Costs of founding and managing a GmbH
WARNING
The information provided is based on personal experience and does not constitute legal advice, tax advice, or any other regulated advice.
This guide provides an overview of the cost structure and assists with navigation during the initial years of operating a GmbH. Learn how to strategically plan your expenses and make your dream of a successful business a reality.
If you decide on the legal form of a GmbH, an important question arises: What costs can you expect? In this article, we will walk through the different cost blocks that may arise and help you to quantify them. The goal is to gain a clear overview so that you can plan your budget effectively and efficiently. With the right knowledge and solid planning, you can successfully launch your business and put it on a path to scale.
Overview for the First Business Year
| Purpose | Founder | Company |
|---|---|---|
| Deposits | €25,000 | - |
| Notary | €350 | - |
| Commercial Register | €150 | - |
| Trade Office | €30 | - |
| Transparency Register | - | €20 / Year |
| Professional Association | - | >€50 / Year |
| Operational Liability Insurance | - | €400-1,000 / Year |
| Tax Consultant | - | €2,500 / Year |
| Business Bank Account | - | €120 / Year |
When estimating the running costs for a GmbH, you can use €300 per month as a benchmark. This amount can, of course, vary depending on the size of your company and the specific costs involved in your business model. However, it's a good starting point for your financial planning.
In addition, when setting up your GmbH, you should also consider the founding costs. These costs generally include legal advice fees, notary costs, and fees for registration in the commercial register. On average, you can expect about €600 here.
The First Months
At first glance, €25,000 might seem like a substantial amount for the start-up phase of your business. However, it's important to understand that a GmbH can incur many costs in the first few months. It's not uncommon to have to budget for additional operating costs of between €5,000 and €10,000 in the first two months alone.
Particularly in industries like the consulting sector, travel and accommodation costs can quickly add up. Also, investments for IT equipment or setting up a mobile phone contract, which is necessary for registering with Amazon Business, for example, should not be underestimated.
Furthermore, it's important to note that customer invoices are often not paid until 20 to 30 days after they've been issued. Therefore, you should not expect your first income before the third month of your business operations.
With these factors in mind, it's easy to see why the initial amount of €25,000 can quickly be depleted, and why a well-thought-out financial plan is essential.
Founding
Notary
A crucial step in establishing a GmbH is notarization. For this process, you can expect costs of about €350. It's important to understand that these costs must be borne by the founders themselves and do not count as an operating expense of the GmbH.
However, in the founding protocol, you have the option to make agreements about the GmbH taking over the founding costs. It's worth considering whether and to what extent the GmbH should take over the shareholders' founding costs.
The decision can have various impacts on the financial structure of your company and should therefore be carefully weighed.
Commercial Register
After founding your GmbH, you will automatically receive an invoice from the responsible commercial register. This is usually about €150. It's important to note that this invoice is not to be paid from the business account of the GmbH, but by the shareholders.
This is another cost point that you need to consider in your financial planning. It shows once again that besides the obvious operating costs, there are also a range of other expenses that need to be taken into account when founding and running a GmbH.
Trade Office
The processing fee for registering your business is usually about €30. However, it's important to know that the fee notice may not be clearly marked as such. In some cases, the information about the fee is integrated into the flow text of the registration confirmation and can therefore be easily overlooked.
This can result in missing the payment and subsequently incurring reminder fees. To avoid this, it's crucial to carefully read all documents carefully you receive during the founding of your GmbH and to pay all due fees and costs promptly.
Transparency Register
A continuous obligation that you should consider is managing your entry in the Transparency Register. This task, not only legally required but also crucial, requires you to ensure the accuracy of the information on an ongoing basis. The Transparency Register levies an annual fee of about €20 for this ongoing management.
This recurring fee should be firmly budgeted in your annual budget. Don't forget that accuracy and timeliness are key here to meet legal requirements and avoid any misunderstandings.
Deposits
The share capital refers to an amount of €25,000 that you as a founder must bring in when establishing your GmbH. It serves as collateral and is available to the company at its discretion. However, beware: If the share capital is exhausted, you as a shareholder are personally liable to cover the deficit up to the limit of €25,000.
However, there is a way to reduce the deposit at the beginning. You can initially only bring in €12,500. However, it is important to note that you are then obligated to contribute at least 20% of the determined business profit as additional share capital each year until the full amount of €25,000 is reached.
It is important to understand that this deposit is not a cost to the GmbH. Rather, they are private expenses that you as a founder have to bear.
Costs in the First Year
Professional Association
Registration with the relevant professional association is an essential step in the establishment of your GmbH, regardless of the number of employees. Even a 1-person GmbH, which is often exempt from contributions, must be registered. Otherwise, a fine of up to €25,000 is threatened. It is advisable to complete this registration immediately after the notarization of your GmbH.
The costs for membership in the professional association vary depending on the risk class of your business and the income of your employees. As a guide, you can assume that for a marginally employed person (mini-jobber with a monthly income of €520), you will have to reckon with a minimum contribution of about €50 per year.
Tax Consulting
Tax consulting is a crucial aspect that you should not neglect. The preparation and publication of the annual commercial and tax balance sheet is usually carried out by a tax consultant. Especially in the first years of your business activity, there will be numerous questions about how certain items should be booked, or whether they can be classified as business expenses.
A tax consultant can help you optimize the various depreciation options. This is a valuable service, but you should expect operating costs of about €2,500 per year.
It is common for tax consultants to demand monthly installments. One of the reasons for this is that in the event of bankruptcy, the dissolution of the company must be accompanied by the tax office. Therefore, it makes sense to plan for these regular costs in your budget.
Operating Costs
Commercial Liability Insurance
While commercial liability insurance is not legally required, it is an important consideration for your GmbH. It is particularly relevant if you offer consulting services, as many clients require the presence of such insurance. In addition, the absence of commercial liability insurance can be seen as an indicator of pseudo self-employment during audits.
The costs for commercial liability insurance vary depending on the covered services and the nature of your trade. As a rule of thumb, however, you can assume that for a company with an annual turnover of up to €100,000, costs between €400 and €1,000 per year will be incurred. It is therefore a sensible investment that can protect you from potential risks.
Exali
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Bank Account Management
The selection of the right business account for your GmbH can have a significant impact on your monthly operating costs. Most banks offer their business accounts for a fee. These can vary greatly in terms of the monthly basic costs and the costs per booking. In particular, the number of bookings can quickly lead to unexpected costs.
Before opening an account, you should also consider other factors. For example, do you need a credit card? Does your tax consultant or accountant need access to the account? All of these aspects can influence costs.
Depending on the specific requirements of your company, the monthly costs for a business account can range between €10 and €100. It is therefore worthwhile to compare different options and find the best solution for your specific needs.
Finom
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Salaries
Planning your salary expenditures is one of the most important aspects of running your GmbH. In the initial phase, you as the owner and shareholder may choose to forgo drawing a salary in order to preserve the operating assets. However, as soon as the financial situation of your company stabilizes, you should consider introducing salary payments.
Especially if you have employees who are financed through customer contracts, you must consider that you often need to provide up to three months' salary in advance until the first customer invoice arrives in your business account. This lead time can place a significant burden on your liquidity, especially in the initial phase of your business.
Salaries can quickly become one of the largest cost blocks of your business, so it is crucial to carefully consider these costs in your financial planning. Don't forget to plan enough reserves to make these salary payments without getting your business into financial difficulties.
Taxation
Profit
When it comes to taxation and profit, there are some key points you should keep in mind. Unlike in partnerships/freelance, there is no tax-free allowance for profits in a GmbH. This means that the entire profit earned is subject to corporation and trade tax.
Tax rates can vary by municipality, but as a guideline, you can assume that about 30% of your profit will have to be paid as corporation and trade tax. This potential burden must be taken into account in your financial planning to avoid financial difficulties.
It's also important to understand that profit is only determined and taxed in the following year. However, the tax liability remains, even if the money has been spent in the following year. Therefore, it is crucial that you set aside enough funds to cover the estimated corporation and trade tax. Otherwise, there could be financial shortfalls that could endanger the continuity of your business.
Costs from the Second Year Onwards
Tax Consultant
In the first year, the fees for tax consulting are often based on estimates. However, it may be that these estimates were set too low and the actual costs prove to be higher. Your tax consultant will adjust the fees in this case based on the actual costs incurred.
It's not uncommon for the monthly installments for tax consulting to increase significantly, maybe even double, once an accurate assessment of the actual requirements and effort is possible. You should definitely take this adjustment into account in your budget for the second year to avoid unexpected surprises.
Corporation and Trade Tax
In the second year of your company, you will be asked to make quarterly prepayments on corporation and trade tax. These advance payments are based on your company's profit in the first year. It's important to take this into account in your financial planning as these additional costs occur in the second year and were not recorded in the first year. Please note, if the profit in the first year was high, these quarterly payments can represent a considerable financial obligation.
Chamber of Commerce (IHK) or other Chamber
Another point to consider is the Chamber of Commerce (IHK) fees. The exact amount of fees depends on the respective chamber and region and is based on your company's profit. As a rough guideline, you can budget approximately 0.25% of your profit for the Chamber of Commerce fees.
Usually, no Chamber of Commerce fees are charged in the first year. However, in the second year, the fees for the first year are retrospectively charged and as a prepayment for the current year.
Get Started and Plan Your Own GmbH
Create a planning Excel document to plan the next 18 months of your GmbH business activity in detail.
- Create a column for each month, starting with the current month and ending with the 18th month.
- Add rows for the expected income and expenses in each month.
- Consider all relevant cost blocks we have covered in this compendium, such as founding costs, ongoing operating costs, tax payments, and other factors that are specific to your company.
- Create a row for the total amount of income and expenses per month, as well as a row for the accumulated values over the months.
It is recommended to match the planning data with the actual data monthly, thus introducing a monthly rolling budget.