Formation Formalities

26.11.2020 | Uncategorized

In most cases, the establishment of companies is accompanied by formal obligations. In addition, certain actions should be carried out voluntarily so that no disadvantages arise when entering the market.

Conclusion of the Articles of Association

When founding a company, a memorandum of association must be concluded, but this is not necessary for sole proprietorships.

Necessity and Form

In the case of commercial partnerships, the articles of association can be concluded without formality. It can be concluded orally or tacitly by the joint commencement of business activities.

The partnership agreement must be in writing (§ 3 Act on Partnership Companies (Partnerschaftsgesellschaften- PartGG)). Partnership agreements of corporations require both the written form and notarization (§ 23 para. 1 Stock Corporation Act (Aktiengesetz- AktG), § 2 para. 1 Act on Limited Liability Companies (Gesellschaften mit beschränkter Haftung- GmbH)).


If the legally prescribed form is not complied with, the articles of association are void according to § 125 of the German Civil Code (BGB)!


The partnership agreement forms the constitution of a company, it regulates how it participates in business transactions. It is a contract under the law of obligations with elements of organizational law. The following structure is recommended for it: [1]

Part 1: Contractual basis

  • Company
  • Location
  • Business purpose
  • Financial year
  • Share capital

Part 2: Internal order

  • Management, in particular representation regulations and non-competition clauses
  • Shareholders’ meeting, in particular convening, management, reservations of consent and adoption of resolutions
  • Controlling bodies, for example supervisory board or advisory board
  • Disposal of company shares

Part 3: Financial statements and appropriation of results

  • Preparation of the annual financial statements
  • Auditing duties, for example by an auditor
  • Appropriation of earnings, for example the distribution of dividends
  • Withdrawal regulations

Part 4: Resignation of shareholders and dissolution of the company

  • Termination by shareholders
  • Exclusion by other shareholders
  • Redemption of company shares
  • Severance payment regulations

Part 5: General Provisions

  • Announcements
  • Severability clause
  • Bearing of formation expenses
  • Agreements on jurisdiction

Part 6: Attachments

  • Shareholder lists
  • Inventory

Legal registrations and permissions

There is freedom of trade and industry in Germany. This means that basically everyone is allowed to take up a commercial activity. With a few exceptions, entrepreneurs can therefore set up their business without needing a permit or authorization. In spite of the freedom of trade, every entrepreneur is obliged to inform various authorities and institutions about starting a self-employed activity, regardless of whether this activity is carried out full-time or part-time. This includes in particular:

  • Commercial register (local court)
  • Trade Office
  • Tax office
  • Employment Office
  • Chamber of Commerce (for liberal professions)
  • Chamber of Crafts (for skilled trades)
  • Employer’s Liability Insurance Association
  • Chamber of Industry and Commerce
  • State Statistical Office
  • Health insurance (in case of employment of employees)
  • Pension insurance (for employment of employees)

Trade Office

First of all, every business enterprise must be registered with the responsible trade office (mayor’s office, municipality). Excluded from this are members of the liberal professions, for example lawyers, doctors, architects, tax consultants, artists, writers, as well as self-employed persons in agriculture and forestry. The local jurisdiction of the trade office is determined by the location of the company’s headquarters. When registering, the identity card or passport as well as any special permits and proofs such as trade card or concessions must be presented. The business registration also automatically informs other authorities about the commencement of business activities, for example:

  • Tax office
  • Chamber of Crafts (for skilled trades)
  • Employer’s Liability Insurance Association
  • Chamber of Industry and Commerce
  • State Statistical Office
  • Commercial register (local court)


In the case of permit-free trades, the Trade Licensing Office merely confirms the registration and sends the confirmation to the entrepreneur, usually within three days.

For certain trades, a special permit is required before commencing business. Depending on the activity, the permit may be subject to the following requirements being demonstrated:

  • Personal reliability, for example through a police clearance certificate and an extract from the central trade register
  • Material requirements, e.g. information from the list of debtors or a certificate of no objection from the tax office
  • Professional requirements, for example, proof of training or studies or participation in further education

The obligation to obtain a permit may result from the German Industrial Code (GewO) or other laws, for example:

  • Showcasing of human beings(§ 33a GewO)
  • Operation of amusement arcades (§ 33i GewO)
  • Pawnbroking trade (§ 34 GewO)
  • Guarding trade (§ 34a GewO)
  • Auctioneer (§ 34b GewO)
  • Real estate agent, property developer, construction supervisor (§ 34c GewO)
  • Financial investment brokers (§ 34f GewO)
  • Travel industry (§ 55 GewO)
  • Trade with vertebrates (§ 11 Animal protection law)
  • Debt collection agency (§10 Law on extrajudicial legal services (RDG))
  • Cab company (§ 2 Passenger Transportation Act (PBefG))
  • Day Care Center (§ 45 Social Security Code (SGB) VIII)
  • Temporary employment (§ 1 Labour Leasing Act (AÜG))
  • Arms Trade (§ 7 Waffengesetz (WaffG))

Commercial register

Merchants are obliged to register in the commercial register at the competent local court and to have this registration certified by a notary (§ 29 German Commercial Code (HGB)). The commercial register provides information about all legally relevant facts that may be important for a business partner. This includes in particular:

  • Company
  • Name of the owner or the personally liable partners of a partnership
  • Liability of the limited partner
  • Share capital of the GmbH
  • Granting and withdrawal of procuration
  • Opening of insolvency proceedings
  • Deletion of the company

In this respect, the Commercial Register enjoys public trust. This means that to a certain extent it protects legal transactions in good faith in its trust in the correctness of the entries and announcements.

Merchant status

According to § 1 (1) HGB, every merchant who operates a commercial business (actual merchant). This is “any type of commercial enterprise, unless the nature or scope of the business does not require a business operation set up in a commercial manner” (§ 1 HGB). The term “commercial enterprise” refers to the organized unit of material and personnel resources with the help of which the owner of the business conducts a recognizably scheduled, long-term independent and not freelance, scientific or artistic offering activity with the intention of making a profit on a market.


This definition does not apply in particular to members of the liberal professions and so-called small businesses.

Merchants also include companies with a certain legal form (Form-Kaufmann), for example:

  • General partnership (§ 6 HGB)
  • Limited partnership (§ 6 HGB)
  • Public limited company (§ 3 Abs. 1 AktG)
  • Partnership limited by shares (§ 278 Abs. 3, § 3 Abs. 1 AktG)
  • Limited liability company (§ 13 Abs. 3 GmbHG)
  • Registered cooperative (§ 17 Abs. 2 Cooperatives Act (GenG))


Companies that cannot be classified as merchants, for example small businesses, freelancers or BGB companies, can voluntarily register in the commercial register (Kann.Kaufmann).

Registration procedure

Registration and transmission of documents must be done electronically. For founders, this is done by the notary.

professional chambers

There are professional chambers for various professions, which are usually organized under public law and perform tasks of professional self-administration. Some of them have compulsory membership, which is why these chambers must be notified regularly of the commencement of business activities.

Chamber of Industry and Commerce

All tradesmen and companies are by law members of the Chamber of Commerce and Industry. The only exceptions to this rule are craft enterprises, agricultural businesses and freelancers, as long as they are not entered in the commercial register. In this case, information is provided automatically by the trade office.

Chamber of Crafts

If someone wants to start a craft business, it may be necessary to register in the register of craftsmen at the local Chamber of Crafts. This depends on whether the craft enterprise belongs to the so-called dangerous professions. These are professions in which improper practice can endanger the health or life of customers or the general public. Such occupations may only be taken up and exercised if at least one employee (the owner or an employee) has passed a corresponding master craftsman’s examination. The trades with master craftsman’s certificate are listed in Appendix A of the Crafts Code. To this belong for example:

  • Road builder
  • Heat, cold and sound insulators
  • Scaffolding erectors
  • Metal worker
  • Surgical Mechanic
  • Car body and vehicle manufacturers
  • Precision Mechanic
  • Refrigeration plant manufacturer
  • Information Technician
  • Automotive Technician
  • Agricultural machinery mechanic
  • Installer and heating engineer
  • Electrical Engineer
  • Electrical Engineer
  • Boat- and shipbuilders
  • Dental technician

Craft trades listed in Appendix B of the Crafts Code (HwO) can be practiced without special qualifications. In addition to the registration of the trade, only a notification to the Chamber of Crafts is necessary. This includes for example:

  • Tank and apparatus construction
  • Watchmaker
  • Metal Former
  • Electroplaters
  • Metal and bell founders
  • Cutting tool mechanic
  • Gold- and silversmiths
  • Model builder
  • Ladies and men dressmakers
  • Interior decorator
  • Brewers and maltsters
  • Wine cooper
  • Textile cleaner
  • Building cleaners
  • Photographers

Chambers of Professional Conduct for Freelancers

For some members of the liberal professions, there are independent professional chambers (chambers of professional conduct) with which they must register. These so-called “chambered” liberal professions include:

  • Architects
  • Pharmacists
  • Doctors
  • Consulting engineers
  • Notaries
  • Patent attorneys
  • Psychotherapists
  • Lawyers
  • Tax consultant
  • Veterinary surgeons
  • Certified Public Accountant
  • Dentists

For all other freelancers such as journalists and artists there is no compulsory membership. They can simply start their activities.

Tax office

In addition, the tax office must be informed about the establishment of the company. Entrepreneurs who have already submitted a notification to the trade office do not need to take action here, as the tax office is automatically notified by the trade office. Members of the liberal professions and artists, on the other hand, must independently notify the tax office within one month of commencing their activities. All that is required is an informal registration with the tax office in whose district their place of residence is located. Recipients of a start-up grant must also submit their business plan to the tax office.

After registration, the tax office sends the entrepreneur a “questionnaire for tax registration”. On the basis of the information in it, the tax office assigns a tax number to the business and possibly determines advance payments. It is therefore advisable to realistically estimate the turnover and profit expectations.

Employer’s Liability Insurance Association

It may also be necessary to notify the relevant Employer’s Liability Insurance Association. The employers’ liability insurance associations are the carriers of the statutory accident insurance and have the primary task of preventing accidents at work and on the way, occupational diseases and work-related health hazards by all appropriate means.

Membership in the professional association is compulsory as soon as the company employs workers. The responsible trade association should be informed within one week after the registration of the trade or the start of the self-employed activity, unless the information is automatically provided by the trade office (see section [[When is this the case?]]

Entrepreneurs who do not employ any employees are not always subject to compulsory insurance. However, voluntary insurance with the employers’ liability insurance association can be useful to insure against the consequences of occupational accidents and diseases.

Employment Agency

If a company wants to employ employees, mini-jobbers or trainees subject to social insurance contributions, it is necessary to apply for a company number. This application can be submitted to the Business Number Service of the Federal Employment Agency in telephone or written form or by fax or e-mail.

Social security

In principle, self-employed persons are personally exempt from membership in the statutory social insurance schemes, i.e. pension, health, nursing and unemployment insurance. They are therefore free to decide whether and how they want to insure themselves, either through private insurance or by voluntarily joining the statutory social insurance schemes. However, a few groups of self-employed persons are not exempt from the statutory pension insurance, for example:

  • Craftsmen
  • Midwives
  • Independent teachers and educators
  • Artists and publicists.

You must register with the German Pension Insurance.

Obtaining official approvals

In addition, care should be taken to ensure that legal requirements are met and necessary official permits are obtained. Here it should be taken into account that official inspections can lead to time delays and additional costs.

Trade Supervisory Office

The trade supervisory authorities of the federal states supervise the compliance with regulations of the industrial safety, environmental and consumer protection. It is their task to check that businesses subject to authorization or permit are in compliance with the regulations and obligations applicable to the respective business during the entire period of operation.

Environmental Agency

Any requirements of the environmental authorities must also be observed. Often, for example, the costs of meeting environmental protection requirements are underestimated, for example for renaturalization, or the entrepreneur is not aware of the legal provisions of the Federal Immission Control Act (BImSchG).

Building authority

If rooms that are currently used for residential purposes are to be used as business premises in the future, a change of use must be applied for at the responsible building authority. This application should be submitted as early as possible in order to be able to coordinate planned conversions and new buildings with the building authority in good time.

Health Authority

In addition, legal requirements and conditions of the public health department must be observed. For example, newly founded catering businesses must have received instruction in accordance with the Infection Protection Act from the public health department or an appointed doctor. In addition, an official certificate of good conduct and a confirmation from the Chamber of Industry and Commerce of participation in a seminar on hygiene and the handling of food must be available. Employees require a certificate of no objection from the public health officer. In addition, checks are carried out to ensure that the hygienic standards are observed.

[1] vgl. hierzu Heussen (2014)