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Declaration: The answers provided here is not applicable to specific cases but common information, and thus under no circumstances should they be taken as tailored consultation for any business decision; if you make business decision with part of the information contained in the answers but without our learning about and analyzing the case, you should bear all consequences thereof.

12. Q: How to set up a company in Germnay? How many company types are there in Germany and what are they?
A:Private Limited Liability Company (GmbH)
The German private limited liability company (GmbH) is the most widely used legal form for corporations. It combines high flexibility with relatively few obligations.
Since November 1, 2008, a reform of the GmbH Act (facilitating the establishment and running of a GmbH) has become effective. The reform’s main achievement is the establishment of a new category of limited liability company, the limited liability entrepreneurial company (Unternehmergesellschaft, (haftungsbeschränkt)), or “Mini- GmbH“.
The minimum share capital required to establish a GmbH is EUR 25,000 (this can also be made up of contributions in kind). The formation procedure of a GmbH is fairly uncomplicated, as it is established by the founding shareholder(s) executing a deed of formation and articles of association in the presence of a notary.
For uncomplicated standardized formations of a GmbH, the modernized GmbH Act provides model articles of association (for set-ups by cash subscription with a maximum of three shareholders and one managing director). These articles must still be notarized, but for a reduced fee. Furthermore the chambers of industry and commerce (Industrie- und Handelskammer, IHK) provide model articles.
At the time of registration, at least half of the minimum capital (i.e. EUR 12,500) must be actually and verifiably contributed on a bank account. In order to be valid, the GmbH must be entered into the commercial register (Handelsregister).
All managing directors (Geschäftsführer) must sign the commercial register application in person in the presence of a notary.
Once registered in the commercial register, the GmbH becomes a legal entity. The GmbH must then be registered at the local trade office (Gewerbeamt).
Steps Needed to Set Up a GmbH in Sequence
Step 1: Procurement of capital and partners
Step 2: Notarization of the Articles of Association
Step 3: Opening a bank account and payment of share capital
Step 4: Commercial register application (notary required)
Step 5: Commercial register entry
(limitation of liability comes into effect)
Step 6: Trade office registration
(if necessary application for permits etc.)
A GmbH is managed and legally represented by its managing directors.
There must be at least one managing director who does not have to be a shareholder or a German resident. By issuing binding instructions or directions to the managing directors, the shareholders may exercise direct influence on the management of the GmbH.
The estimated total costs for the formation of a standard GmbH are approximately EUR 750 to EUR 1,000 plus fees for legal counsel if a lawyer is employed to draw up the articles of association. Ideally, the time period required for the formation of a GmbH is two to three weeks.

2.Limited Liability Entrepreneurial Company (“Mini GmbH”)
As a result of the reform of the GmbH a new category of limited liability company, the limited liability entrepreneurial company (Unternehmergesellschaft,(haftungsbeschränkt), UG) or colloquial “Mini-GmbH” was established.
The Mini-GmbH is not a new legal form of company, but a GmbH which has a minimum capital of less than EUR 25,000 and where cash subscription is required. This means that it is possible to set up a company with limited liability in Germany with capital of only one euro.
In order to compensate the initial absence of capital the company has to retain a quarter of its annual profit until it has accumulated the minimum shareholder capital of an ordinary GmbH (EUR 25,000).
The accumulated capital can then be converted into share capital and the Mini-GmbH changed into a standard GmbH.
Except for the above-mentioned specific provisions the Mini-GmbH, by terms of law, is generally subject to the same duties and rights as the standard GmbH.

3.Stock Corporation (AG)
An AG generally enjoys a high market reputation among business partners. However, the founding formalities and costs of an AG are relatively high, and the AG is subject to extensive organizational obligations in day-to-day business.
In principle, an AG can be established by any individual. Generally speaking, there are only two founding obligations to be observed. First, an AG must have a minimum share capital of EUR 50,000 (which must be fully subscribed by the founding shareholders) and articles of association need to be certified by a notary.
The AG comes into existence upon registration in the commercial register. The application must be signed by the founding shareholders, the members of the supervisory board, and the management board before a notary. In addition, an AG must be registered with the local trade office as is also the case with GmbHs.
The founding shareholders appoint the first auditor (Abschlussprüfer) and supervisory board (Aufsichtsrat), which in turn appoints the first management board (Vorstand). The appointment of the first auditor and supervisory board must be notarized. The founding shareholders must also prepare a formation report with the relevant details of the establishment of the AG. This report has to be scrutinized by the boards.
The AG is managed by its management board. Neither supervisory board nor shareholders can exercise direct influence on the management board.

4.Partnership Limited by Shares (KGaA)
The partnership limited by shares (KGaA) combines the structures of a stock corporation (AG) and a limited partnership (KG). It connects the entrepreneurial commitment and personal standing of the individually liable shareholders (general partners) with the function of the AG as a public company and source of capital. The KGaA can be described as a stock corporation having individually liable shareholders (general partners) instead of a management board.
The KGaA can have an unlimited number of capital investors (limited shareholders), whose liability is limited once they have paid their subscribed capital contribution. They have more or less the same legal rights as shareholders in an AG. At least one partner, the general partner, has to be liable for debts and liabilities of the KGaA without limitation. The KGaA must be entered into the commercial register and registered with the local trade office. The KGaA is not a frequently used legal form in Germany.

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