How to Register a Business in the US from Germany

Step 1: Benefits of starting your US business from Germany

Starting a US business from Germany presents a host of advantages that can significantly enhance your entrepreneurial journey. One prominent benefit is access to one of the world's largest and most diverse markets. The United States boasts a population of over 330 million people, providing a vast pool of potential customers and clients. This enormous consumer base, coupled with high purchasing power, offers tremendous sales opportunities for your products or services. Moreover, Americans have a strong appetite for innovation, making them receptive to new business ideas and offerings, creating a fertile ground for business growth.

Another significant advantage is the relatively straightforward process of incorporating a business in the US. States like Delaware, Nevada, and Wyoming are renowned for their business-friendly regulations, low fees, and expedited services, making it particularly appealing for foreign entrepreneurs. These states offer robust legal frameworks that protect business owners and their assets, providing peace of mind and stability. Additionally, the US tax system can offer beneficial tax incentives and deductions, particularly for startups, which can help maximize your profits and support sustainable growth. Overall, launching a US-based business from Germany can be a strategic move, leveraging the strengths of both economies to build a successful enterprise.

Step 2: How to start your US business from Germany

For entrepreneurs in Germany looking to start a business in the US, the process involves several key steps. Firstly, it is important to choose the right business structure, such as an LLC (Limited Liability Company) or corporation, depending on the nature of your business and personal needs. Once the structure is decided, selecting a state to register the business is crucial, with popular choices often being Delaware, Nevada, or Wyoming due to favorable business climates and lenient regulations.

After selecting the state, the next steps involve registering the business with the appropriate state authorities, acquiring an Employer Identification Number (EIN) from the IRS, and setting up a US-based bank account. In many cases, engaging a local attorney or business consultant who understands both US and German regulations can be very helpful. Additionally, international founders might need to consider visa requirements if planning to manage the business operations in the US personally. By carefully navigating these steps, German entrepreneurs can effectively establish and grow their business in the US market.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Germany

Understanding Compliance Requirements for Running a US Business in Germany

Expanding a US business into Germany can present a myriad of opportunities, but it also brings about a host of compliance requirements. Understanding these requirements is essential to ensure seamless operations and avoid legal pitfalls. Here are several key considerations:

1. Business Registration

Mandatory Registration: All businesses must register with the local trade office (Gewerbeamt). Ensure that you get the correct permits and licenses according to the type of business you are operating.

Types of Entities: Familiarize yourself with different business structures like GmbH (Gesellschaft mit beschränkter Haftung), AG (Aktiengesellschaft), and others to determine the best fit for your enterprise.

2. Financial Compliance

Accounting Standards: German businesses must adhere to the Generally Accepted Accounting Principles (GAAP) specific to Germany, also known as the German Commercial Code (Handelsgesetzbuch or HGB).

Taxation: Understand the corporate tax obligations, including Value Added Tax (VAT), trade tax (Gewerbesteuer), and corporate income tax (Körperschaftsteuer). Register for an EORI number if you plan to import or export goods.

3. Employment Law

Worker Protection: German labor laws are stringent concerning worker protection, minimum wage, working hours, and conditions. Be aware of the Betriebsverfassungsgesetz (Works Constitution Act) which dictates company-wide employee rights.

Social Security Contributions: Contributions to social security for employees, covering health insurance, pension insurance, unemployment insurance, and nursing care insurance, are compulsory.

4. Data Protection

GDPR Compliance: Adherence to the General Data Protection Regulation (GDPR) is mandatory. Ensure that your data handling procedures are transparent, secure, and explicit consent is obtained from individuals where necessary.

5. Contract Law

Adherence to German Standards: Contracts must be in alignment with German civil law (Bürgerliches Gesetzbuch or BGB). This includes terms of service, employee contracts, and vendor agreements.

Language Requirements: While English may be used in international contexts, certain legal documents might need to be presented in German.

6. Industry-Specific Regulations

Sector Compliance: Different industries have specific regulations. For instance, the healthcare sector follows strict guidelines supervised by the Federal Institute for Drugs and Medical Devices (BfArM).

Environmental Regulations: Germany is stringent about environmental compliance. Be prepared to comply with the packaging regulations, waste disposal, and emission standards.

Conclusion

Running a US business in Germany requires navigating a complex landscape of compliance requirements. Thorough research and possibly some legal consultation are recommended to ensure a smooth transition and ongoing operations. Being compliant not only safeguards your business but also sets a solid foundation for growth and success in the German market.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Germany

Understanding Tax Obligations for Running a US Business in Germany

Operating a US business in Germany introduces several tax considerations that need careful attention. From understanding bilateral tax treaties to dealing with different tax regimes, here are some essential points to consider.

1. Bilateral Tax Treaties

The United States and Germany have a bilateral tax treaty designed to prevent double taxation on your business income. This treaty ensures that income is only taxed once, either in the United States or Germany, depending on the nature and source of the revenue.

• Permanent Establishment: If your US business has a permanent establishment in Germany, you will be subject to German taxation on the income generated by this establishment.
• Residency Rules: The treaty outlines residency rules that determine which country has the right to tax certain types of income. Understanding these rules can help you plan your tax obligations effectively.

2. Corporate Tax Rates

Germany has its own corporate tax rates which include corporate income tax, solidarity surcharge, and trade tax. The overall effective corporate tax rate can vary but tends to range around 30-33%.

• Corporate Income Tax: This is levied at a flat rate of 15%.
• Solidarity Surcharge: An additional 5.5% on the corporate income tax amount.
• Trade Tax: Varies by municipality and typically ranges from 7% to 17%.

3. Value-Added Tax (VAT)

In Germany, the standard VAT rate is 19%, with a reduced rate of 7% for specific goods and services. Your US business will need to register for VAT if it sells goods or services in Germany.

• Registration: Ensure you obtain a German VAT number to comply with VAT reporting and payment obligations.
• Invoices: Include the appropriate VAT rate on your invoices and maintain thorough records of all transactions.

4. Employee Taxation

If you employ staff in Germany, various employee-related taxes will apply:

• Income Tax: Employees in Germany are subject to progressive income tax rates ranging from 0% to 45%.
• Social Security Contributions: Both employers and employees must make social security contributions for pension, unemployment, health, and nursing care insurance.

5. US Tax Considerations

Even while operating in Germany, you must not overlook your US tax obligations. The US taxes its citizens and resident aliens on worldwide income.

• Foreign Earned Income Exclusion: If you meet certain requirements, you may exclude a portion of the foreign earned income from your US taxable income.
• Foreign Tax Credit: You can claim a credit for taxes paid to Germany to offset US tax liability on the same income.

Running a US business in Germany requires navigating a complex array of tax obligations. It's advisable to seek consultation from experienced tax professionals in both countries to ensure compliance and optimize your tax situation.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country