Corporate income tax (KSt)

Corporate income tax – Most legal forms of business are subject to taxation. Depending on the legal form, income tax, corporate income tax, sales tax, trade tax and/or capital gains tax are due by law. Under certain circumstances, it is possible for some companies to be exempt from one or more of these types of tax. Who pays corporate income tax? How much is corporation tax? What do you have to pay corporation tax on?

• Corporate income tax (KSt)

Income tax (ESt)

Income tax – Most legal forms of business are subject to taxation. Depending on the legal form, income tax, corporate income tax, sales tax, trade tax and/or capital gains tax are due by law. Under certain circumstances, it is possible for some companies to be exempt from one or more of these types of tax. How much income tax do I have to pay? How do you calculate income tax? How much income tax do I pay? What do I pay income tax on?

• Income tax (ESt)

Capital gains tax (KapESt)

Capital gains tax – Most legal forms of business are subject to tax. Depending on the legal form, income tax, corporate income tax, sales tax, trade tax and/or capital gains tax are due by law. Under certain circumstances, it is possible for some companies to be exempt from one or more of these types of tax. What percentage is capital gains tax? What is the capital gains tax exemption amount? When is capital gains tax payable? How much is capital gains tax?

• Capital gains tax (KapESt)

Value added tax (VAT)

Value added tax – Most legal forms of business are subject to tax. Depending on the legal form, income tax, corporate income tax, sales tax, trade tax and/or capital gains tax are due by law. Under certain circumstances, it is possible for some companies to be exempt from one or more of these types of tax. What is the value added tax? What is the difference between VAT and sales tax? What is sales tax, simply explained?

• Value added tax (VAT)

Trade tax (GewSt)

Trade tax – Most legal forms of business are subject to taxation. Depending on the legal form, income tax, corporate income tax, sales tax, trade tax and/or capital gains tax are due by law. Under certain circumstances, it is possible for some companies to be exempted from one or more of these types of tax. When is trade tax payable? How much trade tax is payable? Who is subject to trade tax? When do you not have to pay trade tax?

• Trade tax (GewSt)

Tax cycle: taxes simply explained

For those who are confronted with the topic of taxation for the first time, here is a short explanation of the typical “tax cycle”.

Taxes explained simply: taxation of income and profit

Taxes are complex and a simple explanation is hard to come by, but possible if you start by looking at the following:

1. All inputs / outputs are documented (accounting)
2. All income must be taxed
3. Against income, expenses are calculated
4. Monthly submission to the tax office as an “interim balance sheet
5. Annual financial statements as “balance sheet
6. You pay tax on your profits

Calculate profit (simple):

Profit / loss = income – expenses

Example Invoice:

• 10.000 Euro = 100.000 Euro – 90.000 Euro

Here’s another look at the mechanism behind the tax system:

Monthly closing: Regular submission

Regardless of whether it is a company or a private person, once a month “accounts are settled” and once a year an “overall conclusion” is drawn (balance sheet).

Private individuals – Private individuals have relatively little to do with this monthly evaluation. The job is “done” by your employer. The gross salary is your salary before you have paid taxes and social security contributions. In the net salary, everything has already been deducted. Therefore, private individuals, or employees, have the monthly statement and contributions theoretically done automatically. It is different for companies, they have to prepare this “statement” themselves.

Company – The majority of companies submit their figures every month. The so-called monthly statement. Here, the income and expenses are summarized, the whole is then sent to the tax office. Either by the entrepreneur himself or by an appointed tax advisor.

Month End Closing – The month end closing then contains all the income and expenses of the business as just described. This includes all items that are incurred by the company:

• Material purchase
• Power
• Communication costs
• Wages for employees
• Health insurance contributions
• …

Of course, also the income, from delivery and performance but also capital gains. Both are taxed differently! While the income tax, or the trade tax, is relatively high, the capital gains tax is only 25%.

That is why it is worthwhile to let money “work”, through shares, currency trading or much less risky: real estate as a capital investment.

Exceptions (quarterly) – There are a few small exceptions, e.g. if the company is still very small and has little turnover. After a certain period of time, e.g. two or three years, such companies are allowed to submit their sales on a quarterly basis. However, this does not happen with real estate investors.

Annual financial statements: Taking stock

Simply explained, the balance sheet occurs at the end of the year. Just as the monthly financial statement summarizes the calendar days of a month, the annual financial statement summarizes the twelve months of the year. From this, you (or usually your tax advisor) create your balance sheet.

In this balance sheet you can then read all accounts, assets, the most important statements and key figures about your company. In summary, the annual financial statement.

So the control game itself is relatively simple

As soon as you have registered a company, you make a monthly statement of accounts, punctually at the start of the new month, at the latest by the 10th of the following month (deadline). At the end of the year, or at the beginning of the following year, you then prepare the annual accounts, which summarise all your financial and accounting activities.

Want to learn more about taxes? Then read through the different types of taxes above, from personal income tax, to business tax for companies, to capital gains tax, which applies to both individuals and companies. Of course, there are also other special cases, such as payroll tax, and much more.

• Learn taxes

Owner: Save taxes with real estate

Taxes are an important topic. The more you earn, the greater the tax burden. At some point, taxes are your biggest expense. By choosing the right legal form, you can save a lot of money as a landlord or real estate investor. Classics are, for example, the real estate GmbH or the family foundation. Learn more about real estate, taxes and saving taxes with real estate here.

• Save taxes with real estate

Stock Corporation: Establishment, Advantages and Disadvantages

The AG is not just a legal form — it is a structured vehicle for taxation, liability, and capital raising. In the following, you will learn everything essential about the establishment: Who can found an AG? What is the difference between internal and external relations? What are the actual costs — not only the share capital, but also notary, founding auditor, and ongoing management? And above all: When is an AG worthwhile from an investor’s perspective — and when is a Real Estate Holding in GmbH structure the better choice?

The 7 Founding Criteria of an AG at a Glance

1. Number of Partners — at least 1 shareholder, plus 3 supervisory board members = 4 people minimum
2. Management — Board of Management (not managing director!), controlled by the supervisory board
3. Founding — formal, notarized, multi-stage process
4. Company Name — freely selectable, suffix “AG” mandatory
5. Funding — at least 50,000 Euro share capital, share issuance possible
6. Liability — limited to share capital in external relations
7. Profit distribution — dividends, decided by the general meeting

Capital company AG: Management according to HGB

In the business world, there are many different types of business structures. They are broadly divided into two categories: sole proprietorships and companies, which in turn are divided into incomplete companies — including silent partnerships and BGB partnerships — and complete companies (personal companies, capital companies, and a few more).

The stock corporation — abbreviated as AG — is one of the complete companies and is not subject to the Civil Code (BGB), unlike incomplete companies, but rather to the Commercial Code (HGB) and the Stock Corporation Act (AktG). As a capital company, the AG is more complex in structure than other forms of business law. It cannot be established informally, but requires the notarized certification of the shareholder agreement and compliance with numerous legal requirements.

Other typical capital companies:

• European stock corporation (Societas Europaea, abbreviated as SE)
• Limited liability company with shares (KGaA)
• Entrepreneurial company / UG (limited liability)
• Company with limited liability (GmbH)

The stock corporation is, together with the GmbH, the best-known form of capital companies. In Germany, it is mainly chosen as a legal form for listed companies and is considered — not least because of the higher initial capital — as the “big sister” of the company with limited liability.

AG vs. GmbH vs. KGaA: Comparison table

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Before you decide on a legal form, a direct comparison of the three heavyweights of capital companies is worthwhile:

Insider Tip: For pure Real Estate Holding Structures, the GmbH is usually the more efficient choice — the AG only pays off starting from an asset base of 5–10 million euros or in case of a planned stock market listing/REIT status.

Legal Form Variant AG & Co KGaA — KGaA with Complementary AG

Sometimes the AG also appears in combination with a stock limited partnership (KGaA). For example, family businesses occasionally organize themselves as a stock corporation & Compagnie Limited Partnership on Shares — short: AG & Co KGaA. In this case, they form a stock corporation in a legal sense — however, the general partner as personally liable partner is not an individual, but also a stock corporation. If the general partner is instead represented by a GmbH, it is referred to as a GmbH & Co KGaA, and in the case of a Societas Europaea, as a SE & Co KGaA.

Why this structure? It combines the capital market capability of an AG with the takeover protection of a KG. Families like Henkel, Merck or Hornbach thus retain full control through the general partner, even if 90% of the shares are listed on the stock exchange.

More about the individual hybrid forms:

• GmbH & Co KGaA — see Gesellschaft mit beschränkter Haftung (GmbH)
• SE & Co KGaA — see Societas Europaea (SE)

Examples of AG & Co KGaA companies:

• CTS EVENTIM AG & Co. KGaA
• Drägerwerk AG & Co. KGaA
• Fresenius Medical Care AG & Co. KGaA
• Henkel AG & Co. KGaA
• HORNBACH HOLDING AG & Co. KGaA
• ProCredit Holding AG & Co. KGaA

A special case is CEWE Stiftung & Co. KGaA: Here, the general partner is represented by a foundation. In general, the stock limited partnership is possible in all conceivable combinations.

Read more about the topic “Establishing a family foundation”:

• Establishing a family foundation

Establishment & Founding of an AG — From Articles of Association to Registration

You want to set up an AG? Then you need to know: A natural or legal person is sufficient as a founder, so you can appear as the sole shareholder and automatically be the sole managing board member. Such a one-person AG is often referred to as a “small stock corporation.” However, you can’t do it entirely alone: an AG must appoint at least three members of the supervisory board — the smallest possible AG thus consists of four people.

The process of establishing an AG can be divided into two phases: the internal establishment of the AG and the external establishment of the AG.

Phase 1 — Preparation & Foundation (Internal Relations)

You establish your stock corporation internally. The most important step is first and foremost the drafting of the articles of association, which must be notarially certified by a notary. For the formulation of the articles of association, all founding members must be present, as well as the future management board and supervisory board.

Content of the articles of association (mandatory under § 23 of the Stock Corporation Act):

• Company name and registered office
• Business purpose
• Amount of share capital (minimum 50,000 €)
• Face value and number of shares
• Type of shares (bearer or registered shares)
• Number of board members
• Form of announcements

From bearer shares to nominal value shares — learn more about the different types of shares here:

• Types of shares — Transferability, scope of rights & division of share capital

In the second step, the acquisition of shares and the appointment of the organs of a stock corporation follows, which must be notarially certified. Optionally, the auditor for the annual financial statements can already be appointed here. The supervisory board then appoints the management board as the first official act. No later than now, the contributions must be deposited into the business account, with at least a quarter of the share capital (i.e., at least 12,500 €) being recorded.

Phase 2 — Registration in the Commercial Register (External Relations)

Zum Abschluss des Gründungsprozesses muss dein Unternehmen ins Handelsregister eingetragen werden. Dieser Schritt rüstet die Aktiengesellschaft mit einer eigenen Rechtspersönlichkeit aus. Die Gründungsmitglieder, Aufsichtsrat und Vorstand führen die Anmeldung gemeinsam aus. Es bedarf einer Übersicht zu allen Aufsichtsräten und Vorständen, diverser Urkunden und notarieller Beglaubigungen, sowie eines Gründungsberichts und ggf. einer Gründungsprüfung durch einen externen Wirtschaftsprüfer (bei Sachgründung oder qualifizierter Bargründung).

Das Registergericht beurteilt nach Vorlage aller Dokumente, ob die Errichtung der Aktiengesellschaft ordnungsgemäß erfolgt ist. In einem letzten Schritt wird die Eintragung ins Handelsregister vorgenommen — deine Aktiengesellschaft gilt damit offiziell als gegründet.

The Founding Process at a Glance

• Phase 1 — Construction in the internal relationship
  • Determination of the bylaws (notarially certified)
  • Share acquisition
  • Order of the company organs (notarially certified)
  • Possibly ordering the final examiner
  • Einzahlung der Einlagen (mind. 1/4 Grundkapital = 12.500 €)
    ]]> https://lukinski.com/limitation-of-liability-for-ag-bodies-internal-relationship/ Mon, 08 Mar 2021 15:24:26 +0000 https://lukinski.de/limitation-of-liability-for-ag-bodies-internal-relationship/ Limitation of liability for AG executive bodies – In the event of a loss, the stock corporation as a legal entity under private law is, to a certain extent, subject to a limitation of liability, because the liability – apart from a few rare exceptions – exclusively burdens the business assets of the company. In the external relationship, therefore, only the share capital is liable for any losses. In the internal relationship, on the other hand, the liability claim can vary depending on the executive body of the AG. Here you can find all legal forms and here you can go back to the overview AG.

    Limitation of liability for AG bodies

    In principle, it is possible to arrange for a limitation of the liability of an AG in the internal relationship. Such a limitation is, for example, the requirement of approval by shareholders, according to which particularly risky projects are to be supported and approved by the shareholders. This spreads the liability risk and relieves members of the management board plus members of the supervisory board.

    Alternatively, agreements can be made regarding the limitation of claims. However, the protection of creditors must not be violated by law, which is why this form of limitation of liability does not offer comprehensive legal certainty. In all simplicity, however, it is also possible for shareholders to express a waiver of the liability of the supervisory board and management board in a shareholders’ resolution. However, such a resolution may not be adopted before the end of the third year after the liability claim has arisen.

    Limitation of liability in the internal relationship of the AG:

    • Shareholder approval
    • Covenant
    • Waiver of liability by resolution

    Liability of the Management Board – breaches of the duty of care

    As the management body, the management board takes over the operational business and enjoys a great deal of freedom with regard to the management of the company. This requires a high degree of trust on the part of the other executive bodies, which is why the management board is subject to a duty of care as a basis for liability: After all, it works with the shareholders’ deposits and not with its own finances! Accordingly, the management board is liable for breaches of the duty of care imposed on it and for criminal offences. In the event of liability claims, the management board is held liable by the supervisory board.

    Liability of the Supervisory Board – Breaches of Principle & Principle of Confidence

    The supervisory board is also subject to a duty of care – more precisely: the principle of careful and orderly management – and must act in accordance with the principle of trust vis-à-vis the management board. It is liable to the stock corporation and its shareholders for damages caused by financial losses, but also to third parties insofar as they are affected by a culpable act on the part of the supervisory board.

    Liability of shareholders – individual liability & pass-through liability

    Each shareholder is individually liable to the extent of the shares he holds. Creditors can therefore in principle not encumber his private assets should the value of his contributions be insufficient. The only exception to this rule is the so-called “pass-through liability”, in which the strict separation between business and private assets can be waived under certain circumstances. An assessment in this regard must be determined by the respective competent court.

    Establish a GmbH: Legal form and alternatives

    1. Limited liability company (GmbH)
    2. Special case: Real estate GmbH
    3. Legal forms: List

    Limited liability company (GmbH)

    Limited Liability Company (Gesellschaft mit beschränkter Haftung, GmbH) – The limited liability company is a German legal form that is founded by at least one person and managed by at least one shareholder. As the name already indicates, this corporate legal form is characterized by a limitation of liability for its shareholder(s).

    • Limited liability company (GmbH)

    

    Special case: Real estate GmbH

    Immobilien GmbH / Vermögensverwaltende GmbH / Immobiliengesellschaft – In this article you will learn the basics about real estate companies. Who would think of founding a limited liability company when buying a house or a condominium? Admittedly, this makes no sense for owner-occupation, but it does for renting.

    • Real estate company

    

    Here you will find all the legal forms that can be chosen as a founder in Germany and a guide with a checklist:

    Legal forms: List

    Legal forms – What types of company are there? If you want to start your first company, then choosing the ideal legal form is one of the first steps in the process of setting up a company. Whether it’s a special real estate company or a start-up, I’ve summarized all the types of companies in Germany for you here.

    • Legal forms: List

    

    ]]> https://lukinski.com/organs-of-a-gmbh-managing-director-supervisory-board-company-meeting/ Mon, 08 Mar 2021 14:48:20 +0000 https://lukinski.de/organs-of-a-gmbh-managing-director-supervisory-board-company-meeting/ A limited liability company consists of several bodies. The managing directors deal with the day-to-day business and other matters of the company and represent their company externally in accordance with the GmbHG. The supervisory board is required by law above a certain number of employees and acts as a controlling body of the company by appointing and advising the management, but also by monitoring and, in case of doubt, dismissing it. Alternatively, its establishment can also be determined within the framework of the articles of association. The shareholders’ meeting acts as the decision-making body of the GmbH. Here you can find all legal forms and here, you can go back to the overview GmbH.

    Organs of a GmbH – management, control & resolution

    A limited liability company can only function if all its bodies work together. This requires a high level of trust and an equally high level of reliability for the individual shareholders.

    Managing Director – The Management Body

    A GmbH has at least one managing director who, according to his employment, is characterised by a management authority in the internal relationship and a power of representation in the external relationship. This can be one of the GmbH shareholders – one then also speaks of shareholder managing directors – but does not have to be. The term of office is not limited in time.

    Supervisory Board – The supervisory body + Labour Director

    The composition of the supervisory board is prescribed in different legal sources depending on the number of employees of a company. A supervisory board consists of both members of the company – i.e. the shareholders – and employees, with all members of the supervisory board having the same rights and obligations.

    If the company has fewer than 500 employees, the law does not require the establishment of a supervisory board. In this case, the GmbH may decide for itself whether or not a supervisory body appears to make sense for the company from a situational point of view.

    One-Third Participation Act for more than 500 employees

    If there are more than 500 employees, the One-Third Participation Act (DrittelbG) comes into play. This limits the supervisory board to a minimum of three and a maximum of 21 council members. The size of the supervisory board is directly related to the size of the company. As the name of the law suggests, one third of the supervisory board must be made up of employees, who are elected as employee representatives by the entire workforce in a ballot.

    Montan Co-Determination Act for more than 1,000 employees (coal and steel industry)

    Coal and steel companies with more than 1,000 employees are subject to the Coal and Steel Co-Determination Act (Montan-MitbestG). Companies that are active in mining and the iron and steel producing industry are considered to be part of the coal and steel industry. The supervisory board is formed on an equal footing between the employer side and the employee side. In addition, the so-called “neutral man” is appointed. As a rule, the supervisory board consists of eleven members – depending on the share capital, it can be expanded to 15 or 21 members if necessary. Furthermore, there is a requirement to appoint an equal member to the Board of Management as Director of Labor Relations. All members of the Supervisory Board are elected at the Company’s Annual General Meeting, taking into account the proposals made by the Works Council.

    Co-determination Act for more than 2,000 employees

    In the case of more than 2,000 employees, on the other hand, the German Co-Determination Act of 1976 (MitbestG) applies. Accordingly, the supervisory board is composed of equal numbers of employees and shareholders. The shareholders’ side provides the chairman of the supervisory board, who may make use of his double vote in the event of a stalemate. In addition, an equal member must be appointed to the management board to take the position of labor director. Depending on the size of the company, between twelve and 20 supervisory board members may be appointed according to the MitbestG. If the GmbH does not have more than 8,000 employees, the election takes place directly; in all other cases, the election is conducted by secret ballot and is subject to the principles of proportional representation.

    Shareholders’ meeting – The decision-making body

    A shareholders’ meeting is convened by registered letter from the managing director(s). During the meeting, the GmbH shareholders can discuss and vote on important matters of the company, which is why the shareholders’ meeting is also defined as a decision-making body. Each shareholder receives votes in proportion to his share in the company. Thereby, the shareholder is granted one vote per 50 Euros.

    Establish a GmbH: Legal form and alternatives

    1. Limited liability company (GmbH)
    2. Special case: Real estate GmbH
    3. Legal forms: List

    Limited liability company (GmbH)

    Limited Liability Company (Gesellschaft mit beschränkter Haftung, GmbH) – The limited liability company is a German legal form that is founded by at least one person and managed by at least one shareholder. As the name already indicates, this corporate legal form is characterized by a limitation of liability for its shareholder(s).

    • Limited liability company (GmbH)

    

    Special case: Real estate GmbH

    Immobilien GmbH / Vermögensverwaltende GmbH / Immobiliengesellschaft – In this article you will learn the basics about real estate companies. Who would think of founding a limited liability company when buying a house or a condominium? Admittedly, this makes no sense for owner-occupation, but it does for renting.

    • Real estate company

    

    Here you will find all the legal forms that can be chosen as a founder in Germany and a guide with a checklist:

    Legal forms: List

    Legal forms – What types of company are there? If you want to start your first company, then choosing the ideal legal form is one of the first steps in the process of setting up a company. Whether it’s a special real estate company or a start-up, I’ve summarized all the types of companies in Germany for you here.

    • Legal forms: List

    

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