How to Establish a Company in Germany
On this page we will present an overview of the appropriate company forms a temping company in Germany can take. However, should you require more information and more detail involved in setting up a firm in Germany please see our page on Establishing a Company in Germany as this page covers the many forms of company in Germany. Knowing the difference in form is important when it comes to issues such as liability, paperwork, cost, control of the business and many other issues.
When it comes to establishing a company in Germany, a business must have the required share capital and also have the correct paperwork and bureaucratic requirements completed. Our firm provides assistance with preparing business plans and with the filling of paperwork. Our immigration team also specialise in helping those from outside of Germany in availing of the Visa for Entrepreneurs for those who need it to set up their temping agency. Furthermore, when in Germany and the company is established, we provide all the help you need with relocation services for workers and in providing corporate immigration services for businesses.
Which Form of Company is Most Appropriate for a Temping Agency?
When it comes to setting up the temping company there are several options one can adopt. In Germany, the most prominent form of the limited liability is the GmbH. The Gmbh (Gesellschaft mit beschränkter Haftung) is a form of limited liability company similar to a private ltd. company in the UK. These companies do not list their shares on the stock market which makes them different from the AG (Aktiensgesellschaft) or plc businesses.
Should the temping agency go down the route of GmbH they should be aware that this type of company requires a minimum starting share capital of €25,000 when being founded and also has more extensive bureaucratic requirements in the form of the Articles of Association, obtaining the required certifications and licences and in how accountable the company is. The benefit of the GmbH is that this form of company is widely respected in Germany and it provides limited liability so that the private assets of those involved in the company cannot be sought for should the company face financial difficulties.
However, the GmbH is not the only the option available for temping companies as we will outline now.
The Unternehmersgesellschaft (UG) / Startup Company
The UG is a popular form of business model for newer businesses entering the German market. These companies also go by the name of the “mini-GmbH” and largely follow the same rules. Such rules include:
- Limited liability,
- Separate legal person,
- Similar tax and set-up bureaucracy,
- Use of share capital without the ability to sell on the stock exchange.
The real difference between the UG and the GmbH is that the UG does not require the €25,000 starting share capital. For this reason, the UG is open to new companies on the market. However, it should also be noted that UGs carry a little bit less respect in terms of their reputation for this reason. Due to their accessibility it can take a bit longer for these companies to convince investors and other partners to work with them or view them as a genuine business prospect. Therefore, it is unsurprising that many UGs do become GmbHs once they have established themselves on the market.
Are There Any Other Options for my Temping Agency?
There are of course other options when establishing the temping agency. These options will not have full limited liability and therefore establishing such companies brings the problem that the company will not be recognised as a fully independent body from the founder. This means that the private assets of the founders may be at risk should the company suffer financial difficulties. Here are some of the unlimited liability options available for starting the agency:
Sole Trader / Einzelhandler: This option allows the entrepreneur to be the sole person in charge of the direction of the company. However, this option comes with the most amount of risk as they have to perform the tasks involved with running the business by themselves.
General Commercial Partnership / OHG (offene Handelsgesellschaft): This form of business allows two or more entrepreneurs to work together to pool their resources for the benefit of their business idea. Once again there is more control given to the partners as to how the company will develop but they also face the risk of unlimited liability.
The KG (Kommanditgesellschaft): Under this model, the partnership has a minimum of two partners with there being limited partners with limited liability (Kommanditist) and general partners with unlimited liability (Komplementär). The partner with unlimited liability has more of a say when it comes to how the company is run. This form also allows for the GmbH & Co. KG model where the GmbH takes the role of the partner with unlimited liability.
What Other Requirements are Needed for Temping Agencies?
When the form of your business is chosen and your business plan has been prepared etc. it is time to register the business. This involves registering with the Gewerbeamt / trade office and also registering for tax with the Finanzamt (Tax office). Depending on which model your company has taken there will be more or less paperwork involved. If the company is a GmbH or an UG it has to be registered with the commercial register (Handelsregister) and registration with the Chamber of Commerce and Industry is also required. As can be seen there are quite a few hurdles to overcome when setting up a business in Germany!
Furthermore, a temping agency in Germany has to be given licence by the German government (Federal Employment Agency) to enter the industry. As can be seen below, this area of work is quite strictly regulated to ensure that it is not exploited. This licence is originally granted for a one year period but over time and once the company has shown itself to be reliable it can be obtained without limit. The licence is to ensure that the company pays its workers fairly, treats them correctly and that it shows transparency in how it operates.
What Regulations Should my Temping Company be Aware of?
Germany values workers’ rights and ensuring that workers are treated fairly. This applies in the case of temporary workers as well as for more traditional workers. In the field of temporary workers, it is worth knowing that the Temporary Workers Act legislates many of the key issues. This Act outlines what is allowed for in the field and what is not allowed for. For example, under § 2 of the Act it is not permitted that temporary workers work directly in the field of construction. Furthermore, under § 9 of the Act the agency is permitted from entering elements into the contract which would prevent a company from hiring the worker full-time.
As can be seen on our page about temporary agency workers and their rights there are a lot of laws that coincide in this field. For example, the agency worker also has employment rights as regards notice periods, severance payments and protection against unfair dismissal. All of these factors need to be taken into account when establishing a temping company.