SETTING UP A COMPANY ABROAD


I’ve been busy setting up a business in Germany (replicating our UK operation) and thought it might make an interesting read for those of you who are thinking of establishing an office abroad – or even setting up a business in the UK.
It all starts with a plan
Yes, I’ve said it before but it’s a fact. The first and most important step is to form a plan. It forces you to work out costs and is a useful yardstick against which to measure your progress. So, in June and July, I spent a lot of time studying the German market, working out how much money and what level of investment I needed to set up a limited liability company there.
Formality and commitment
The first two facts I discovered were that, in Germany, you need to invest a minimum share capital of €25,000 and the process is far more complex than it is here.
To become a director I had to have all the necessary documents notarised; authenticated, legalised and my signature witnessed by a notary. This is a far more formal and detailed process than it is in the UK and all had to be done before I could open a bank account into which I could pay the €25,000. That payment then had to be confirmed (the bank sends a statement as evidence that the share capital has been paid) otherwise I would have been personally liable for the €25,000 until the limited company, known as a GMBH, had been set up.
This was a rather scary proposition, even for an old hand like me, and it had to be completed before I could offer jobs to get the company off the ground. It took about three months but now that I have been through it, I can see that the German way makes sense – you have to be wholly committed to setting up the business, unlike in the UK where it can, in effect, take an hour and be done with a share capital of £2.
A different approach to tax and credit
From then onwards, everything happened with the utmost level of efficiency. VAT numbers appeared in days (rather than weeks in the UK) and I discovered that PAYE had to be paid every month. Indeed, the German attitude to tax is very different from ours; it is considered a moral crime to pay your tax late.
Interestingly, and presumably because they know you have paid in €25,000, people are far less concerned about giving you credit; there is a natural assumption that you will pay – office contracts are not detailed and do not require huge advance payments for new companies.
Down to earth with a bump
Now that I had a company, a bank account and an office, all I had to do was find my staff, possessing our usual mix of bright, clear-thinking congenial professionals.
And here came my first real shock. The cost of living in Germany is about the same as in the UK but salaries are much higher. If you pay £20,000 for an admin person in the UK, you can reckon on it costing €30,000 in Germany. This is fine if the £ is at €1.50 but today they are roughly at parity, despite the fact that the Eurozone is seeing its worse crisis since its inception.
The upside
However, once you have waded through the red tape and paid the accountants and solicitors their set up costs, it does seem worthwhile. Generally, working conditions are far better than in the UK, there is less traffic, the cities are more spacious, communications are better and nearly everyone in business speaks English. On that last point, people will claim their English is very poor and then conduct a two-hour meeting in near faultless English. One of the banks we deal with sent their manager for English lessons so he could improve his communication with me. Can you imagine the equivalent happening here?
The joke’s on Peter
Lastly, on that note I will give you a funny side to working in Germany.
My three-day week in mainland Europe starts at 5am on a Monday when the alarm forces me on my way to catch the red-eye flight from Heathrow and, trust me, doing this commute is far more tiring than you can ever imagine.
A short while ago, after a long day at work, and to avoid cabin fever in my hotel room, I decided to go for a run beside the Rhine – a lovely prospect in the late summer sun. I found the river and ran for half an hour in one direction before turning round and running back. I am not sure whether I ran faster on the return journey but it came to pass that I became completely lost; it was now dark and I had forgotten to look out for landmarks. I then realised I had no money, no keys, no phone, no idea of the name of the road on which my hotel was and I couldn’t speak a word of German.
After another half hour I stumbled into a police station soaking wet and asked the desk sergeant if he spoke English. Naturally he said he could. He looked for my hotel on the internet, gave me a map and calmly told me I had only overshot by a mere 4k. “Good for your health, anyway,” he said as I set off to limp back to the hotel. I am not sure of the moral of this story but thank goodness all Germans speak English.
In summary, I have found that Germany is a very conservative, safe, structured place to do business. Once you have mastered the early bureaucracies of their corporate structure it is very straightforward and the economy itself is one where you feel as if they really do know how to manufacturer capital goods, unlike us English that merely export financial services and really make not a lot. Now that is an interesting article in the making.
If you would like advice on setting up a business here in the UK or abroad, do email me on peter.savage@azule.co.uk and/or write to the TV Bay editor. To read other articles in this series, visit our website: www.azule.co.uk.

Tags: finance | azule | vat | paye | germany | setting up a company in germany | iss058 | N/A
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