It's also connected to so much bureaucracy that you almost need to hire someone for that alone, because you wont have as much time for your actual business. Founding a company in Germany is so much unnecessary paperwork its crazy. Single handedly the only reason I will never try it in my home country.
I agree that the process is unnecessarily complex, but I also think hiring someone for that would be the wise choice in most places anyway.
And even in Germany hiring someone for that would probably amount to paying 500-1000€ for the whole registration of the company instead of doing everything yourself and only paying the 100-200€ notary fees. It's not as bad as you might think.
> I will never try it in my home country.
May I ask, where would you try it? As I understand it, it's not really possible to found in a different European country while you're still living in Germany.
I may be misunderstanding, is this statement suggesting that the advice to use lawyers in Germany is simply standard op procedure, and not even remotely necessary? As it really isn't necessary in the US, especially with how easy it is to change or update later if it gets to that point.
I have incorporated (s-corp), created a couple LLC's and briefly used a sole proprietorship with a DBA filed in my county - this one was by far the most annoying, time consuming, and confusing one. The state filings took maybe 10-15 minutes of filling out straight forward online forms, $1 (at the time for a name search) and $300 to file. Soon after I was the paper owner of a legal corporation (or LLC's). The most complicated part was understanding taxes, but the application of taxes is separate from starting the company (assuming you understand the best tax structure for what you are doing). If anything, an Accountant is way more important imo.
In the US, getting a lawyer just to incorporate is flushing money down the drain. At best you can do it yourself (and in most states it's not particularly complex), at worst there are cheap online services to help you.
There's a lot of small, one-person shops that manage to make LLC's and stuff in the U.S.. There's books on how to do it yourself. In my state, there's little paperwork, too.
Why should there be a globally relevant software company? How about locally relevant software companies? If it is successful enough to pay for its own expenses and decent income for the employees/founders, it is a good business.
Because software has enormous fixed costs and low marginal costs, so spreading the fixed costs across more users improves the economics, often by a large factor.
It’s not that it’s strictly required, but it’s so beneficial that it’s often chosen.
> The company is the largest non-American software company by revenue and the world's third-largest publicly traded software company by revenue. As of December 2023, SAP is the largest German company by market capitalization.
SAP is kinda of a monopoly no ? The software is bloated and complex to use. The UI is dated but everyone still uses it because it is so embedded into the core arteries of businesses.
It's not a monopoly if it is hard to migrate from. SAP doesn't go out of its way to prevent you from migrating out of the HANA database. It's just that by the time you need a software like SAP, whatever you're buying becomes business critical and hard to migrate from regardless. And SAP is good enough to handle all kinds of edge case scenarios reasonably strongly. SAP doesn't even engage in monopolistic practices like what Microsoft or Apple do.
SAP and Salesforce are pretty much in the same bucket imo. The reason there is no Hubspot for SAP is that most smaller companies don't really need an ERP system.
true. SAP is more of an entrenched SaaS. Once you have it, the switching costs are too high later on. What an amazing kind of biz. The stickiness is crazy.
AUTOSAR alliance is an organization based in Germany defining automotive ECU software architectures. Most automotive SW development is happening in Germany.
I’m from Sweden and live in Switzerland. I know many people who have their own companies, and I was looking to start one myself before moving to Switzerland. It is SUPER EASY.
I’ve helped my wife become self employed in Switzerland. I do most of the admin work for her. Again, very straight forward.
I think Sweden is one of the very most entrepreneur-friendly EU countries. It's got a big safety net, but doesn't impose much bureaucratic or financial burden on new businesses or even solopreneurs just getting started out.
It's so easy (relative to this) to just go grab a SAFE. No strings, no bureaucracy. You can structure your endeavor however you want. And you can sometimes do it with just a conversation.
I never thought about founding my own company while living in Germany. I hate this countries bureaucracy to the core. If I ever wanted to found one, I'd first move out of Germany.
1) India. Lots of conflicting laws. Lots of conflicting paperwork. And as a foreign company you'll probably pay more in bribes ("voluntary non-disclosed payments to ensure success") than you would in taxes, because the alternative is that they send the police after your local employees and maybe try to have the local court seize your property.
2) EU. The VATOSS is straightforward, but the income tax systems are not. Within the EU, France is the worst, followed by Belgium, Denmark, and Germany. Portugal and Ireland are very chill about tax returns. For the bad countries, there is lots of paperwork. Literally every transaction must be documented. On both sides. And they will ask for the documents when they audit. And they will challenge any cross-border transaction that results in reduced local income.
3) Africa. I've only dealt with South Africa, Nigeria, and Egypt. South Africa was the easiest to deal with, and Nigeria was surprisingly business friendly other than the constant requests for bribes. Egypt should have been straightforward (and there is a bit of language barrier), but the bribes were not optional, even to file basic tax returns.
4) South America. There's a lot of it. So much of it. In Brazil, you need certified letters just to send and receive money...including tax payments. And there's a lot of requests for bribes in other countries. But once you get past the language barrier and the logistical hassle, it's actually quite straightforward and logical. If not for the military dictatorships and drug gangs, South America would be a good place to do business (from a compliance perspective).
5) USA. Lots of laws. Lots of jurisdictions. But all relatively straightforward. It only gets complicated if you choose to minimize your tax burden (or maximize your refund) by taking advantage of the many, many complications. If your only source of income is W2 income, you could finish your tax return in 15 minutes.
6) Canada. Even Quebec, which insists on doing everything in French.
7) Australia. It's the least complicated tax system I've dealt with, and the easiest to work with as a taxpayer. The ATO is also quite easy to reach...I'm almost always able to get a human on the phone within 5 minutes.
Huge +1 to Australia, speaking from a salary worker PoV. So many of the Australian digital services are absolutely fantastic. As an American who was working there, there were often situations where I thought I did something incorrectly because my mentality was, "if it was this easy, I did something wrong and there are more steps".
> Canada. Even Quebec, which insists on doing everything in French.
Quebec would be the one place in Canada where you’re expected to do business in French. Maybe New Brunswick? Even right across the river in Ottawa you’d have no reason to use French in any official capacity.
Sure, you might want a FR/EN selector at the top of your site since Quebec is a big market (within Canada).
Having formed multiple companies in India - my experience was that I did not pay any bribes and it was relatively easy (not as easy as USA - where too I have formed multiple companies)
"If your only source of income is W2 income, you could finish your tax return in 15 minutes."
Also free on H&R Block now. They can scan your W2's with your phone camera, too, if they can't pull it. Then, direct deposit it into your bank account. It was great.
It does if you're actually incorporating (C or S corp). You'll need to at least file both federal and state returns. And in many cases you'll need to pay money even if your business earned $0.
An LLC setup as a passthrough can get away with filing personal returns, but that only works for small freelance operations. Once you've got payroll or investors it's constant paperwork hassle.
Having payroll is always a tax hassle, but I've been at passthrough-structured LLCs with employees and mid-high 7 figure revenue (at some point, you start filing as an S for your LLC).
But can we get back to the original thing here? Creating an LLC in the US is trivial and does not require accounting.
Payroll is relatively simple for a basic LLC. You can use a service like Rippling or a local CPA to do it for you. Usually costs around $40 per month per employee.
S Corp filings are drop dead simple. The tax return may take a CPA’s help if your structure is complicated or you want to get the absolute best tax breaks possible.
Yes it could be simpler - jurisdictions like Estonia figured this out.
I've had a couple of LLCs in the US (now and in the past) and they've been pretty hands-off as far as paperwork/tax stuff go. More or less, just keep good books and file/pay quarterly taxes and that's about it. I'm curious about what you've run into?
Mine is almost certainly almost the minimal case, except for someone running in Delaware. Federally, I file quarterly 941s (employee tax withholding), annual 940 (unemployment) and 1020 (tax return). In Delaware I final annually (stamp tax). I then file locally for Washington (excise tax) and Seattle (licensing tax).
I believe a freelancers wouldn't file employee tax forms. They frequently roll their filings into their personal taxes.
There are already services that do that, e.g. firma.de[0]
But in general, not really. I also just founded a GmbH in Germany, and the paperwork really isn't that crazy, and for the more complicated parts you'll generally will want to have a tax advisor you are going to have a long-term relationship with (rather than a one-off founding service). I considered using a founding service, but ultimately, most of the "hard parts" about the process is in understanding what agency you have to talk to for what parts, which you'll have to learn anyways if you want to run a business in a way that doesn't land you in jail, so the benefits of such a service are marginal.
The only real way to streamline it would be to deregulate the process (e.g. getting rid of notary requirement).
Having gone through the process of incorporation myself, I agree with everything you said: Yes, there is some paperwork you'll have to take care of and a bit of a learning curve to everything but not outrageously so. It can all be done within ~2 weeks (including roundtrip times for mail). Yes, that's still a lot more than it'll take you in e.g. Estonia (where you can do everything online in a few minutes from what I've been told) but it really would be the least of my worries, compared to actually running the company.
That being said, I do think the process could be simplified drastically. Not necessarily by getting rid of the notary requirement but 1) through digitalization and 2) by streamlining (possibly centralizing) the whole back and forth between notary (official incorporation & signing of articles of incorporation), bank (getting a business account + obtaining proof you actually put the money in that account that you're claiming to have during incorporation), local court (registering the company, including articles of incorporation), tax authorities (getting a tax ID and sales tax ID), local authorities (getting a business permit), local chamber of commerce (paying dues for mandatory membership), Federal Gazette / federal company register (submitting your initial balance sheet).
This is my general opinion with regards to bureaucracy in Germany. All the data is most likely already there and all the technical challenges have been solved in the meantime. Why do I have to do the runaround from office to office, when they are physically connected by a piece if wire (aka the internet).
There is a reason why we have so much bureaucracy in Germany (1. because we like it) and second because it is supposed to provide trust, trust that every company I deal with is legit, trust that the system knows who is participating. Without trust nobody would make business or business would be very hard, because you would have to price in the risk of not having trust.
There is something to be said for trust here. I like that I can go straight to the imprint ("Impressum") to know with whom I'm dealing with online, where the company is located and who the CEO is. This is not always easy to decipher from the "Terms" pages companies in the US and elsewhere provide.
The downside for founders is that you have to divulge your address, unless you take additional steps to give yourself a mailbox address, but this can also be illegal if you're not careful. You can also rent an office of course, but for indie devs and freelancers, this is usually not financially viable.
Yes, there are ways to buy up existing “empty” companies with a bank account, commercial registration, etc.
If you want to found a new one, there are also services that will prepare all paperwork and set up appointments with notaries, etc. for you for affordable prices
Day to day operations do generally not require much else than bookkeeping and accounting which you can almost fully outsource (though accountant fees are not cheap, however, doing it yourself is also not to hard if you have the right software and do not sell thousands of different products) unless you are in specific industries
There are a few unnecessary fees and it takes longer than it should to get started but for most businesses it does not really matter and is limited in scope when it comes to time and money needed
I have founded multiple companies in Germany and in the US. Sure, in the US you have services like Stripe Atlas that make it a bit easier. But still, I would not say it's much crazier registering a company in Germany compared to the US.
Of course, it helps if you have a bit of an idea of legal concepts and accounting, but to be honest, that also makes sense, since you are starting a business.
This is not to say that we should not work to make it less bureaucratic in Germany (and other countries).
I agree that applying to loan and grant programs within Germany, and especially EU, are a super pain in the ass. I definitely see some potential there.
You can create a full blow corporation in Delaware from Europe in an easier way that you can open here.
Anyway, the benefits go beyond how easy it is to open, the most important things are moving forward with things like stock options, issuing shares, creating preferred ones, etc, etc, taxes access to funding, etc..
You’d just be moving the complexity around if you did that. If you’re residing and working in Europe then having your company in the US will cause all kinds of tax and logistical issues that you’re probably not qualified to deal with. Probably much less so than dealing with the local paperwork. Everything your company does will now be scrutinized and has to fit through two separate tax and legal systems. Nothing simple about it
I have multiple friends that incorporated their companies in US from Europe.
It isn't a particularly worse arrangement with founders, and, again corporate law in Europe is really behind, making things like attracting talent for equity much more difficult.
You still need to deal with business registration, taxes, accounting and so on.
You can also create a GmbH in Germany by downloading a few free templates from the internet and making an appointment with a notary. It's a bit more expensive than creating an LLC, but not significantly (maybe a few hundred dollars).
Especially since most of the cost come from running the business (tax filings, accountings, business registrations) and not the initial founding costs.
The context is creating companies in another country.
The states hasn't yet devolved into separate countries (I'm not sure what advantages California gets from the union. But a Brexit is clearly a costly move).
Some still do it. And while I would never start my own company in Germany. Working at a startup in Germnay is going pretty well for me so far. 1.5 years in.
Ye been working in a startup as well. I just witness all the appointments my boss has to go through and I could never do that. But I'm also the type of person not picking up their phone when it rings.
Go to your hometown administration, pay 35 Euro and leave 15 minutes later with a "Gewerbeanmeldung" which enables you to start doing business right away.
The Gewerbeanmeldung typically registers you as a sole proprietor (Einzelunternehmer) or GbR (partnership). Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG. Those require notarized founding documents, minimum capital requirements (€25,000 for GmbH), and a commercial register entry (Handelsregister)
The simple Gewerbeanmeldung structure is problematic for venture capital because most VCs require a corporate entity structure (GmbH/UG) and converting from a simple structure to a proper corporation later can trigger tax consequences.
At each investment round all shareholders must appear before a notary or provide notarized power of attorney, the entire investment agreement must be read aloud by the notary, changes to company documents require notarization, and each notarization costs thousands of euros and creates delays.
Major decisions which are likely to affect shareholders require formal shareholder meetings with proper notice periods. Unanimous consent is often required for key decisions. Capital increases must be executed through complex formal processes. Registration with the commercial register takes weeks. Minimum nominal values of shares restrict flexibility. Required reporting to tax authorities is extensive. I can go on and on. And don't even get me started about German employee stock option plans.
> Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG.
Meh, do they really? Only if they want to go the VC route. But in this topic we're talking about more healthy ways to build and grow a company and for that you don't need a GmbH or GbR to start.
Is this really true? I'm in the US, and have a corporation in the US. I am shielded from liability through the corporate veil, but I also have a $50/mo $2M/incidence liability umbrella. I honestly have no idea if either are necessary, in 20 years of "doing business" I've never had a single liability needing to be covered by insurance or the veil.
I think it's wise to have, just in case, but even in lawsuit happy America where I have had to fire multiple clients mid-project due to various reason. I've never had blowback or even the treat of a suit. We all just went our separate ways.
Lawsuits are more common in Germany than the US. Possibly because the procedure is different, with lower overhead, and penalties are not reduced for reasons like: you don't have the money to pay.
I believe Germany is generally heavy on liability and light on ways to avoid it. If you damage someone's property, there may be a procedure to confirm that you damaged their property, and then you must pay the value of the damage - as well as the court fee because you didn't just pay it upon asking. No ifs or buts. You cannot avoid paying it in any way, including the clever use of paperwork to avoid paying it. That's why there's a high bar to form a GmbH. As you correctly pointed out, good insurance can also limit your effective liability. I think such business liability insurance products are very common in Germany.
After reading that, for all the talk the USA has about "personal responsibility", it doesn't seem that serious about it, does it?
I haven't been sued either, and I live in Germany. I did pay someone $100 to replace something I accidentally broke, and walked away with the broken thing. No court was involved there and I didn't bother to claim insurance.
Limited liability is something you should always want, and if it merely costs a $30 filing fee and some forms, you should get it, but it's obviously jurisdiction-specific and in Germany, with the much higher requirements, it's obvious that they really only want medium to large businesses to have it (though this isn't a direct rule, I think).
From this thread I just learned about the Unternehmergesellschaft (haftungsbeschränkt) which is apparently a GmbH that can be formed for less than $25,000, but instead, you have to set aside 25% of your profit until you have $25,000, at which point you can convert to a normal GmbH.
> I've never had a single liability needing to be covered by insurance or the veil.
That’s how insurance works. You don’t need it often and maybe not even your entire life, but if it happens and you aren’t covered it will ruin your life.
If this description is not accurate for the situation then you probably don’t need insurance.
I'll warn you that insurance companies often try not to cover a loss or all of it. They often try to cheat their customers. So, having insurance isnt equal to a structure that makes you personally immune to liability because what the insurance company will do is unknown.
And I'll warn you a limited liability entity doesn't necessarily protect your personal assets either.
Undercapitalization is a big one that people don't often realize - going without insurance an not enough funds to cover a claim will usually pierce the veil.
Same goes with little things that typically don't matter to the owner of a one person company, like failing to keep board/member annual meeting minutes and sending them to the state body that requires them, and the biggest one for most small businesses - commingling funds and "alter ego" doctrine - the company is not you, the company's money is not yours.
There are a lot of ways that limited liabilities vanish - especially for smaller businesses like OP is describing.
> > Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG.
> Meh, do they really? Only if they want to go the VC route.
Funnily enough, a German friend of mine and his buddy got accepted into YC some years ago and apparently YC handed them the funds before they had even incorporated or anything, so at least from the point of view of German law they were essentially a partnership (GbR). Not sure how that even worked, especially in terms of delineating what the entity actually was that they and YC owned together. Did YC own 7% (standard deal) of… them? (Without incorporating you are personally liable after all.)
Anyway, from what my friend told me they had a whole bunch of cash lying around on a personal account for quite some time lol
Then again, this was before covid – money was incredibly cheap back then.
That feels like an exaggeration. I did that last year. They took several months to process the registration itself.
And this was just to freelance as a developer. In my case I was allowed to start while they were processing the registration. But had it been something that would require their permission, I'd have to wait several months before I could start my business, while they wave through a form that basically says "I'll be selling goods".
I'm not one to blindly hate on all bureaucracy. But in this case it feels unnecessarily complex.
This might depend on where you live and the kind of business… last time I made an Unmeldung online I needed to call after a week waiting and they literally told me that in person would be solved the same day. And it was.
That's a bit exaggerated. I did have a company, and while it did come with bureaucracy, the vast majority of my time was spent on what you expect a founder to do (sales, marketing, product, etc.).
