Limited and other corporations abroad: risk of opportunity?

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This represents new opportunities for start-ups and young companies Article the establishment of corporations abroad, including the English Limited. The article describes the procedure and the advantages of such a foundation, but also draws attention to the extensive disadvantages, which I have already mentioned elsewhere. The same applies here. Everyone has to decide for themselves.

Limited and other corporations abroad: risk of opportunity? Limited and other corporations abroad: risk of opportunity?

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Simone Janson Simone JansonSimone Janson is publisher, German Top20 blogger and Consultant for HR communication.


Important NOTE

This entry contains content and information that may be out of date, eg due to legal or statistical changes. Because it can still be helpful to get an overview of the topic, you can still find it here.

Choice of the company form

For start-up founders and small ones Company the choice of form of company was limited so far. It usually remained at a high-risk GbR, the founding of a GmbH was simply too expensive. The recent ruling of the Federal Court of Justice on company law now helps less financially strong German companies to found a so-called Euro-GmbH.

The European Court of Justice had already ruled in its ruling on the 05.11.02 that entrepreneurs lawfully establishing a company within the EU in order to circumvent domestic (anti-corporate) corporate law are lawful.

New judgment

The Federal Court of Justice has upheld this ruling at 13.03.2003 and thus recognizes the legality and legal capacity of companies based abroad.

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The ruling of the Federal Court of Justice (BGH) now allows the limited liability companies founded in other European countries, the legal capacity in Germany. The BGH thus complied with the judgment of the European Court of Justice (ECJ). So far, Germany had against the

Blocked legal capacity

The legal capacity of companies from the EU countries in Germany. But this was contrary to the guaranteed European freedom of establishment and thus against EU law.

The European Court of Justice has thus issued a judgment which makes the formation of a company abroad more attractive. But who benefits, which disadvantages are to be taken into account and which tax specificities apply? For entrepreneurs, a company within a state of the European Union, this form of society must also be recognized in the other EU countries (so-called founding theory).

Is the establishment of a foreign company worthwhile?

Since there are significant differences in the minimum capital required in the individual Member States, especially when founding corporations, the establishment of a foreign company can be worthwhile. If you have to invest at least 25.000 EUR when establishing a German GmbH, it is only 7.500 EUR in France, 3.000 EUR in Spain and 2 Pound in the UK.

But this seemingly favorable foundation also has disadvantages from a competitive perspective. Customers and business partners are often suspicious when a Limited or Société anonyme appears on the letterhead. German: / de / ir / corporate_go ..._ report.aspx It is better to place orders on German companies, which can be challenged on German ground if in doubt.

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According to the 2 pound-limited-liability company, the tax office as a rule also expects a company that merely shields its shareholders and wants to protect profits by means of a skilful change of seat in front of the German state. Frequent and above all more intensive controls are therefore pre-programmed.

Practical tip

Before setting up a foreign company, it is important to seek a conversation with a tax or business consultant. Also important: despite being founded abroad, such corporations are often used in Germany for corporation tax.

The reason: According to § 1 Abs. 1 Corporation Tax Law, a foreign corporation is already subject to unlimited tax liability in Germany if it has its management in Germany.

Euro-GmbH for 279 Euro

With less risk: in particular entrepreneurs as well as small and medium enterprises profit from the new law. The founding act is no longer associated with bureaucratic and time-consuming hurdles thanks to the much simpler corporate law in England.

The start is faster, cheaper and safer. The biggest advantage is that personal liability is excluded with a Euro-GmbH. Up until now, young and smaller companies could hardly afford to raise 25.000 Euro equity for a German company. So it often remained with a GbR, combined with high risk. Because as owners of these companies you are liable with all their personal assets.

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With the establishment of a limited company in England, they can now exclude this risk. Without large capitals. In fact, no more than 279, - Euro are necessary to make a Euro-GmbH from a German single company or GbR.

What the new judgment means

German companies can make use of the much lower hurdles that exist abroad for the establishment of a limited liability company and still operate your business in Germany.

This repealed the jurisprudence that had been practiced for years, which prevented it. Any European can thus found a Limited in the UK, even if he does so only with the aim of circumventing the German (or other European) anti-corporate social law. Starting your Limited takes less than 2 weeks (a one-day service is also possible).

Comfortable “Limited”

Without administrative procedures to succeed: Go Ahead offers full-service to start-up founders without expensive and bureaucratic procedures. The use of the advantages of a Euro GmbH does not have to mean, however, to completely turn its back on Germany.

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On the contrary. Many companies have long since decided to found a limited company in England - but only to operate in the German market. Neither an actual office in England nor English language skills are required. And of course the companies are registered in the German commercial register.

Outsourcing of operational risks - formation of a holding structure

Large companies regularly outsource operational risks to new companies and set up expensive GmbHs or AGs. Nevertheless, these costs are still low if you compare the risks of “non-outsourcing”!

The decision also allows entrepreneurs and small and medium-sized enterprises (SMEs) to establish their own companies, for example, for risky business areas. This is useful if, for example, you are concerned about warnings from competitors or claims for damages.

In the complaint

If your company A is actually "accused", this has no effect on your other limited companies. Or you use a limited if you do not want to use your previous company name, for example, to test a new business area or to expand a business area.

The outsourcing of companies is sensible if you have high demands in a business area. Should these fail, this does not affect your other business areas. This protects your company and the jobs from insolvency in the other business areas. A simple foundation of a holding structure (also with the holding of the existing company shares of a GmbH) is possible.

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The English Limited as Euro GmbH

A UK Limited company can be used as Euro GmbH. They intend, for example, to legally circumvent the disadvantages of setting up a company in Germany and set up an English Limited.

This is easier in the establishment, administration and handling than the German GmbH. You can, of course, do all sorts of business with UK Limited and open branches all over Europe.

case studies

Example: For example, customer X already operates a company in Germany or has chosen a market analysis for the German market. Employees and personal appearances at the customer are necessary, because the products need to be explained or have to be installed and / or maintained. It is advisable to set up a limited company in England, where only the administrative seat of the company is established, ie the transactions are made in Germany.

Your Limited is equated with a German GmbH on the basis of relevant EU provisions (Maastricht Treaty, Art 52-58). You can open bank accounts, acquire and manage real estate in Germany, permit cars, etc. as a GmbH in Germany. A commercial application is not required, however, the commencement of business activities is obligatory to the authorities. In special cases, it is also possible to register your Limited as a branch in the German commercial register if you so wish.

Example: Entrepreneur Y operates with his Limited (or worldwide) through the EU. He is the only employee of his company and carries out a small number of transactions a year, but with a high order volume. The customer contacts are exclusively via Internet or telephone / fax. Few personal meetings take place with his customers. This is the ideal case to operate the UK Limited entirely in London. In this case, an office service could be of great use: customer calls and faxes can be forwarded everywhere (telephone fees in the UK correspond to the German), the Internet is already available worldwide, an office service is cheaper than an office with secretary and representative rooms and flights to London are currently available for under 50 EURO.

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Example: Company Z operates a German limited liability company and has, for example, transferred properties or patents and licenses of British Limited. Since in this constellation the Limited Company is not actively active in the market anyway and, possibly, anonymity criteria also play a role, it is advisable to limit the Limited to Great Britain.

There are basically four options for the activity of an English limited company in Germany:

  1. The English Limited is itself directly in Germany, represented by its directors (managing director). Each English Limited, registered in the English Commercial Register, is already legally recognized and capable of doing business on a global basis. The director (s), or one of these directors, may represent and operate the Limited on a worldwide basis, including, of course, in Germany. This does not require an office, a trade license, nor a commercial register entry in Germany. The official office in England is enough.
  2. The English Limited establishes a dependent branch in Germany. This is the most chosen form. As a result, the presence in Germany is officially documented, as this branch office must be displayed at the local city or municipality in which the German branch takes place (§14 Gewerbe-Ordnung). It is, however, except for licensed trade, such as restaurant, food, pharmacy, craftsmen, etc., no approval by the advertising office necessary. Instead, the trade office is obliged to officially confirm this within three days on the basis of the proper notification (§15 Abs.1 GewO). This confirmation is commonly referred to as a trade license and the document can also be used everywhere as an official confirmation of the establishment. The Trades Licensing Office may not discriminate against foreign companies due to EU regulations. The German Trade and Industry Code, which was amended several years ago in this regard, corresponds to EU law in this respect.
  3. An independent branch registered in the German Commercial Register. To do this, a notary must register the German branch with the commercial register. Since this not inconsiderable notary and commercial register costs arise, should be carefully considered whether the commercial register entry in Germany really brings real benefits. It is under corporate law in almost all cases not required.
  4. The English Limited may establish a German GmbH as a subsidiary. It is then the main or sole shareholder of the GmbH. This is a big step in special circumstances, when the German GmbH should play a special role in an international company construction, or sometimes even in a large business operation in Germany, several branches and a large number of employees in Germany.

Euro - GmbH - Why an English Limited (Ltd.)?

The European Law offers decisive advantages, in which more and more German entrepreneurs are taking part. However, it is even more important to pay attention to the fact that everything from the outset is legally correct in the rest of the business life, as a new company is a matter of trust and is the basis for all future business. To ensure this, the choice of the founding partner is of crucial importance ,

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  1. Faustino

    Great, that's exactly what I have in mind!

  2. Paul Meinhart

    Is it really true that the blogg is as good as my friend has eMailed me - congratulations

    • Simone Janson

      Thank you Mr. Meinhart, as my blogger heart!

  3. Daniela Messner

    Good approaches to follow.

  4. Oliver Grationk

    Do you have

  5. Simone Janson

    Thanks for the started comment. I am also curious about the rest :-)

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