Miscellaneous Questions all Around a Company During Incorporation
Here you will find answers to questions that are important when opening a new company but do not really fit into a more specific category.
Does it make any sense that I open a company? The idea of being a company owner is intriguing. What are the pitfalls compared to working solo or as a GbR or oHG?
You would like to ask and answer yourself the following questions. The more you say "yes", the more that speaks for the foundation of a company.
Do you want to take and have real money in your hands to finance a legal entity for your business?
- Are you willing to publish your annual accounts and personal data in the commercial registry?
- Are you comfortable with disclosing your annual closures to the public via the Federal Gazette
- Can your bookkeeping be complex?
(Complex implies strict formalistic approach with double-entry bookkeeping. The opposite will just keeping records; a tax auditor can "easily" determine what is income and expense.)
- Will have a profit significantly over 50 k€ – starting from the first year?
- Do you want to acquire venture capital?
- Does your line of business include high liability risk?
Is it okay to register our personal address as the business address?
The law does not care! It's the shareholders' decision. Especially when working internationally or as a prominent business line, a "good" address will be vital! If you do not really need an office space and / or don't want to disclose your private address to the public, get a virtual office! Our associate business partner, Beam my Presence to Germany, www.PresenceInGermany.biz will gladly provide you with a virtual address.
I was reading about the timing for forming a company towards the end of the year being a bad idea. Why is that a bad idea?
Well, ... Whether or not it's really a "bad" idea depends on a variety of factors and the urgency to engage in business.
- The answer mostly relates to "Is it worth the trouble and costs to file an annual closing for only a few months?" As a ballpark number, tax consultancy fees will be around 2 k€. Will the potentially available business bring that turnover? If not, it is not harmful to have a tax loss at the end of the year! It will reduce the tax burden for the next year.
- Are your business partners expecting your services / products? Are you losing business? Then open the company!
We need a footprint here in Germany! However, it is not really foreseeable, when we will be doing business over here. Does Germany provide special regulations for dormant companies?
By word of the law, there is no such thing as a "dormant" company. Reality knows that company's are either active or inactive (= dormant). Germans do not use the wording of a "dormant company (schlafende Gesellschaft)" – only inactive. Inactive companies are only relieved of running VAT pre-returns during the year! The duties for annual closings as well as annual returns remain as normal. The dues for the Chamber of Commerce and any other comparable duties also remain.
I'm interested in founding a company. Currently, I am employed and need the salary to pay for my daily bills and as starting capital. Are there any hindrances for me in this regard?
Sorry, I cannot answer this question without further information! You seriously need an initial consultation. It all depends on what is written in the employment contract. Are there any stipulations that you have to provide your full working power? If so, then you might have an issue. If not, then it depends whether you will be competing with your employer. If you opening a competition to your employer this can lead to serious legal problems. Maybe just talk to your direct superior and brief him on your entrepreneurial plans and persuade him that your work quality will not suffer. Chances are that you might be supported if your business complements your employer's line of business. Best is to talk!
I am a student and I really need to start my company now. Are there any obstacles?
Well, company law has no problem that you are studying – but immigration law does. The main obstacle is that foreign students are not allowed to be entrepreneurs – but only as employees. A shareholding director is a businessman! The lawmaker expects you to quickly and smartly study to prepare yourself for the labor market. However, you are allowed to hold company shares because they are only assets. It is as if you have a second house here.
Is there no workaround?
Well, yes. You can become a director (without shares) with an employment contract. This is the only legal way out of this drama. You need to entrust your company shares to someone for the interim – give to another person to hold in trust. This is a legal workaround! This trustee can be a relative (even abroad), or a friend, or spouse. I would also be at your disposal for a small fee.
I would like to establish a holding company. Is there anything special to consider?
Actually, no. A holding company construct necessarily requires that there be at least two companies. The holding company (also called the parent company) and the company held by the parent company (subsidiary). Even if the holding company does not become active and only holds the shares of the subsidiary, it is a full-fledged company. The holding company must also be registered with all authorities. There is nothing special to pay attention to. Remember, when you start, the holding company must be established first and then the subsidiary!