| Doing Business with Germany |

Establishing a company in Germany

First of all

  • Study the German market
  • Experience the differences
  • Take advantage of competent help and available resources

1. Study the German market

It is assumed that you have done a marketing study to determine that you have an opportunity in the German market and your product is well positioned - price, features, etc. - to compete. Or perhaps you have been exporting your product already for a number of years and are ready to make the next step into the German market. There are special aspects that must often to be considered. Some of these are:

  • Does your product(s) have to comply with special standards (German TÜV etc.)?
  • Is there a need or advantage to obtain CE certification for your product?
  • Have you done an adequate location study for your future headquarters or production?
  • What type of legal entity is available in Germany and which appropriate for you? (Consult with a local attorney and accounting firm). Possible types:

    I. Sole proprietorship General Partnership (OHG)
    II. Limited partnership (KG)
    III. Limited liability company (GmbH)
    IV. Corporation (AG)

    There are also the options that do not require legal establishment in Germany:

    V. Branch of US Company
    VI. Foreign Sales Office

  • Would it make sense to buy an existing company?
  • Are you aware of the type and rates of taxation: VAT ("MWSt"), Corporate ("Körperschaftssteuer"), Trade ("Gewerbesteuer", etc.?
  • Are you aware of the differences in accounting practices (e.g. two sets of books are required to meet US GAAP and German HGB Standards)?
  • Required registration with IHK and local authorities
  • Are you aware of different health insurance and health care practices?
  • Are you aware of indigenous personnel practices? Things to be aware of:

    I. European employees expect signed contracts
    II. Termination notice periods are long, contractual and enforced by labour courts
    III. Employees have and are entitled to letters of reference from every employer
    IV. When a company reaches a certain number of employees, employees have the right to form a workers council ("Betriebsrat") who must be consulted on key - especially personnel - issues.

  • Do you know the necessary steps for expatriates to work in Germany?
  • Consider what German financing alternatives are available. Examples:

    I. ERP Loan (European Recovery Program)
    II. Company start-up loan (government program)
    III. Equity capital help (government program)
    IV. DtA Deutsche Ausgleichsbank (funding for start-ups)

2. Experience the differences

When German companies come to the United States, they often think what works for them in Germany must work in the States. Furthermore, if they have a technical product, they are shocked to hear their products criticized for being "over-designed" and therefore too expensive. In short, they didn't appreciate the differences.

Shapes, colors, etc. that «work» in the States, don't always come on well in Europe. That is why, for example, firms like Rubbermaid designed a separate product line in other colors for the European market.

Make sure you make an adequate assessment of German and European tastes and expectations and tailor the product or the service to that need. The translation of brochures, packaging, service manuals and other materials needs to be considered.

The same applies to the different mentalities among the various Europeans and between them and Americans. Europeans and between them and Americans. Europe is perhaps a "Common market" but it is not a homogeneous one.

It is also important to use "local talent" instead of expatriate management in your European company or companies.

3. Take Advantage of Competent Help and Available Resources

Often the cheapest way to go is to use a trustworthy consultant. It reduces your "leaning curve" and can avoid

costly mistakes

. Specifially, select a German Alliott accounting firm, pick a good lawyer and use a personnel consultant, among others.

For referrals to service providers in the following areas, please contact Hans J. Basten

  • Accounting and tax questions
  • Legal
  • Insurance
  • Personnel or human resources
  • Translations
  • Temporary office locations
  • General business questions

Source: AMCHAM, Frankfurt

Example for setting up a GmbH, see Examples