Miscellaneous Questions on Corporations

Here you will find answers to questions that are important when taking over one of our virgin readymade companies 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 should ask and answer the following questions for yourself. The more you say "yes", the more that speaks for opening 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 you 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! We will gladly provide you with a virtual address.

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 companies 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 but they will be minor because their fees will be based on revenue.

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 from our partnering lawyer Alexander von Engelhardt. 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 on whether you will be competing with your employer. If you open 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 even supported if your business complements your employer's line of business. The best is to talk with one another!

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! 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 them to another person to hold in trust. This is a legal workaround! This trustee can be a relative (even abroad), a friend, or your spouse.

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! Simultaneously taking over two companies would be your option.

What happens if my company is not registered? Will I get my capital returned?

Good question! We respect it. First of all, no one wants your company's entry to fail! The first hindrance is we strive to serve your wishes regarding your setup and yet make sure that it will be registered. The second hindrance is the notary. The notary also has the job to make sure that by all reasonable means, your company will be entered into the commercial registry. It is the registry that decides. If the registry is unhappy, they first send a complaint and allow a remedy. If you do not manage to resolve the complaints within the provided or extended time, then, yes, the entry of your new setup will be denied. N.B. We are only taking care of your personal setup! The shelf company remains untouched and existent. In this event, we have not experienced before, you would have to communicate to the bank that the entry was denied. The bank will then refund you – maybe after some fees.