Answers to the questions founders actually ask.
Most venture-backed startups choose a GmbH (Gesellschaft mit beschränkter Haftung). It requires EUR 25,000 in share capital (half due at registration) and offers full liability protection. If you are bootstrapping, a UG (haftungsbeschränkt) lets you start with as little as EUR 1 — but VCs generally expect a GmbH before investing.
A common setup is a holding structure: you personally hold a management holding (UG or GmbH), which in turn holds the operating GmbH. This lets you defer capital gains tax when you eventually sell shares. Talk to your advisor before incorporating — changing the structure later is expensive.
From signing the notarial deed to receiving the Handelsregister (commercial register) entry typically takes 2 to 6 weeks. The notary appointment itself can often be booked within a few days.
You can begin operations right after notarization as a 'GmbH in Gründung' (GmbH i.G.), but founders are personally liable during this interim phase. Key bottlenecks: opening a business bank account (some banks take weeks) and the tax registration with the Finanzamt.
A UG is essentially a 'mini-GmbH' — same liability protection, but you can start with as little as EUR 1 in share capital. It must retain 25% of annual profits until reserves reach EUR 25,000, at which point you can convert to a full GmbH.
A UG makes sense for solo founders testing an idea, or as a personal holding vehicle. It does not make sense if you plan to raise VC soon — investors will ask you to convert first, and the conversion costs time and notary fees.
If you plan to sell shares eventually (including in a fundraise), a holding structure can save you significant capital gains tax. As a private individual, you pay roughly 26% on gains. Through a holding GmbH, the effective tax on a share sale drops to around 1.5%.
The holding must be established before the operating company gains value — restructuring later triggers tax. A typical setup: personal holding UG → operating GmbH. Setup costs for the holding are around EUR 1,000–2,500 including notary and registration.
A SHA governs the relationship between co-founders and investors beyond what the articles of association (Gesellschaftsvertrag) cover. It includes vesting schedules, leaver clauses, anti-dilution, drag-along/tag-along rights, and decision-making rules. You absolutely need one before taking investment.
In Germany the articles of association are filed with the commercial register and are public. The SHA is a private contract that contains the commercially sensitive terms. Most VCs bring their own SHA template — having a lawyer who has actually negotiated SHAs from the founder side is critical.
A VSOP grants employees a contractual right to a cash payment that mirrors the economic upside of actual equity — without giving them real shares. This avoids notary costs and complex cap table changes for each grant. The payout is typically triggered by an exit event.
Since 2024, Germany's Zukunftsfinanzierungsgesetz improved the tax treatment of equity-based compensation. Under certain conditions, the taxable event can be deferred to the point of sale rather than exercise. Whether real ESOP or virtual VSOP is better depends on your cap table, headcount, and timeline. VSOP remains the dominant model in the German startup ecosystem.
A GmbH pays roughly 30% combined corporate tax, made up of Körperschaftsteuer (15%), Solidaritätszuschlag (0.825%), and Gewerbesteuer (roughly 14–17% depending on your municipality). Hamburg's combined rate is approximately 32.28%.
Founders who are also managing directors (Geschäftsführer) pay income tax on their salary. Dividends to personal shareholders are taxed at roughly 26% (Abgeltungsteuer). If you hold through a GmbH holding, dividends between GmbHs are 95% tax-exempt.
Yes, a 'GmbH i.G.' (in formation) can hire employees and sign contracts. However, the founders are personally liable for all obligations until registration is complete. In practice, most founders sign their first employment contracts within days of notarization.
Make sure to register with the Sozialversicherung (social insurance) and obtain a Betriebsnummer from the Arbeitsagentur. Employment contracts should follow German labor law requirements — notice periods, working hours, and vacation days are all strictly regulated.
German labor law is strongly employee-protective. Key rules: minimum 20 vacation days (24 for a 6-day week), strict termination protection after 6 months (or 10+ employees), mandatory social insurance contributions (roughly 20% employer share), and a probation period of maximum 6 months.
Fixed-term contracts are allowed for up to 2 years without a specific reason (Sachgrund). After that, the contract automatically becomes permanent. For startups within their first 4 years, fixed-term contracts can be extended to up to 4 years — a helpful provision many founders don't know about.
The Geschäftsführer is the legal representative of the GmbH. You personally sign contracts, file tax returns, and are responsible for compliance. If the company becomes insolvent, you must file for insolvency within 3 weeks (since 2024: 6 weeks if an over-indebtedness restructuring plan exists) — failure to do so is a criminal offense.
The Geschäftsführer can be held personally liable for tax arrears, social insurance contributions, and willful or grossly negligent harm to the company. D&O insurance is advisable once the company has significant revenue or funding.
A German seed round typically involves: a term sheet (non-binding, except exclusivity and confidentiality), due diligence, a shareholders' agreement (SHA), updated articles of association, and a notarized capital increase. The round closes at the notary appointment, where shares are issued.
Convertible instruments (e.g., SAFE-like notes or German Wandeldarlehen) are also common at pre-seed. These delay the valuation discussion but add complexity at the next priced round. Budget 4–8 weeks from term sheet to closing, assuming no major legal issues.
A Wandeldarlehen is the German equivalent of a convertible note or SAFE. It is a loan that converts into equity at a future financing event, typically at a discount (10–25%) to the next round's valuation or at a valuation cap. Unlike a US SAFE, it is technically debt and accrues interest.
Key points: the conversion is triggered by a 'qualified financing round' (usually defined as a minimum raise amount). If no conversion event happens, the loan matures and must be repaid. German Wandeldarlehen do not require notarization unless they contain certain corporate law provisions.
Yes. A GmbH must deposit its share capital into a company bank account before registration. The notary requires proof of deposit. Many founders use traditional banks (Commerzbank, Deutsche Bank) or neobanks (Qonto, Fyrst) that accept GmbH accounts.
Opening times vary dramatically — some neobanks open accounts in days, while traditional banks may take 2–4 weeks and require in-person appointments. Start the account opening process in parallel with notarization to avoid delays.
At minimum: Terms of Service (AGB), a Privacy Policy (Datenschutzerklärung) compliant with GDPR, an Impressum (legal notice, required by German law for every commercial website), and — if you process personal data on behalf of customers — a Data Processing Agreement (Auftragsverarbeitungsvertrag, AVV).
If you sell to consumers (B2C), you also need a Widerrufsbelehrung (cancellation policy) and must comply with the Fernabsatzrecht (distance selling regulations). B2B SaaS is simpler but still requires AGB that address liability caps, SLAs, and data processing.
An Impressum is a mandatory legal notice required by § 5 DDG (formerly TMG) for any commercial website or online service operated from Germany. It must include the company name, address, contact details, registration number, and VAT ID. Failure to include one can result in fines and cease-and-desist letters (Abmahnungen).
The Impressum must be reachable within two clicks from any page. Social media profiles also need an Impressum (usually linked in the bio). The requirement applies to any 'business-like' online presence — even a personal blog with affiliate links.
The standard German VAT rate is 19%. If your annual revenue is below EUR 22,000, you can opt for the Kleinunternehmerregelung (small business exemption) and not charge VAT — but then you also cannot deduct input VAT. Most funded startups should register for VAT from day one to reclaim VAT on expenses.
For B2B SaaS sold to customers in other EU countries, the reverse-charge mechanism applies — you invoice without VAT, and the customer self-assesses. For B2C sales across the EU, you must register for and charge VAT in the customer's country (One-Stop-Shop / OSS simplifies this).
Yes. There is no citizenship or residency requirement for founding a GmbH or serving as Geschäftsführer. You need a notarized formation deed (can be done remotely via online notarization since 2022) and a German business address. A German bank account is required for the share capital deposit.
If you are a non-EU citizen and plan to manage the company from Germany, you will need a residence permit (often a startup visa or freelance visa). Operating from abroad is legally possible but raises practical issues around tax residency, permanent establishment, and ongoing compliance.
The Transparenzregister (transparency register) is a public register of beneficial owners of German entities. Every GmbH and UG must register its beneficial owners — typically anyone holding more than 25% of shares. Failure to register can result in fines up to EUR 150,000.
Registration is done online at transparenzregister.de. After a fundraise where ownership stakes change, you must update the register without undue delay. This is frequently forgotten by founders after closing a round.