***STARTING UP IN BERLIN***
So, you want to start up a company with your friends in Berlin and you are wondering what the simplest form of partnership is for Germany?
You are less than 7 people, so you cannot go for an association plus you don´t want to mess with books and taxes..then..how about forming a civil law partnership?
GESELLSCHAFT DES BÜRGERLICHEN RECHTS_CIVIL LAW PARTNERSHIP
Formation of a GbR is fairly uncomplicated. At least two partners must agree on the establishment of the GbR and conclude a partnership agreement. A written partnership agreement is recommended, but is not compulsory. The partners are jointly liable with their private assets for debts incurred by the company. If the GbR conducts trade in the form of a small trade business, it has to register with the local trade office. It must not be entered into the commercial register.
A GbR is only allowed to conduct “small trade business.” As soon as it exceeds certain thresholds of annual turnover, capital resources and total number of employees or uses commercial accounting, the company is deemed to be a commercial business and must be entered in the commercial register upon which it automatically becomes a general commercial partnership (Offene Handelsgesellschaft, oHG).
-at least 2 Persons
– name of society should include the names of all participants plus a fantastic name if desired like your case
-one official address for the post
-every person participating the society should be also registered for trade&tax number
depending on the activities of the society, one should apply for trade number (Gewerbeschein) from GEWERBEAMT for the society and then responsingly the tax number (Steuernummer) from FINANZAMT for the society.
The difference between the business number and the tax number is that the first one is necessary, if you aim to do business in the meaning of selling tickets etc, as part of the activities of your society, ie trading, as you are going to do by organising events and cashing tickets etc.
STEPS 4 FOLLOW
1. Registration of domicile-Citizen´s Hall of your residency
2. Trade certificate for each participant and for the society – GbR-online https://www.ea.berlin.de/…/guest;jsessionid=A819DDA1689B03C…
3. Tax number for each participant and for the society, registration of your activities-Finanzamt of your area
4. Declaration of an address for the society-it could be the address of one participant-post address
As soon as one applies for the trade certificate, he gets contacted by the tax office and gets to fill in the papers regarding the activities of the society and have them sent back to then. When you have all the numbers, you can move on with signing contracts, sending bills etc.
For more information over how to enrol, you can call this number, they give out information in english. +49/30/9013-7577 (englisch)
In contrast to corporations, partnerships are not independent legal entities but associations of people. In partnerships, the individual partners responsible for the liabilites of the company (including private assets) act for the company. Limitations of liability for individual partners are only possible to a limited extent.
No minimum share capital is required , and the accounting obligations and publication requirements are less extensive than those for corporations.
Establishment of a Partnership
Establishing a partnership is easy and can be completed in just a few steps. At least two partners are required to establish a company. A minimum share capital does not have to be raised. The management of the company can only be carried out by partners.
Depending on the type of partnership, entry in the commercial register (Handelsregister) is required. The application is signed by all partners and must be filed by a German notary in certified and electronic form with the commercial register. If a business activity is carried out by the partnership, the trade office (Gewerbe-/Ordnungsamt) must accordingly be notified.
Please read more on business registration here:
Taxation of a Partnership
The partnership itself is not taxed (as is the case with corporations), but the individual partners. The taxable profit is determined at the level of the company and allocated to the partners according to their shares. The partnership itself is only subject to trade tax.
The different kinds of partnerships differ primarily in terms of the contingent liabilities of the partners and the necessary registration obligations.
The average tax burden on companies is less than 30 percent. In some regions of Germany, due to a locally variable rate of trade tax, it is under 23 percent. The tax rate to which a partner of a partnership is subject can be optionally adjusted to the tax rate of corporations.
Companies Liable to Personal Income Tax
Partnerships such as the civil law partnership (GbR), the general commercial partnership (oHG) or the limited partnership (KG) are not separate legal entities but associations of partners, with the partners themselves generally being subject to all rights and obligations. Accordingly, partnerships are not subject to corporate income tax (Körperschaftssteuer) but to personal income tax (Einkommenssteuer), with the individual tax rate applicable to each shareholder.
Personal Income Tax Rates
The personal income tax rate starts at:
14 percent for an annual income exceeding the tax-free allowance of EUR 8,354.
It rises progressively to a maximum personal income tax rate of 42 percent which is applicable to annual income of EUR 52,882 or more.
An increased tax rate of 45 percent applies to every euro in excess of earnings of EUR 250,731 per year.
These tax rates also apply for personal income tax for employees.
Harmonizing Corporation and Partnership Tax Rates
Generally, distributed and retained earnings of partnerships are subject to personal income tax with progressively rising tax rates. In order to reduce the tax burden for partnerships (making it similar to the tax burden of corporations), two options exist for partnerships:
To avoid a progressively rising personal income tax rate, partnerships can apply for a flat taxation rate of 28.25 percent plus solidarity surcharge on retained earnings – leading to a flat taxation rate of 29.8 percent equaling the tax burden for corporations. (If retained [taxed according to flat taxation] are distributed to partners at a later date, the distributed earnings are, under certain conditions, subject to a subsequent taxation rate of 25 percent.)
Trade tax payments for both distributed and retained earnings can be offset against personal income tax.
Companies Liable to Trade Tax
All commercial business operations in Germany are liable to pay trade tax (Gewerbesteuer) irrespective of their legal form.
The trade tax is set by local authorities which means it can vary from one municipality to the next. However, trade tax is generally the same rate for all businesses within one municipality. Trade tax in Germany is currently set at between 7 and 17 percent.
Here some links with all the useful tips in English!