OnPoint Consulting by Hau Pham

Common Company & Business Forms for Foreign Investors Entering Germany

4 Jan 2026
Disclaimer: This overview is provided for general information purposes only and does not constitute legal, tax, or investment advice. It does not take into account individual circumstances, and no liability is assumed. Professional advice should be obtained before making any business or investment decisions.

Choosing the right legal form depends on capital availability, risk exposure, speed of entry, and long-term business objectives. Below is an overview of the most common and practical options for foreign investors, not to aim to provide a list of all available forms (some of which are OHG, Kommanditgesellschaft and GmbH & Co. KG).

GmbH (Gesellschaft mit beschränkter Haftung)
Best for: serious, long-term market entry
• Pros: Limited liability; strong credibility with banks, customers, and authorities; flexible shareholder structure
• Cons: €25,000 share capital (minimum €12,500 payable upon formation); higher setup and ongoing compliance costs
• Typical use: Operating businesses, manufacturing, sales, and services
• Indicative timeline: ~4–8 weeks (depending on banking and notarization)
The GmbH is widely regarded as the standard and most defensible structure for foreign investors.

UG (haftungsbeschränkt) – “Mini-GmbH”
Best for: early-stage market testing or pilot projects
• Pros: Limited liability; can be formed with very low share capital (from €1 in theory)
• Cons: Lower market credibility; mandatory retention of 25% of annual profits until €25,000 share capital is reached
• Typical use: Pilot projects, startups, initial market entry
• Indicative timeline: ~3–6 weeks
In practice, higher initial capital is usually required for banking and operational reasons. The UG is generally considered a temporary structure, often with a planned conversion into a GmbH.

Branch Office (Zweigniederlassung)
Best for: foreign companies seeking direct operational presence without forming a subsidiary
• Pros: No share capital requirement; direct integration into the parent company
• Cons: Parent company is liable with all its global assets, not only German assets;
• Typical use: Sales or service extensions of an existing foreign company
• Indicative timeline: ~4–6 weeks
A branch office must be registered and may conduct business in Germany. The unlimited parent liability is often a key decision factor for foreign boards.

Bottom line
• GmbH: Best balance of credibility, flexibility, and risk protection
• UG: Low-cost entry for testing the market, with structural limitations
• Branch Office: Faster entry, but significantly higher liability and tax exposure (not a common choice)
For most foreign investors planning to operate in Germany, GmbH or UG are the most practical and defensible choices.

Is there something like a “Representative Office”?
German law does not recognize a representative office as a formal legal entity. The term “Representative Office” is an informal business practice, not a statutory company form.
In practice, it is usually implemented as:
• A non-commercial presence
• Activities strictly limited to market research and liaison functions
• Pros: Low cost; minimal setup
• Cons: No commercial activity allowed; no revenue generation; not registrable in the Commercial Register (Handelsregister)

Note on other business forms
Germany also offers other structures such as partnerships, joint ventures, and corporate forms like AG or SE. These may be relevant in specific scenarios but are not suitable for most small businesses or companies in an early exploration phase.