GmbH in Germany: requirements, process, benefits & costs 2025
Many founders in Germany choose a GmbH to run their business professionally and reduce personal liability. But how does the process work? What requirements must you meet, and what costs and responsibilities are involved? This practical, easy-to-read guide covers everything you need to get started with confidence.
Summary
- What is a GmbH?
- Key features
- Pros and cons
- Requirements for setting up a GmbH
- Step-by-step guide to forming a GmbH
- Costs of setting up a GmbH
- Obligations and liability
- Alternative forms and variations of a GmbH
- Is a GmbH right for you?
- FAQ: common questions about a GmbH formation
What is a GmbH?
AGmbH, or “company with limited liability”, is a widely used private limited company structure, favoured by start-ups, small and medium-sized businesses, and those focused on growth and a strong reputation. The main advantage: liability is limited to the company’s assets, so your personal assets are protected. A GmbH can be set up by one or more individuals or legal entities.
Key features of a GmbH
- Limited liability: in most cases, your financial risk is limited to your capital contribution, and creditors cannot claim against your private assets.
- Minimum share capital: €25,000 required (at least €12,500 must be paid in before registration).
- Independent legal status: a GmbH has the capacity to make contracts, own property, and appear in legal matters in its own right.
- Clear structure: there are defined rules for management, shareholders, and company organs.
Pros and cons
Advantages
- Liability shield: your financial exposure is restricted to the amount you have invested in the business.
- Strong reputation: a GmbH is trusted by banks, business partners, and clients.
- Versatility: suitable for solo founders, teams, and investors.
- Easy transfer of shares: ownership can be transferred without much bureaucracy.
Disadvantages
- Higher initial capital: at least €25,000 in share capital is required.
- More formalities: notarial certification and entry in the commercial register are mandatory.
- Ongoing obligations: you must keep proper accounts, prepare annual financial statements, and comply with disclosure rules.
For a detailed comparison of business structures, check our main article on company types in Germany with a comparison table of all business structures.
Requirements for setting up a GmbH
Who can set up a GmbH?
- Both individuals and companies–either on their own or together with others.
- Foreign nationals can also establish a GmbH in Germany.
Share capital and contributions
- A minimum share capital of €25,000 is required.
- At least €12,500 must be paid in before registration.
- Contributions can be made in cash or as assets (e.g. equipment, vehicles).
Articles of association and notary
- The articles of association set out the company’s purpose, who the shareholders are, how management works, and how shares are distributed.
- This document must be notarised.
Managing director and shareholders
- At least one managing director is required.
- The shareholders decide who will run the company.
Company name and business purpose
- The company name must be unique and include “GmbH”.
- The business purpose is registered in the commercial register.
How to set up GmbH: step by step
Plan and prepare
Define your business idea, shareholder structure, funding needs, and management responsibilities.
Draft the articles of association
Set out the rights and duties of shareholders, the division of shares, and the company’s purpose. Many notaries offer digital templates and advice.
Notarise the articles
Sign the articles in front of a notary, either in person or via video call. The notary certifies the signatures and submits the documents to the commercial register.
Open a business account and deposit share capital
Open a business account, upload the formation documents, and pay in at least €12,500. The bank will provide a confirmation needed for registration.
Register with the commercial register
The notary registers your GmbH. Once approved, the company is officially established and gains its own legal status.
Register your business and with the tax office
Register your business with the local trade office and provide the necessary information to the tax office. You’ll receive a tax number and, if needed, a VAT ID.
Start trading
Once registration is complete, you can begin operations. Your business account will be active, and you can issue invoices, sign contracts, and hire staff.
Stay organised with digital tools
Use digital platforms to track your progress and manage documents. Many providers offer dashboards with status updates and reminders.
Tip: Digital GmbH formation saves time and effort. Modern services allow you to handle notary appointments, document management, and banking online.
Costs of setting up a GmbH
When you set up a GmbH in Germany, expect the following costs:
- Notary and registration fees: Around €800 to €1,200 for notarising documents and registering the company.
- Professional advice: Legal or business consulting is optional and depends on your needs.
- Share capital: At least €12,500 must be paid in up front (the legal minimum is €25,000; you can pay the rest later).
- Running costs: After formation, you’ll have ongoing expenses such as accounting, tax advice, and chamber of commerce (IHK) membership fees.
The final costs can differ based on your region and the specific needs of your business.
Obligations and liability of a GmbH
Shareholder liability
Shareholders are generally liable only up to the company’s assets and not with their private wealth. Exceptions arise if certain duties are breached, such as mixing personal and company assets or delaying insolvency proceedings. In such cases, personal liability may extend to private assets.
Duties of the managing director
- Careful and legally compliant management of the company
- Compliance with insolvency filing obligations (in case of inability to pay)
- Timely informing shareholders, for example, if more than 50% of the share capital is lost
- Maintenance of accounting records and preparation of annual financial statements
- Filing of tax returns (corporation tax, trade tax, VAT)
Tax obligations
- Corporation tax: around 15% on profits
- Trade tax: varies by municipality
- VAT: applied on taxable sales
- Annual accounts: balance sheet and profit and loss statement
If the managing director fails in these responsibilities, they may be held personally liable, even with their private assets. Therefore, these management duties must be taken very seriously.
Alternative forms and variations of a GmbH
UG (haftungsbeschränkt) – the affordable mini-GmbH
An Unternehmergesellschaft, or UG for short, is a popular alternative to the GmbH for those looking to start with a smaller amount of capital. The minimum share capital can be as low as one euro, making it much easier to get started. Like the GmbH, the UG offers limited liability, but it requires the creation of reserves until the capital reaches €25,000. This makes it ideal for founders who want a flexible and cost-effective start while still benefiting from the advantages of a limited company.
gGmbH – the non-profit GmbH
A gGmbH is a special legal form designed for companies pursuing charitable objectives such as social projects, education, or environmental protection. It combines the limited liability of a GmbH with tax benefits, as non-profit activities can be tax-exempt. A major advantage is the ability to issue donation receipts, which helps in fundraising. However, the gGmbH must ensure its non-profit status is maintained permanently.
GmbH & Co. KG – the hybrid of GmbH and limited partnership
A GmbH & Co. KG is a hybrid legal form where the GmbH acts as the general partner with unlimited liability within a limited partnership. This means the GmbH is liable with its assets, while the limited partners’ liability is confined to their contributions. This structure combines the liability protection of a GmbH with the flexibility and tax benefits of a partnership, making it attractive for companies that want elements of both capital and personal partnerships.
Shelf GmbH – start quickly with a pre-formed company
A shelf GmbH is a company that has been set up but is not yet active. Founders can begin trading immediately without going through the incorporation process themselves. Shelf companies are usually created and sold by specialised providers. This saves time but increases start-up costs. It’s a good option for entrepreneurs who want to enter the market quickly, especially when timing is crucial.
SE – the European company
A Societas Europaea (SE) is a public limited company under EU law, registered in at least two EU states. It allows businesses to organise cross-border operations and adopt consistent structures across Europe. The SE is particularly suitable for large companies or groups with an international focus. While more complex to establish and manage than GmbH, it offers greater flexibility and boosts competitiveness in the European market through unified legal frameworks and streamlined cross-border activities.
Is a GmbH right for you?
A GmbH is especially recommended for founders who prioritise protecting their personal assets and aim to build their business with long-term growth in mind. Thanks to limited liability, your legal responsibility is confined to the share capital you have paid in. Additionally, a GmbH conveys professionalism and reliability to business partners and customers, which is particularly advantageous for larger ventures or when working with investors. If you have sufficient starting capital and clear plans for your business, GmbH is a solid choice.
However, if flexibility and a lower-cost startup are more important, alternatives such as UG, also known as the mini-GmbH, or sole proprietorships might better suit your needs. These options offer lower entry barriers but may be less suitable for ambitious growth plans or establishing a highly professional public image.
Ultimately, the decision largely depends on your individual goals, financial capacity, and desired risk structure. Therefore, it is worthwhile to carefully weigh the pros and cons and, if necessary, seek professional advice to find the most suitable legal form for your venture.
FAQ
How long does it take to set up a GmbH?
Setting up a GmbH typically takes between two and six weeks. The timeline depends largely on preparations, such as depositing the share capital into a business account and having the articles of association notarised. Once notarised, the GmbH is registered with the commercial register, which can take anywhere from a few days to several weeks depending on the local court. Cash contributions are usually processed faster than contributions in kind, which require additional valuation work. Overall, thorough preparation and efficient coordination of the steps help ensure a swift setup.
Can a single person register a GmbH in Germany?
Yes, it is possible to set up a GmbH as a sole founder, known as a single-member GmbH, where you act as both shareholder and managing director. The legal requirements are the same as for multiple shareholders. Importantly, a minimum share capital of €25,000 is required, with at least half to be paid in at the time of founding. Contributions in kind are also permitted. As the sole member, you must specify the management structure in the articles and comply with formal requirements, allowing you to run your GmbH independently and securely.
What if I can’t pay in the full share capital at once?
Registration with the commercial register can only proceed once the minimum share capital has been paid in–at least half of the €25,000 minimum. If contributions are missing, shareholders are personally liable for the outstanding amounts. Should the capital be depleted during operations, the management must promptly inform shareholders and consider capital increases or restructuring. If more than half the share capital is lost, an extraordinary shareholders’ meeting must be convened. Failure to act risks insolvency proceedings.
What documents do I need?
To set up a GmbH, you require:
- Valid ID (passport or identity card) of the founders
- The articles of association detailing rights and duties
- Proof of share capital payment (at least half of €25,000)
- All shareholders must attend or be represented at the notarisation
- Any permits or licenses relevant to the business activity
- Post-formation, registrations with the commercial register, trade office, and tax authorities follow.
These documents form the legal foundation essential for proper GmbH formation.
How can I take over an existing GmbH?
Taking over a GmbH involves purchasing or transferring shares. It is crucial to conduct thorough due diligence to assess financial and legal risks. A clearly worded purchase agreement, often notarised, regulates the transfer of shares. Legal advice is highly recommended to navigate liability issues and contract details. After the sale, changes must be registered with the commercial register, and existing contracts and employment relationships generally remain in place.
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