The limited liability company (GmbH) is a popular legal form for startups in Germany. The primary advantage of the GmbH is that only the company’s assets are liable for seizure, making it a low-risk choice when launching a startup since the founder and partner’s assets are protected in the event of default.
German law dictates a minimum share capital of €25,000 for a GmbH. This not only guarantees the solvency of your company but it also indicates financial security and reliability to banks and potential investors. That said, you can launch your company with €12,500 in statutory capital and then later contribute the remaining funds to the share capital account. This can prove helpful if you don’t initially have a lot of capital to invest at the outset.
There can, however, be some drawbacks to creating a GmbH: coming up with €25,000 in share capital isn’t exactly easy for some. Not to mention the administrative requirements can take time, e.g. drafting the Articles of Association, certifying your company with a notary, entering your company into the commercial register, trade licensing registration, and so on. Accounting for a GmbH is also relatively complex since they’re required to maintain double-entry bookkeeping.