Insights
How to Start a Business in Germany (2026): GmbH, UG, Branch or EOR
Insights · By YuDing Wang · Updated 27 October 2026
To start a business in Germany most foreign companies set up a GmbH: you need €25,000 of share capital, at least €12,500 of it paid in, a notarised formation and registration in the commercial register, then trade, tax and employer registrations. Formation usually takes a few weeks. If you need to hire before the company exists, an employer of record can employ your first people in the meantime. This guide walks through each route and the steps in order.
Last reviewed in October 2026 against the Limited Liability Companies Act (GmbHG), the Temporary Agency Work Act and the 2026 social insurance rates. General information, not legal or tax advice.
Your options at a glance
| Route | Capital and set-up | Liability | Can it employ staff? | Best for |
|---|---|---|---|---|
| GmbH (limited company) | €25,000 share capital, at least €12,500 paid in; notarised formation | Limited to company assets | Yes | A long-term business, local contracts and invoicing |
| UG (haftungsbeschränkt) | From €1; a quarter of each year’s profit must be retained until €25,000 is reached | Limited | Yes | Founders with little capital; less credible with some partners |
| Branch (Zweigniederlassung) | Registered in the commercial register; no separate capital | The foreign parent is liable | Yes | Operating in Germany as the same legal person |
| Representative office | Trade registration only | The foreign parent is liable | Yes, for preparatory work | Market research and contacts, no sales |
| Employer of record | No entity; a licensed local employer employs your staff | The employer carries employer duties | Yes, for up to 18 months per person | First hires before or instead of a company |
How to set up a GmbH in seven steps
| Step | What happens | Who handles it |
|---|---|---|
| 1. Articles and shareholders | Agree the articles of association, the shareholders and the managing director. A sample protocol is available for simple companies. | Founders, with a notary |
| 2. Notarisation | The articles are notarised. Since 2022 a GmbH can also be formed online by video notarisation. | Notary |
| 3. Share capital | Open a business account and pay in at least €12,500 before the application for registration. | Bank |
| 4. Commercial register | The notary files the application; the company exists once it is entered in the commercial register (Handelsregister). | Local court |
| 5. Trade registration | Register the business with the local trade office (Gewerbeamt), which informs other authorities. | Municipality |
| 6. Tax registration | Submit the tax registration questionnaire through ELSTER to receive a tax number; the VAT ID follows from the Federal Central Tax Office. Report the beneficial owners to the transparency register. | Tax office |
| 7. Employer registration | Before the first hire, get a company number (Betriebsnummer) from the Federal Employment Agency, register with the accident insurance institution and set up payroll. | Federal Employment Agency, Berufsgenossenschaft |
A GmbH pays corporate income tax of 15% plus a 5.5% solidarity surcharge on it, and trade tax set by the municipality. Together that usually comes to around 30% of profit. It also needs bookkeeping, annual accounts filed with the company register and monthly VAT and payroll returns.
Hiring before your GmbH exists
Formation and the registrations that follow can take weeks, and a bank account or a managing director is often what holds things up. If a candidate is ready now, an employer of record can employ them from the start date.
In Germany this is temporary agency work: a local employer with a licence from the Federal Employment Agency employs the person, and your company directs the work. The same person can work for you this way for up to 18 consecutive months, which is usually enough time to set up the GmbH and move the employee across. How NNRoad’s employer of record service in Germany works.
A full-time person who works under your direction is an employee, even if the contract calls them a freelancer. Treating them as self-employed risks back payments of social insurance for up to four years.
Hiring directly without a German company
A foreign company can also employ people in Germany directly. It needs a company number from the Federal Employment Agency, registers employees with a German health insurer and pays social insurance like any German employer. Whether it must also withhold wage tax depends on whether it has a permanent establishment or a permanent representative in Germany. This route avoids an entity but means running German payroll from abroad.
EOR, PEO or GEO: which do you need?
A professional employer organization (PEO) shares employer duties with a company that already has its own German entity. An employer of record, sometimes called a global employment organization (GEO), is the legal employer itself. If you have no German company, you need an EOR, and in Germany that means a provider working within the agency work rules. How to choose an EOR in Germany.
If the founder is moving to Germany
Citizens of the EU, EEA and Switzerland can live and work in Germany freely. A non-EU founder usually needs a residence permit for self-employment or, as managing director of the GmbH, a permit for employment. The authorities look at the business plan, financing and the benefit to the German economy. Check the current requirements on Make it in Germany before you plan the timeline.
When to move from an EOR to your own GmbH
- The 18-month limit for an employee is approaching
- The team is growing and the fixed cost of a GmbH is now lower than the EOR fees
- You will sign contracts with German customers or invoice locally
- Your tax adviser sees permanent establishment risk in the roles you plan
Employees then move to your GmbH under new employment contracts. Agree with them how their length of service is recognised. Once the GmbH employs staff, we can run its payroll: see Germany payroll.
Questions about starting a business in Germany
How long does it take to set up a GmbH in Germany?
Usually a few weeks from notarisation to entry in the commercial register, depending on the court and how quickly the share capital is paid in. Tax, trade and employer registrations follow.
How much capital do I need to start a company in Germany?
A GmbH needs €25,000 of share capital, with at least €12,500 paid in before registration. A UG can be formed with €1, but must retain a quarter of its annual profit until it reaches €25,000.
Can a foreigner open a company in Germany?
Yes. Foreign individuals and companies can own and manage a GmbH. A managing director who lives in Germany and is not an EU citizen needs a residence permit that allows the role.
Can I do business in Germany without setting up a company?
Yes. You can sell from abroad, work through a distributor, engage genuinely independent freelancers, register as a foreign employer, or employ staff through an employer of record for up to 18 months per person.
Can I hire in Germany without a German company?
Yes, either by registering your foreign company as an employer and running German payroll yourself, or through an employer of record that employs the person for you within the agency work rules.
Need to hire before your GmbH is ready?
We can employ your first people in Germany while you set up the company. Tell us about the role and we will reply with the total cost and a realistic start date.
Related
The hiring process step by step, from offer to first payday.
What a hire costs each month, with worked examples.
Official sources: Temporary Agency Work Act (AÜG), English translation; AÜG section 1: licence, 18-month limit; AÜG section 8: equal treatment; Residence Act section 40; Social insurance rates and ceilings 2026; German Pension Insurance: 2026 minimum wage and mini-job limit; Make it in Germany: EU Blue Card. Also: Minimum Wage Act (MiLoG), Evidence Act (NachwG), Part-Time and Fixed-Term Employment Act (TzBfG), Working Time Act (ArbZG), Federal Holidays Act (BUrlG), Continued Remuneration Act (EntgFG), Dismissal Protection Act (KSchG) and Civil Code (BGB) sections 622 and 623. Reviewed October 2026; general information, not legal or tax advice.