Doing Business in Germany from abroad
Entrepreneurs often conduct business outside of their home country. Either to benefit from strategic and structural location advantages, or simply because their business idea and operations require it. In case you are interested about the different ways and possibilities to start doing business in Germany from abroad, stay tuned – This article gives an overview of what is both possible and required for the different options.
Starting with the most obvious, conducting business in another country is likely to be more complicated than it is within the borders of where you live. There are many different regulations varying from country to country. Keeping up with all of those is almost impossible without the right help. So, the best and most sensible thing to do is to take advantage of competent information or consulting services offered by a lawyer specialized in state and commercial law. Another great source of information is simply the respective country’s foreign authority. There are also business consultants specialized in helping entrepreneurs plan and take the right steps when founding abroad.
Depending on where you live, and which state you are a citizen of, you need to prepare for different requirements and bringing several documents in accordance with international certification. It is better to invest a little money in the right information upfront than to find out later that you do not fulfill certain regulations and, if need be, to spend a lot more on dealing with the consequences.
Founding a company
The most traditional way of starting a business is probably founding a limited liability company. In Germany, they are called either GmbH or limited liability UG. In order to set up a limited liability company, there are basically only things you need to get started: Firstly, a passport or another form of residence or settling permit. Secondly, a physical address inside Germany.
A passport or another form of residence or settling permit. For people with EU-Citizenship, this is easy, as they already have a permit because of European trade agreements etc. People from outside of the EU might have to go through a few steps before being granted a residence permit. This is where the idea of agency comes to play.
For a person living in one country wanting to operate in another, employing an agent who lives in the designated country makes a lot of things easier. You do not necessarily need a residence permit. Your agent does most of the formalities for you. He shows up to notary and bank appointments and as executive manager of your firm he can act in your interest without you having to personally show up. The entity of your business is then often related to your agent specifically, which means the requirements for doing business and founding a company are largely to be fulfilled through your representative and not you. This is also helpful for meetings where your presence is not obligatory but having a representative to personally meet with clients or partners still is smarter than travelling to them.
There are versions to the use of agency: If you want to be a stakeholder only and not be involved in executory tasks, you can choose to be represented through an agent in almost all appointments. If you plan to take on an executive role in your company, you will not be able to profit from agency as much. For example, the notary requires you to attend to meetings personally as well as some banks for the opening of a business account. In general, managing directors of German firms need to be able to travel to Germany at any given point in time.
The employment of an agent who runs your firm for you has other advantages as well: As you are lawfully required to have an eligible address for your company, an agent can use his own address. And, if not his own, it is a lot easier for him to acquire one.
Consulting your country’s foreign authority, aforementioned specialized lawyers, or business consultants can help to specify or customize the ideal way of using agency for your needs.
In some cases, to start doing business in Germany form abroad may not even require setting up a company per se. Depending on the type and size of your operation you can use the concept of agency to for example employ several independent freelancers or to hire full-time employees abroad that take care of your business interests in Germany.
Representation and Expansion of existing Firms
If you are looking to expand your existing business and to start operating in Germany, there are a few options. You can choose between opening a subsidiary company (Tochtergesellschaft), an independent branch (Zweigniederlassung), or a dependent operating facility (Betriebsstätte).
Which one to choose depends on the branch and scope of operations you are planning to conduct, and which operations are supposed to be executed in Germany. As always, there are requirements to fulfill before you can start doing business. To find the right way to expand, consulting the designated chamber of industry and commerce is a good way to go. They will be able to tell you what certificates, paperwork etc. you will need for each one of the three main options.
A subsidiary company is a whole new company that is under your control. This means, all the criteria that apply to founding a company in Germany also apply to the subsidiary. It has its own legal entity while still under control of the mother enterprise that owns most of its shares. Apart from that, the subsidiary’s operations are not bound to the mother’s operations and can be of another nature.
However, if you want to expand your existing operations and not to venture into another field of industry, opening an independent branch might be the right way for you. It does not have its own legal entity and is therefore bound to the law of the mother company’s state although the branch’s registry is still in accordance with German commercial law You do have to open a separate account, to have separate bookkeeping, and to have an executive director that is able to fully represent the independent branch without you as head of the corporate group.
In order to profit from specific advantages doing business in Germany you might only want to open a dependent operating facility with specific purposes such as e.g., selling, production, or logistics. Facilities of this kind are limited extensions of your company’s operations and do not require the typical entry in Germany’s commercial register.
Coming back to the concept of agency and representation: Each of the above-mentioned forms of expansion require their own kind of representation. In some cases, you can work with freelancers, in others you need people under which name to register the entire subsidiary.
As you can see, there are a lot of options that can be applied and customized to your needs. Again, consulting with an expert and the respective authority is the best way to find out which one will suit your goals.
- Doing business in Germany from abroad using agency - Februar 23, 2021