Legal Advisory for Entrepreneurs and Founders

Formation and Corporate Structure

The first legal decision for most founders is the choice of entity. For a GmbH, the minimum share capital is € 25,000. For a UG (haftungsbeschränkt), formation with share capital below € 25,000 is possible; contributions must be made in cash at formation and one quarter of the adjusted annual surplus must be allocated to the statutory reserve. The UG rules cease to apply only after the share capital has been formally increased to at least € 25,000 — this requires a formal capital increase, not a mere accumulation of reserves. The choice between GmbH and UG should also take account of financing needs, market perception, banking, investor expectations and — for international founders — the immigration-law evidence of adequate business substance. Both require notarial formation and commercial-register filing.

For international founders, the corporate structure must also account for the immigration dimension: forming a GmbH does not itself authorise a non-EU national to live or work in Germany. The appropriate residence route depends on the founder’s shareholding, voting rights, actual entrepreneurial control and managing-director role. A founder or shareholder-director may fall under § 21 AufenthG, while a managing director without genuine entrepreneurial control may require an employment-based permit, in particular under § 19c(1) AufenthG in conjunction with § 3 no. 2 BeschV. The corporate and immigration steps are legally separate but should be planned together.

Key formation decisions: single founder or co-founders; shareholding and voting structure; managing-director appointment and service agreement; articles of association and reserved matters; shareholder agreement — depending on the ownership and financing structure, this may address voting rights, reserved matters, vesting, transfer restrictions, leaver provisions, deadlock, drag-along and tag-along rights and, where investors are involved, anti-dilution protection. Further detail is on our GmbH formation page and GmbH for foreign shareholders page.

Residence Permit for Non-EU Founders

A non-EU national who intends to establish and actively manage a business in Germany generally requires a residence permit under § 21 AufenthG. The immigration authority normally obtains an opinion from the competent economic or professional body, such as the IHK or HWK. The opinion is not legally binding, but a critical assessment can materially increase the risk of refusal. Under § 21(4) AufenthG, a settlement permit may be granted after three years of successful self-employment if the business is expected to continue sustainably, the required family livelihood is secured and the other statutory conditions are met. The permit is not automatic. This three-year route does not apply to freelance permits under § 21(5). Further detail is on our entrepreneur visa page and managing director residence permit page.

Commercial Contracts and Early Operations

The first commercial relationships — with customers, suppliers, service providers, distributors and partners — require contracts that reflect German law and protect the business. Standard terms (AGB) require careful drafting to be enforceable under §§ 305 ff. BGB. International contracts may involve choice-of-law and jurisdiction questions. The CISG may apply to international sales unless validly excluded. For technology and creative businesses, the contract structure should also address ownership and licensing of intellectual property created by founders, employees and external contractors. Further detail is on our commercial contract law page.

Employment Law for Growing Businesses

Hiring the first employees triggers employment-contract drafting, the statutory documentation obligations under the NachwG, working-time and social-security issues, and — where relevant — fixed-term and immigration requirements. Once the headcount threshold is reached, KSchG dismissal protection applies. Since 1 January 2026, a German-based employer recruiting a third-country national who resides abroad for work in Germany must provide the information required by § 45c AufenthG no later than the first day of work, including the contact details of the nearest Faire Integration advisory centre. Further detail is on our employment law for employers page.

Ongoing Corporate Counsel

Beyond formation, a growing business needs ongoing legal support: shareholder resolutions, managing-director changes, capital measures and investment rounds, commercial-register filings, contract reviews, and guidance on corporate governance questions as the company develops. We advise founders who prefer a consistent legal point of contact across disciplines.

Advice by Alexander Kagan, Attorney at Law, admitted to the Hanseatic Bar Association Hamburg.

The contents of this page are for general information only and do not constitute legal advice. A mandate is established only upon express acceptance.