The Gesellschaft mit beschränkter Haftung (GmbH) is Germany's most popular business form for good reason: it limits the shareholders' personal liability to the company's assets, provides clear structures and enjoys high trust in business dealings. However, forming a GmbH is not a bureaucratic formality – and the early decisions have long-term consequences.
The basic requirements
To form a GmbH you need:
- At least one shareholder (natural or legal person)
- Minimum share capital of €25,000 (at least €12,500 must be paid in at the time of formation)
- Articles of association (Gesellschaftsvertrag) in notarially certified form
- At least one managing director
Alternatively, there is the Unternehmergesellschaft (UG, haftungsbeschränkt) – also called a "mini-GmbH" – which can be formed with share capital of as little as one euro, but is required to build up reserves.
What should the articles of association cover?
The articles of association are the GmbH's rulebook. They must contain: the company name and registered office, the business purpose, the amount of share capital and the shareholders' shareholdings.
Beyond the mandatory provisions, it is advisable to expressly regulate:
- Majority requirements for shareholder resolutions: which decisions require a simple majority, which a qualified majority?
- Share transfer restrictions (Vinkulierung): can a shareholder freely transfer their share or does it require the consent of the other shareholders?
- Redemption and compensation provisions: what happens when a shareholder is to leave or wishes to do so?
- Non-compete obligations: are shareholders or managing directors prohibited from carrying on competing activities?
- Managing director provisions: sole representation authority or joint representation? Which transactions require shareholder approval?
A model template (simplified articles of association) is only sufficient for the simplest constellations with one or two shareholders – anyone with multiple founders or wishing to bring in investors needs a bespoke agreement.
Overview of formation steps
- Have the articles of association notarially certified
- Pay in share capital to the company's bank account (opening account of the GmbH in formation)
- Registration with the commercial register filed by the notary
- Entry in the commercial register (from this point the GmbH exists as a legal entity)
- Registration with the tax office and application for a tax number
Common mistakes when forming a GmbH
- Overly brief articles of association: a minimalist template creates conflict as soon as shareholders develop different expectations.
- No provisions for shareholder exclusion: without clear rules, a dispute with a shareholder can paralyse the company.
- Share capital budgeted too thinly: the GmbH must be able to meet its obligations on an ongoing basis; undercapitalisation can lead to personal liability.
- No provision for investment rounds: those planning to bring in investors later should anticipate this in the articles of association from the outset.
