How to close a GmbH in Germany: A step-by-step guide for expats

Are you an expat entrepreneur in Germany and wondering how to close your GmbH? German company law may seem complex, but with the right guidance the process can be straightforward. This guide by GmbH Tax Services outlines the key steps to help expatriates close their German company efficiently.

What is a GmbH?

A GmbH is a common business structure in Germany, similar to a limited liability company. It provides limited liability for shareholders and a flexible organisational structure.

Key terms in dissolving a GmbH

Here are some key terms you should know:

• Dissolution: The legal act of ending a GmbH’s existence. A dissolved company must go through liquidation.
• Liquidation: The process of settling the GmbH’s debts and distributing assets to shareholders.
• Deregistration: The official removal of the GmbH from the Commercial Register.
• Shareholder resolution: A formal agreement by shareholders to dissolve the GmbH.
• Liquidator: An individual appointed to manage the process.

Step-by-step guide to closing a GmbH

Here is a handy step-by-step guide on how to close a GmbH:

1. Shareholder resolution

The first step is passing a shareholder resolution to dissolve the company. This must be documented in writing, signed by all shareholders, and usually notarised.

2. Appointing a liquidator

After the resolution, acting managing directors must be appointed as liquidators. Liquidators act as the legal representatives of the GmbH during liquidation. The liquidator’s duties include:

• Collecting and managing company assets.
• Settling debts and obligations.
• Distributing remaining assets to shareholders.
• Filing necessary documents with authorities.

3. Finalising accounts

Prepare and finalise the GmbH’s accounts to ensure financial transparency. The liquidator must:

• Create an opening balance sheet at the start of liquidation.
• Prepare interim financial statements.
• Draw up a final balance sheet.

4. Asset distribution

Assess the company's assets and settle all debts. Remaining assets are then distributed to shareholders.

5. Blocking year

A mandatory one-year waiting period begins after the dissolution resolution is published in the Federal Gazette. This period allows creditors to claim any outstanding debts.

6. Removal from the Commercial Register

After the blocking year, submit the final balance sheet to the Commercial Register. Once all requirements are met, the company is officially deleted from the register, marking the end of its existence as a legal entity.

Duties and responsibilities of liquidators

Liquidators play a pivotal role in the dissolution and liquidation process. Here’s a detailed look at their key duties:

• Notification of creditors: One of the first tasks for liquidators is to notify all outstanding creditors. This is typically done through a public announcement in the Federal Gazette, ensuring that creditors are aware and can file their claims.
• Carrying out tasks: Liquidators should manage the company’s assets and liabilities. This involves overseeing the day-to-day operations.
• External representation: Liquidators represent the GmbH externally, including in legal matters. They are responsible for communicating with creditors, shareholders, and other stakeholders.
• Bookkeeping and accounting: Maintaining accurate and up-to-date financial records is crucial.
• Insolvency proceedings: If the company’s financial situation deteriorates, liquidators must monitor and, if necessary, file for insolvency.
• Distribution of assets: After settling all debts, liquidators are responsible for distributing the remaining company assets to creditors and shareholders. This must be done in accordance with the law and the company’s articles of association.

Liquidators must exercise the greatest possible care in carrying out their duties, as they are personally liable in case of a breach of their obligations.

Navigating tax implications

The closure of a GmbH entails various tax obligations, including corporation tax, trade tax and VAT. During liquidation, outstanding taxes must be paid and final tax returns submitted.

Costs and fees associated with closing a GmbH

Closing a GmbH involves various costs and fees, which can vary depending on the complexity of the case and the services required. Here’s a breakdown of the potential expenses you might encounter:

• Notary fees: Notary fees are incurred for preparing and certifying the dissolution resolution and other necessary documents. These fees can range from 500 to 2.000 euros, depending on the complexity of the documentation.
• Court fees: Filing the dissolution resolution and other documents with the court incurs fees, which can range from 100 to 500 euros. These fees cover the administrative costs associated with processing the dissolution.
• Accounting and bookkeeping fees: Preparing the opening balance sheet, annual interim balance sheets and the final balance sheet requires professional accounting services. These fees can range from 500 to 2.000 euros.
• Tax consultant fees: Engaging a tax consultant to prepare tax returns and provide tax advice is essential. These fees can range from 500 to 2.000 euros, ensuring that all tax obligations are met, and potential liabilities are minimised.
• Other costs: Additional costs, such as publication fees for the Federal Gazette, can range from 100 to 500 euros. These fees cover the cost of public announcements required during the liquidation process.

It’s important to note that these are estimated costs and fees. Consulting with a qualified tax consultant can provide a more accurate estimate and help you navigate the financial aspects of closing your GmbH.

Alternatives to dissolution

Expats might consider alternatives to dissolution, such as:

• Selling the business: Transferring ownership to a buyer may offer better financial outcomes.
• Restructuring: Changing the legal structure or modifying operations can provide future opportunities.
• Merging: Combining with another company can leverage resources and create a stronger business.

Seeking professional assistance

By following these steps and seeking professional advice, foreign entrepreneurs can close their limited liability companies smoothly, efficiently and in compliance with regulations.

GmbH Tax Advisor is Germany's go-to tax advisor for English-speaking owners of limited liability companies (GmbH). They take the hassle out of German tax law, making it simple and convenient for their clients. Visit their website to see their full range of services.