registration is finalized, personal responsibility is exempted.

• The board of directors has representative power over the company's business execution within the scope prescribed in the articles of incorporation or within limits determined by employee resolution if not defined in the articles of incorporation.
  However, this representative right doesn't have legal effect on third parties, and the representative right concerning third parties belongs to the head of the corporation.
  Any changes to the board of directors and the termination of representation rights must be registered in the Commercial Register.

• Limited liability companies face limitations in raising external capital due to their lower creditworthiness compared to unlimited liability companies.
  Consequently, limited liability companies with small equity capital tend to require external investors or banks to provide separate collateral.
  The amount of capital plays a crucial role in actual transactions due to the risk of bankruptcy caused by liability limitations.
  Unlike stock companies, the capital of a limited liability company is represented as equity, and the transfer and sale of shares must be carried out through a notary.
  Since November 1, 2008, it has been possible to establish a mini-Limited Liability Company (UG) with an initial capital of 1 euro, similar to the UK's Limited Liability Company (Ltd.).
  However, 25% of annual sales must be accumulated as capital until the capital reaches 25,000 euros.
  If the requirements for a limited liability company are met, the corporation can be converted into a limited liability company (GmbH).

• Limited liability companies are subject to German corporate tax, business tax, and VAT collection.
  They are also required to maintain books and financial statements according to German accounting principles.
  Thus, financial statements and tax returns must be submitted to local tax offices in Germany each year.
  Additionally, under the German Commercial Act (Handelsrecht), financial statements must be submitted and disclosed in the electronic federal gazette (elektronischer Bundesanzeiger) annually.
  One notable aspect in tax processing is transfer pricing (Konzernverrechnungspreis), which can be reviewed during a tax audit since many local German corporations have business relationships with the parent company.
  If a local German corporation purchases goods from its parent company and the tax inspector deems the purchase price too high, the German corporation's pre-tax profit might be increased, resulting in additional charges.
  Limited liability companies must prepare their financial statements within three months after the end of the fiscal year.
  However, in the case of small capital companies, this can be postponed by up to six months after the fiscal year's end.
  Companies with 500 or fewer employees aren't required to establish a supervisory committee (Aufsichtsrat) unless specified otherwise in the articles of incorporation.
  For a limited liability company with 500 or more employees, an audit committee must be established, with 1/3 of the supervisory committee composed of workers' representatives.
  Additionally, companies with more than 2,000 employees (excluding coal and steel manufacturing) must have half of the supervisory committee members under the Consent Procedure Act (Mitbestimmungsgesetz).

Establishment Requirements

For a limited liability company, it can be established with at least one founder registration.
A corporate head, responsible for company operations, must be appointed, and the minimum capital required is 25,000 euros.
If deposited in cash, only 25% of the capital must be deposited (a minimum of 12,500 euros) before commercial registration, with the remaining balance needed.
In-kind investments are also recognized, but in this case, the subject and valuation of the in-kind investment must be specified in the articles of incorporation.
The articles of incorporation must be prepared and certified by a notary.
They must include five items: the location of the corporation, the business purpose, the capital, and the investment of each employee constituting the company.
While the fiscal year's entry is voluntary according to the articles of incorporation, it's a common practice to include it.
If the company's existence period is defined or if employee investors bear obligations beyond capital investment, these details should also be included.
Furthermore, a list of investors and business details must be specified, and it should be indicated in the trade name that it is a limited liability company.

Features

Private companies are the simplest form of company in Germany.
They are owned by one person, and there is no legal provision for a minimum capital requirement.
Currently, the majority of single-person business offices in Germany (such as barbershops, fruit shops, bakeries, butchers, etc.) operate as private businesses.
Private companies also have relatively low management costs after establishment.
Regarding accounting obligations, corporations are required to account for accrual stocks that involve double bookkeeping, but private companies are allowed to use simple cash accounting.
Basically, private companies do not have a disclosure obligation.
According to the German Disclosure Act, private companies are obligated to disclose financial information only when their total assets exceed 65 million euros and sales are over 130 million euros.
However, private companies are bound by unlimited liability for corporate debt, even involving the personal assets of their owners

Establishment Requirements

Private companies have a straightforward establishment process.
They automatically acquire private business qualifications through Gewerbeanmeldung and operate under the direct supervision of the owner.
There is no need for a notary.
The company name may be freely selected, but the name of the owner must be included (e.g. Peter Meier or EDV-Versand Peter Meier).

Individual businesses are not obligated to prepare comprehensive financial statements, including income statements and financial status statements.
Only simple income and expenditure statements are required to be submitted, and taxation is conducted based on these statements.
However, if the size of the business increases and sales exceed 600,000 euros or profits surpass 60,000 euros, the obligation to prepare financial statements is imposed.

European Company (SE)

Societas Europaea (SE) is a type of corporation collectively referred to as a stock company in the European Union.
Since late 2004, the European Union (EU) has enabled the establishment of a corporation under a unified legal form.
European companies provide the basis for businesses to operate with the same legal structure in all European member countries.
This allows companies to consolidate their operations with holding companies.
Furthermore, instead of the traditional method of establishing subsidiaries with different legal bases in each country, subsidiaries can be established based on a single norm that is effective across Europe.
Presently, only a small number of large companies, including Allianz, which operates throughout Europe, have legally transitioned to becoming European companies.

Limited Partnership (KG)

A joint venture (KG) is a complex organizational form of a partnership consisting of both unlimited and limited liability partners.
Only the unlimited liability partners are held accountable, and they are granted the company's management and representation rights.
One representative (Unlimited partner - Komplementar) assumes unlimited responsibility (unlimited liability partner under the Commercial Act), while the remaining partners, known as General Partners - Kommanditists, are liable in proportion to their ownership shares (limited liability partners under the Commercial Act).
This structure allows them to invest freely.

Unlike entities such as corporations (AG) or limited liability companies (GmbH), human companies like joint ventures (KG) and general partnerships (OHG) are not obliged to disclose financial information.
The disclosure requirement is designed to provide customers and banks with insights into and trust in the company's financial standing.
However, human companies don't require as much creditor protection, as shareholders are personally liable with their unlimited assets.

Capital Human Company (GmbH & Co. KG) is a modified form of a joint venture, where the limited liability company itself serves as an unlimited liability partner, along with one or more other limited liability partners.
Therefore, unlike typical joint ventures, capital human companies are obligated to disclose balance sheets and income statements.

A general partnership company (OHG) can be established with at least two investors, and all partners have unlimited liability.
As such, unless otherwise stipulated in the articles of association, the unlimited liability partners forming a general partnership company are obligated and have the right to participate in management.
Management responsibilities encompass all tasks related to business activities.
The rights of partners who have disrupted company management can be revoked through legal procedures.

Additionally, each of the unlimited liability partners is granted the authority to represent the company to third parties.
This authority can only be revoked through legally prescribed procedures.
Unlike other associations or private businesses, a joint venture is considered a "full merchant (Vollkaufmann)." Therefore, it falls under the jurisdiction of the German Commercial Act (HGB) and carries both advantages and disadvantages.

A joint venture company gains trust from clients and banks because of its registration in the commercial registry, which allows for accurate financial analysis due to meticulous accounting records.
The partners are liable with their personal assets for company debts, making it advantageous for securing loans from financial institutions such as banks.
A general partnership company must adhere to accrual accounting in accordance with German commercial law.

Combination (GbR)

A partnership (GbR) can be established with at least two individuals coming together to pursue a common purpose, especially suitable for founders with only a small amount of business capital.
Among human companies, a partnership is the simplest form of a company, and only the minimum necessary documents related to its establishment are required.
In theory, oral contracts are also possible, but experts recommend having written articles of association.
There is no legally required capital, and no registration or disclosure obligations to the Handelsregister.

Partnerships do not need to be registered in the commercial register.
However, partnerships engaging in business activities can voluntarily register as general partners.
They are often used by freelancers such as lawyers, tax accountants, certified public accountants, and doctors to jointly operate offices or hospitals.
A general partnership company must account for accrued stocks unconditionally in accordance with the Commercial Act.
Since a partnership is not subject to the Commercial Act, accounting for cash stocks is also allowed.
Nevertheless, in accordance with Article 141 of the German Tax Act (Abgabenordnung), accrual accounting is required regardless of the type of company if the annual sales exceed 500,000 euros or the annual net profit is over 50,000 euros.