Prospective business founders will always want to plan ahead as much as possible for the costs of founding. How much a business costs to found, however, is unique to each business, and dependent on a range of factors. Below we lay out the most major and decisive in Germany. At Q-Found, our corporate law specialists are always happy to take over and organize any and all aspects of the founding process mentioned below for a fair and transparent all-inclusive price.
Before we begin, do remember that all costs can be paid with the company’s founding share capital. Q-Found will always make sure that any articles of association it drafts provide for this, so you can rest assured that there will be no additional costs for formation beyond the share capital contribution. In addition, we will make sure that you can take advantage of the ability to claim a VAT refund from the tax office after foundation.
1. Notary fees
In-person notarial certification is a compulsory part of all business foundation here, irrespective of the kind of company to be founded. The fee a notary charges will be dependent on various factors:
a) Whether the company is using articles of association or a model protocol
Both GmbHs and UGs can be founded with either articles of association or a model protocol. The model protocol was created by the German government to simplify the foundation procedure. It replaces the articles of association, the list of shareholders, and the appointment resolution with one, simple, standardized document. Since all the foundation documents need to be read out loud at a notarization appointment, having less to read can make the appointment shorter and the notarial fee lower.
However, as a one-size-fits-all document, the model protocol is often a poor substitute for individual articles of association which are tailored to each business. In fact, we never recommend it for anything but the simplest UG foundations, and never for GmbHs. While cheaper at the outset, a lack of comprehensive provisions for unexpected situations can lead to greater difficulty and expenditure further down the line. Read more about the debate between articles of association and model protocols here.
b) Amount of share capital
The amount of share capital at a company’s founding can also influence the notarization costs. The costs increase at a threshold of 7000 € for UGs, or, in the case of GmbHs, 30,000 €.
c) Absent managing directors
The managing director is appointed at the notarization appointment. If he is not physically present, it becomes much more difficult and expensive to carry out the necessary checks before his appointment. These include personal assurances of a clean criminal record, particularly in relation to property or commercial crime.
2. Legal fees and other costs
a) Legal fees
While it is not technically necessary to consult a lawyer for the notarization process, the complicated nature of the process means that most founders choose to employ one. In addition, the notary himself has no incentive to make sure that the articles of association are sound and well-drafted. His role is only one of certification. In contrast, an attorney has only one priority: his client’s success and compliance with German law.
For this reason, specialist commercial lawyers, such as those at Q-Found, play a vital role in advising on and drafting of articles of association. We take pride in taking the trouble to draft suitable statutes, offering a clear added value to company founders.
b) Interpreters and translation of the articles of association
Unless the notary is fluent in another language, German will be the language of both the articles of association and that spoken in the notarization appointment. If some of the founding partners do not speak German, a (non-binding) convenience translation must be provided and an interpreter should be present in the meeting.
c) Absent shareholders
If some shareholders are unable to be present at the notarization appointment, they must be represented by another to whom they have given power of attorney, or approve the incorporation deed retroactively. Both options must be publicly certified.
3. Commercial register
The formation of a UG or GmbH is only complete when the company has been entered in the commercial register. If authorized signatories are to be entered in the commercial register in addition to the managing directors, further costs are incurred.
4. Costs after formation
After formation, the company must be registered at the relevant tax office and submit an opening balance sheet dated to the day of notarization. This task can only be carried out by a tax advisor at additional cost.
In addition, the company must be registered at its relevant trade office, incurring additional administrative fees.