company foundation Jun 09, 2020

Setting up a company in Germany for foreign companies – What do you need to consider?

Does your company want to expand into Germany? We will explain to you what foreign companies need to pay attention to when setting up a company in Bavaria using a step by step guide. We have also summarised all the steps in an infographic for you to download.

Setting up a company in Bavaria for foreign companies – with Invest in Bavaria

Do you own a company within the EU or in a non-member country and plan to set up a company in Bavaria? Invest in Bavaria supports you with your investment project. Our service to assist you in setting up your company includes:

  • Planning & preparation
  • Location search & selection
  • Implementation
  • Support for growth in Bavaria

Download: All the necessary steps in one infographic.

Setting up a company in Germany for foreign companies – step by step to success

Step 1: Apply for a business visa or residence permit for Germany

To set up a company in Germany, foreign companies must ensure that the managing directors are allowed to stay in the Federal Republic for the duration of the establishment phase. Different guidelines and requirements apply for setting up a company in Germany depending on whether your company wants to expand into Germany from an EU country or a non-member country. 

Setting up a company in Germany for entrepreneurs from the EU:
Entrepreneurs from other EU countries, but also citizens of the EEA states Norway, Liechtenstein and Iceland, benefit from the freedom of establishment and freedom of trade in the Schengen area. 

Freedom of establishment: Union citizens have the right to settle and work anywhere in the European Union, whether as employees or self-employed. The freedom of establishment is part of the right to free movement. This includes free entry and the right to move within the European Union and to choose one's place of study or work.  

Freedom of trade: Citizens of the EU and the European Economic Area (EEA) are allowed to set up a business in any Member State. 
To summarise, this means that entrepreneurs from EU Member States do not need a residence permit to set up a business in Germany. The situation is different for entrepreneurs from non-member countries.

Setting up a company in Germany as a citizen of a non-member country: Business founders from non-EU countries need a residence permit to be able to expand into Germany and work here. Entry into Germany requires a business visa. 

This must be applied for at the German Embassy or Consulate General in the applicant's home country. Depending on the duration of the stay, a different visa is required: 

Schengen visa
The Schengen visa entitles the holder to stay in Germany for up to 90 days. Normally, all the necessary steps for setting up a company in Germany can be carried out with this business visa. 

National visa
A national visa is required for entry for a stay in Germany for more than 90 days. Founders who are staying in Germany permanently from now on to set up a business must have their national visa converted into a residence permit at the local immigration authorities.

Nationals of the following countries can apply for a residence permit directly from the relevant city’s immigration authorities within three months without the need for a national visa:

  • Australia
  • Israel
  • Canada
  • Japan
  • New Zealand
  • South Korea
  • USA 

The Federal Foreign Office provides an overview list of all countries with and without visa requirements.

Requirements for the residence permit: 
A residence permit to set up a company in Germany is usually granted if: 

  • There is an economic and/or regional interest in the business idea 
  • The business idea is expected to have positive effects on the local economy 
  • The financing is secured by equity capital, subsidies or a valid loan commitment 

Which documents must be submitted to the immigration authority?

  • Valid passport
  • Biometric passport photograph
  • Proof of health insurance 
  • Articles of association certified by a notary
  • Business plan, including financing plan
  • Proof of professional qualifications

The immigration authority consults the Chamber of Industry and Commerce (IHK) to evaluate the business idea and the entire investment project. If the business idea is approved, the activity can be registered with the trade office.

Difference between residence permit and settlement permit
Foreign entrepreneurs who wish to set up a business in Germany are initially granted a temporary residence permit valid for up to three years. If the enterprise is successful, an unlimited settlement permit can be applied for once the three years have expired. As a rule, anyone who has been in possession of a residence permit for five years also receives an unlimited settlement permit.

Step 2: Choose a suitable legal form and, if necessary, formulate the articles of association

When setting up a company in Germany, foreign investors or entrepreneurs can choose their company’s legal form just as freely as German entrepreneurs. Possible company forms are.

  • Corporation (AG, GmbH)
  • Partnership (GbR, OHG, KG)
  • Branch offices (liability lies with the head office)

"The GmbH (limited liability company) is the most popular form of corporation in Germany, because its internal organisation can be designed flexibly, but it is subject to only minor requirements at the same time."

Step 3: Register your business and have your company entered into the commercial register

Both foreign and German entrepreneurs must register their company in public registers before starting any commercial activity.

Trade register
Every entrepreneur must register their business with the relevant city or district trade or public order office before starting business. Afterwards, the entrepreneur usually automatically receives a questionnaire from the tax office for tax registration.

Commercial register
Entry into the commercial register is mandatory for the following legal forms:

  • General partnership (OHG)
  • Limited partnership (KG)
  • Limited liability company (GmbH)
  • Public limited company (AG)

Application for entry into the commercial register is made through a German notary. 

Do you need a notary in Germany? Invest in Bavaria will be happy to assist you in your search for a suitable notary in your vicinity. 

Check list for foreign entrepreneurs setting up a company in Germany:

  • Possession of a valid residence permit for the duration of setting up the company in Germany (and beyond if necessary)
  • Business permit
  • Adequate language skills for entry into the commercial register using a German notary public or, if necessary, an interpreter 
  • Health insurance 
  • Business plan, including financing plan

Other preparations in the foundation phase:

  • Opening a business account 
  • Concluding rental agreements
  • Proof of payment into a statutory or private pension insurance scheme (mandatory for persons over 45 years of age) 

Are you planning to set up a company in Bavaria? The team from Invest in Bavaria will be happy to support you with this, please do not hesitate to contact us. 

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