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Entity structure

GmbH, branch office or no entity at all?

The four realistic legal structures for a US company operating in Germany — what each costs, what it exposes you to, and the decision rules that actually determine which one you need.

Last updated: 2 September 2026

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Short answer

Which structure do you need?

Sell cross-border with a German VAT registration until something forces an entity. The three forcing events are local employees, stock held in Germany, and buyers who will not contract with a US company. When one of them arrives, a GmbH is the answer in most cases — a branch office keeps full parent liability for little practical gain, and a UG saves capital at the cost of credibility with German counterparties.

The expensive mistake is founding a GmbH before revenue exists. It converts an unproven thesis into fixed cost, notarized paperwork and a formal liquidation process if you change your mind.

The options

Four structures, honestly compared.

No entity (cross-border)

Sell from the US with a German VAT registration

4–8 weeks

The default starting point. You keep everything in the US entity, register for German VAT or EU OSS, and invoice German customers directly. It carries no German corporate tax exposure as long as you avoid creating a permanent establishment — which means no fixed place of business and no staff concluding contracts in Germany.

Cost
Low — VAT/OSS registration, tax advisory, compliance registers
Liability
US parent, fully
Tax
No German corporate tax if no permanent establishment
Best for
First market test, e-commerce, SaaS, no local staff or stock

Branch office (Zweigniederlassung)

A registered but legally dependent arm of the US parent

6–10 weeks

A Zweigniederlassung is entered in the Handelsregister and can hire, invoice and appear as a German business address — but it is not a separate legal person. The US parent is liable for everything the branch does, and the parent's own corporate documents must be notarized and translated for the register. Rarely the best answer for US companies once they compare the effort against a GmbH.

Cost
Medium — notarized register entry, no share capital
Liability
US parent, fully
Tax
German trade and corporate tax on branch profit
Best for
Local presence needed fast, parent willing to carry liability

UG (haftungsbeschränkt)

Minimum-capital limited company

4–8 weeks

Legally a GmbH variant with the capital requirement removed, in exchange for a mandatory 25 percent profit reserve until EUR 25,000 is reached. Fully valid, but German counterparties read the suffix as a signal of thin capitalization. Banks, landlords and enterprise procurement will treat you accordingly.

Cost
Low — from EUR 1 capital, notary and register fees
Liability
Limited to company assets
Tax
Full German corporate and trade tax
Best for
Placeholder entity, very early presence, tight capital

GmbH (subsidiary)

The standard German operating company

6–12 weeks

The structure German buyers, banks, insurers and landlords expect. It ring-fences liability, allows clean local employment, and removes the procurement friction of contracting with a foreign entity. The cost is real money and real administrative load: notary, capital, bookkeeping, annual statements and a Steuerberater from day one.

Cost
High — EUR 12,500 paid-in, plus EUR 1,500–3,500 in fees
Liability
Limited to company assets
Tax
Full German corporate and trade tax (~30–33% effective)
Best for
Local staff, stock in Germany, enterprise and public buyers

Comparison

Side by side.

Cross-borderBranchUGGmbH
Separate legal personNoNoYesYes
Minimum capitalNoneNoneEUR 1EUR 25,000 (12,500 paid in)
Parent liabilityFullFullLimitedLimited
Time to operational4–8 weeks6–10 weeks4–8 weeks6–12 weeks
Can employ staff in GermanyNo (needs EOR)YesYesYes
Enterprise procurement friendlyLimitedPartlyWeak signalYes
Annual filing burdenLowMediumHighHigh

Decision rules

Four questions that settle it.

Do you employ anyone in Germany?

If no, stay cross-border. If yes but only one or two people, an Employer of Record is usually cheaper and faster than an entity for the first 12 months. If yes at scale, found a GmbH.

Do you hold stock or run fulfilment in Germany?

Holding inventory triggers local VAT registration regardless of structure, and typically a permanent establishment. Once warehousing is permanent, a GmbH simplifies both tax and supplier contracts.

Who signs your contracts?

Enterprise, public sector and regulated buyers frequently refuse or delay contracts with a US entity. If your pipeline is in that segment, the GmbH is a sales requirement, not an admin choice.

How certain is the market?

If the German thesis is still unproven, an entity converts an experiment into a fixed cost with a wind-down process. Prove revenue cross-border first, then upgrade — that sequence is almost always cheaper.

FAQ

Questions US companies ask about German entities.

What is the difference between a GmbH and a branch office in Germany?

A GmbH is a separate German legal entity with its own share capital, liability and tax filings. A branch office (Zweigniederlassung) is a legally dependent extension of the US parent — the parent carries full liability, but registration is faster and there is no EUR 25,000 share capital requirement. Most US companies that intend to hire, hold stock or sell to enterprise buyers end up with a GmbH.

How much share capital does a German GmbH need?

A GmbH requires EUR 25,000 of nominal share capital, of which at least EUR 12,500 must be paid in before registration. A UG (haftungsbeschränkt) can be founded with as little as EUR 1 but must retain 25 percent of annual profit until it reaches GmbH-level capital. Both cap shareholder liability at the company's assets.

Can a US company sell in Germany without any legal entity?

Yes. A US entity can invoice German customers with only a German VAT registration or EU OSS registration. No German company is required for cross-border sales. An entity becomes necessary once you employ people locally, hold stock in Germany, or face buyers who require a German contracting party.

How long does it take to set up a GmbH?

Six to twelve weeks in practice: notarization of the articles, opening a German bank account and paying in capital, commercial register (Handelsregister) entry, trade office (Gewerbeanmeldung) registration and tax number issuance. The bank account and the tax number are the two steps that most often slip.

What does a GmbH cost to set up and run?

Setup is typically EUR 1,500 to 3,500 in notary, register and advisory fees on top of the EUR 12,500 paid-in capital. Running costs are driven by mandatory bookkeeping, annual financial statements and corporate filings — budget EUR 3,000 to 8,000 per year for a small entity with a Steuerberater, more once payroll is involved.

Is a UG a serious option for a US subsidiary?

It works legally and is cheap to found, but German banks, landlords and enterprise procurement teams read a UG as a thinly capitalized startup vehicle. If your buyers are mid-market or enterprise, the capital saving costs you credibility. Choose a UG only when the entity is genuinely a placeholder.

What is a representative office in Germany?

German law has no true representative office status. A presence that only does market observation and non-binding contact may avoid a permanent establishment, but the moment staff negotiate or conclude contracts, tax authorities generally treat it as a taxable permanent establishment. It is not a safe way to avoid German tax while selling.

Which structure has the lowest tax burden?

Effective corporate tax lands around 30 to 33 percent for both a GmbH and a taxable branch, because both pay corporate income tax, solidarity surcharge and municipal trade tax (Gewerbesteuer, which varies by city). The structure choice should be driven by liability, credibility and operational need, not by an expected tax saving.

Not sure which one applies to you?

The Germany Readiness Review answers the structure question inside a wider entry decision: sizing, channel, compliance and a 90-day roadmap, done personally rather than by a template.

See the Readiness ReviewBook a call