Business Incorporation Goes Digital

Setting up shop in Germany has never been easier thanks to recent technological improvements. Germany Trade & Invest expert Christina Schön walks us through the new possibilities.

January 2023

What is a GmbH?

The GmbH (German private limited liability company) is the most popular company form in Germany – there were more than 550,000 GmbHs with a turnover above EUR 22,000 in 2020. The incorporation of a GmbH requires a German notary, and until recently it was necessary to meet with them in person. Since August 2022, it’s been possible to form a GmbH online purely by cash contribution. From August 2023, the scope of online GmbH formation will be extended to include non-cash contributions. An exemption to this is the contribution of assets whose transfer is subject to notarization (e.g. real estate or shares in a limited liability company). Additionally, online procedures of commercial register applications have been implemented for all legal entities.

How does online incorporation work?

The online notarization takes place in a video conference between the notary and the parties involved. For this purpose, the German Federal Chamber of Notaries provides a video communication system with a two-step identification procedure that requires an electronic proof of identity – called an eID. To access the procedure, you have to register with the eID function of the identity card and extract the photo from the chip of the ID card. Information and documents are exchanged online with the notary, and the notarization takes place in a video conference. The signatures required for the incorporation are obtained by means of a qualified electronic signature. The Federal Chamber of Notaries has published an FAQ.

What about the rest of the process?

The other steps that don’t need to be performed in front of the notary, such as setting up a bank account and making the required capital contribution, remain unchanged and are still required for applying to the commercial register.

Christina Schön, senior manager tax & legal at Germany Trade & Invest, assists international companies seeking to enter the German market with investment projects and specializes in all legal matters purtaining to founding a business. Contact: christina.schoen@gtai.com

Who stands to benefit from the new digital formation proceedure?

Nowadays many identity cards offer the required eID function. German nationals can use eID verification on national ID cards issued as of 2017. However, third-country nationals (citizens that originate from a country that is not a member of the EU or the EEA) with a German electronic residence permit can also use the function. Since 2021, all other EU or EEA citizens who are 16 years or older can apply for an eID card in Germany. This card is intended only for the use of digital services. The website personalausweis.de gives the full details on different identity cards and their eID function.

Can non-German eIDs be used as well?

Electronic identification programs of other EU or EEA member states may also meet the requirements if they comply with the EU eIDAS regulation and correspond to the requirements for the Level of Assurance “high.” Entrepreneurs unsure about whether their eID is valid should discuss this individually with the notary performing the service.

What advantages does the online process offer?

Incorporated businesses can, for instance, already benefit from the new online procedures for commercial register applications. For new GmbHs, it enables remote and faster incorporation. There is also a new rule that incorporations must be registered in the Commercial Register within ten working days from the initial date of the application. This period can be reduced to five working days where certain model documents are used.

© Photo: Illing & Vossbeck