Who's Who in Incorporation

This page wants to introduce you to all the participants in the process of incorporating. There are several persons and authorities that you might like to understand the role and duties. We will introduce you to:

• Handelsregister, a.k.a. Commercial Registry
• Formalities
• Banks
• Public Notary
• Tax Office
• Trade Office
• Interpreter
• Company Seceretay
• Alexander von Engelhardt and team

Handelsregister, aka Commercial Registry or Commercial Registrar

This part will introduce you the registry's when it comes to opening a company.

Friends recently incorporated and absolutely were absolutely stunned by all the paper and exactness produced. The court complained that we did not prove that we may represent our own non-German company. We were perplexed by the produced pickiness.

Admitted, Germany is still very paperbound but yes, digitization of the whole notarization process is very near. Germans, and even more authorities, want it all very clear and proven. This pickiness comes with good reason! The entries in the registry enjoy public faith. Roughly described, they are guaranteed. Hand on your heart, would you too not also be picky when you were to guarantee something?
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Tell me, what role does the commercial registry have in Germany?

This is the most important authority. It adds your company into the registry and so establishes its existence. As long as the company is not registered, it does not exist. Pre-stadiums of a registered company exist but they are most important for the corporate lawyer. A useful and important detail to remember is that you may act on behalf of a not (yet) existing company. Until the company is registered, you personally remain liable for your actions. Automatically after registration, any duties and rights are with the company. Any active transfer will not be required.
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How reliable the entries in the registry? You previously mentioned something about "guarantee".

The public is supposed to and may rely completely on the published entries with legally binding force! This explains why the commercial registry wants to have all proven and distinguishes Germany from other legal orders.
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How far does this guarantee on the correctness go?

Anybody participating in business, be it B2C or B2B or C2B, may rely upon the details entered to be true, correct, and up-to-date. This remains true whatever reality is.
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What do you mean that reality may differ from the registered details?

Simple. For example, a shareholder transferred his shares to another person without informing the registry. The transaction itself is legal. However, if defects in the transaction occur, then whatever the registry says prevails. You will find an example in the news article "Who is Liable for Inaccuracy of the GmbH Shareholder List".
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We shareholders fired this goofy of a director. He just got the letter of notice. Finally, we were happy he was out but only to notice the next day that he did something absolutely correct a few days back once in his lifetime. Unfortunately, after he closed the deal, a different shareholder mentioned that we kicked goofy out of directorship. Now our customer wants to retreat, but we want the deal! What is now the situation?

The deal is valid because the director was not struck from the registry. Goofy was in the registry, and your customer closed the deal, not knowing of any cancellation. The deal is closed. This is another example of a double-edged sword of the reliability of the commercial registry.
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Gosh. What about false entries? Are they also binding?

Yup. If your partner was born on the 9_th of January but due to a typo, the 19_th was entered, then the official birth date is the 19_th. Whatever is correct is binding and can be relied on. It is as simple as that – however brutal. This can easily be remedied by the notary issuing the deed.
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Formalities

This part wants to tell you more about all the formalities in Germany. As typical for Germans, formalities are very fine-tuned and scrutinisingly as well as meticously chased into the Civil Code (BGB).
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Please tell me what do Germans understand as a "copy"? When I produced my Xerox, the notary frowned.

Already the word "copy" will drive a typical German lawyer nuts when dealing with a foreigner! To wit:

The notary asked for a certain form, upon my insistence, he submitted what I provided. As the notary foresaw, the registry rejected my document because the registry wanted the certain form. Come on, this is a just bad joke and they all are against me!

Nope, they are not out against you but, pedantic as it may seem, they only have the "simple" wish from you: They get the right document and that in the right form from you. No more, but especially no less!
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Why all these formalities?

Well, disregarding German's genetic wish for accuracy but also the law so says. The law especially says that any transaction in the wrong form is null and void. §125 BGB rules it illegal. So, if you want something have it in the correct form.
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I read the Civil Code but found nothing relating to "public form". What's that?

That's simple to explain. Any document issued by a notary is in public form. Some documents for incorporating, require to be notarized copies of originals.
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The notary wanted a written shareholder's resolution and I scribbled down the text wanted but only to receive a scowl. Now, what's up?

Yeah, you produced the resolution in written form but it also has to be legible.
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What exactly is written form?

Written form is described in §126 BGB and requires that a document is issued on a sheet of (analog) paper and signed with (wet) ink. A lot of Germans, also, mix up "written" form with "text" form. You're in best company...
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I guess I get this concept of written form. My notary complained on my email being only "text form" and not written. Huh? Isn't that actually the same. Nowadays, a lot is written digitally into a computer. Doesn't that suffice?

No, it does not! You are saying it already yourself – "digitally". In legal understanding, this is "text form". Text form is not written form (§126b BGB).
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Okay. This reliance on written form seems somewhat antiquated nowadays with the degree of digitization existing. Is there a way to legally circumvent the written form?

Yes, you can legally work around the written form and maintain this requirement as well. You can apply the "electronic form" pursuant to §126a BGB. It is really that easy - almost.
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Cool. So, I just need some kind of digital signature and comply with "electronic form"?

Almost. You need a qualified digital and not just a digital signature (§2 SigG). Look a forward an authorized provider! Ask a potential provider whether their offer meets §2 SigG to replace the written form. If the salesperson has a blank face, best move on to the next.
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Why all this fuss that I have to visit a notary?

Certain documents need to be in notarized form. The law on limited liability companies (GmbHG) requires that certain documents are in "public" form – as worded in legalese.
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Banks

This section of FAQ will introduce to the role of banks inside the cooperation process.

My notary instructed me to open a bank account. But I don't want a bank account; my business is purely cash driven. Can the notary force me to do so? I can't believe it.

From the perspective of a German, your concern is such of a smart alec. There is no enforceable law that dictates you to open and hold a bank account. However, when opening a company, the templates for the articles of association provide that the initial capital is paid into an account. This can be waived for UGs and we arrange that a UG can be opened without a bank account. A GmbH will not really be registered without the statutory funds in a bank account. The greatest issue is around paying authorities or utilitis. They will not accept cash – never ever.

I have been running from pillar to post to open a bank account. All banks have turned me down. This is outrageous! How can this be? Is my company not entitled to an account?

I regret no bank is obliged to take you if they do not want to. There is nothing to do about – free economy. This means unless exceptally imposed by law, no private business must accept your request. It's as simple as that.
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They keep telling me, that as a non-European living abroad they cannot bring this into accordance to their compliance rules.

Ouch. Yes, indeed. You living abroad is a k.o. criteria. Sorry.
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Come on, is there no solution to this?

Yes, there is. You will need a German inside the management. It is not a secretary that is needed because this role is not known in German law. Your company will have a proxy director. Our associate company Beam my Presence to Germany offers such service. If you want to learn of the rights and duties of a proxy director, then take a look at our FAQ pages.

Gosh, what I just read sounds dramatic. Since America is Germany's best global partner, I trust I can still incorporate and get a bank account as an American citizen, or?

I'm sad that I have to disapoint you. Thanks to FATCA, is an issue as well.
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All this information sucks. Does Germany want businesses from foreigners?

Sure, German politicians want new businesses — even from foreigners. Incorporation authorities only care for identification and political engagement. Banks are the bottleneck. They so many compliance duties already, which are topped with anti money laundering regulations, it is sometimes hardly imaginable how banks can survive.
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Is there really no solution that a non-European living in Germany can get a bank account for his company?

Well, yes there is. First you open a UG with one euro and without bank account. You can then open account with Wise. You can then step to fully-fledged GmbH. This is the theory. However, it is far away from practicality and financial frugality. In this case, it is best to take out a shelf company from our partner Beam my Presence to Germany UG and keep the current director as proxy director.
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Public Notary

This section wants to introduce the participant "public notary". In civil law countries (like continental Europe) in contrast to Common Law countries (mainly represented by U.S.A. and UK with Commonwealth countries) notaries enjoy a high level of reputation and reliability. A notary is in Germany an attorney with another state examination. In order to provide reliability, becoming a notary requires not only a special training on documentation law but he also must have significant professional experience as a solicitor with a well-going office. Currently, Germany has a lack of notaries. This means they have a saturated business and are in now hurry. Their fees are mandatory and determined by law. The fee rules do not know the subject matter "expedited processing" or alike.

Why do we have to visit a notary to submit our application to open a company?

The law on limited liability companies requires that a notary issues the articles of association and submits notarized copies of accompanying documents to the commercial registry.
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Can I not directly apply to the registry and so circumvent such "obstacle" as a notary?

Sorry, no chance – none whatsoever.
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Cannot the notary consult on my needs?

The notary's role is strictly neutral as a public office wanting to implement an applicant's wish. An office has the only consulting function to make sure that an application is complete and nothing evident is missing (§25 VwVfG). Latest when to shareholders start quarreling on who "deserves" more shares, the notary is out of the picture to discuss this issue. He may and will say that it is legal that one person has more shares than a different but no more. If he starts arguing to the favor of one shareholder then he is abandoning his duty of neutrality. I am available to discuss your corporate needs.
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Tax Office (aka "Finanzamt")

This part will introduce you how the tax office participates in the process of opening a company.

What role does the tax office play during the opening of a company?

As a rule, the tax office plays no role in founding a company. It is not consulted at all.
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You said as a rule... What are the exceptions where the tax office plays a role in opening a company?

The rule as such stands and there is no exception. However, when opening a limited liability company for charitable purposes, it would make sense to first get an "okay" from the tax office on the charitable status of the intended company. This approach saves time and costs.
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Trade Office (aka "Gewerbeamt")

This section intends to introduce the role of the trade office (Gewerbeamt) during incorporation.

What function does the trade office fulfill during incorporation?

Actually, none. Some lines of business require a permission. In some seldom cases, before the company may only be registered after a permission to run the business has been granted. N.B. In some federal states this permission granting authority will be the chamber of commerce or a special office.
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What objective does this office have in general?

Whoever wants to run a trade business and not a "free profession (aka "Freiberuf") requires to register his or her business with the trade office (§14 GewO). Limited liability companies of any kind are by their form already considered as trades – regardless of their actual line of business. This registration is called "Gewerbeanmeldung" or "Gewerbeanzeige" and is to take place at the local office. This registration is not only needed for opening a business but also any internal changes or its relocation. And again, you are not asking for permission! Practically, you are only saying "Hi officials, I am running a business". Yes, you are to register but this does not mean that you may not run the business while registering! Of course, if your line requires a permission then get it first before operating.
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Gosh, the trade office turned my registration down because I have a virtual office and therefore do not need to register. Why are they forbidding my busines?

Relax! They are not forbidding any business at all! Your activites just do not require a registration: in their understanding. That is all. There is no reason to panic! Your business is and remains legal.
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Interpreter

Why is an interpreter needed to register a company?

By the word of law, an interpreter is not considered at all. The law typically assumes that a German registers. However, the notary has the duty to make sure that the involved parties understand what is happening. So, if you do not speak German, you will need an interpreter.
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Well, my German is far from perfect but I have no issue to understand most situations. How good does my command have to be?

It suffices if your ability is at least B1. No, you do not have to prove it. If the notary is not satisfied with your knowledge, he will postpone the founding until you reappear with an interpreter if he does not switch to incorporating in English as well. Don't forget, notarizing in a foreign language is usually pretty expensive.
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Who is eligible to interpret for me?

There is no formal requirement – with the exception of a participant in opening the company. We are thinking of co-shareholders or directors.
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May I bring my best friend along?

Formally, no issue. You may take your best friend. However, the required language abilities also apply to him. The interpreter may be a professional one but this is not necessary. The next question is how much does this person really understand what the notary is talking about? In the assumption you have your best friend with you and this person understands even less then you, how much will this help you?
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I saw that some notaries also speak a foreign language and are willing to interpret. Why is an interpreter required?

Admitted. Some notaries understand that much English that they could issue documents in a different language than German. Some notaries will even actively discuss with you. Caveat! The surcharge for this interpretation will be easily beyond € 300!
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Company Secretary

What functions does a company secretary have?

German law does not know this office! However, if you insist to have such officer in your company you are free to adapt your company's articles of assocation to such position.
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No secretary? Oh, gosh. Who then takes care of the corporate records? Do you not have to submit annual reports to the registry?

Nope, in Germany there is no legal duty to sumbit to the commercial registry an update of the corporate details. In general, the German authorities do not expect annual reports but only when the structure of the company's setup changes. When a new shareholder joins the company or a director leaves, the commercial registry must be informed – as a rule by the director via a notary. Well, actually a duty for an annual report does exist but not as is in common law countries. The director of a company is responsible to publish the company's annual closing with the Federal Gazette. The Bundesamt für Justiz (The Federal Office of Justice) monitors the filing and issues fines in cases of disregard. This fact is theory. In reality, your tax consultant takes care of this for a minor fee.
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Alexander von Engelhardt and Team

Why should we hire you and not just directly go to a notary?

Yes, you can go directly to a notary. However, we provide preparing consultation on the best setup for you matching your needs. The notary's role is not to consult by thinking outside a box but to create a legal document, submit your application, and to make sure that all is correct and legal. When doing this, he has to make sure that your real wish is correctly implemented in as much as it is legal.
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A notary will never discuss whether you require a residence permit or what kind of permit. Already, the discussion around to "incorporate or not" is none of his concern. If he were to consult in those questions, then the law excludes him to notarize.
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Why is the notary excluded from consultation?

The notary's role is strictly neutral as a public office wanting to implement an applicant's wish. An office has the only consulting to function to make sure that an application is complete and nothing evident is missing (§25 VwVfG).
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May I not hire the notary for what you offer on supplementary services?

Hardly. Like mentioned, some notaries are not even licensed attorneys and are so prohibited from providing legal services. Depending on the region where you want the notarization, notaries will not have the license to practice law at all.
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