Other Legal Issues

Registration of the company

Each legal form requires a different application procedure, which you must also include in your considerations. Always make sure that the registrations are correct and complete.

You have to register your company with different authorities:

Tip: Contracts or signatures must be notarised in many cases, e.g. applications for registration in the commercial register or property purchase agreements.

Tax office

You will receive a tax number from the tax office and, if you are internationally active, a “VAT identification number” upon request, so that you can pass on the collected VAT to the tax office.

Trade office

You must always register a trade if you do not practise a liberal profession (e.g. doctors, architects, lawyers, artists, journalists, midwives, tax consultants) and are not a farmer or forester. Additional authorities are usually automatically informed about your start when you register your business: Tax office, Employer's Liability Insurance Association, State Statistical Office, Chamber of Trade, Chamber of Commerce and Industry and the Commercial Register Court.

Tip: Since these redirects do not always work smoothly, you should make the registrations yourself again.

Employer's Liability Insurance Association (Berufsgenossenschaft)

If you employ staff, you must insure them with the Employer's Liability Insurance Association (Berufsgenossenschaft, BG), depending on the industry. Depending on the occupational group, you are also obliged to take out statutory accident insurance personally there. If not, you can take out voluntary insurance. Further notes and information: Bundesverband der Berufsgenossenschaften, https://www.dguv.de/en

State Employment Agency (Agentur für Arbeit)

Here you will receive a company number in case you ever employ any staff. For mini-jobs there is the Minijob Zentrale.

Health insurance fund (Krankenkasse)

You must contact the health insurance fund as soon as you employ staff. Pensions, unemployment and long-term care insurance: In Germany, all questions concerning social insurance are handled by the health insurance funds.

Commercial Register

You must have your company entered in the commercial or partnership register at the local court if your legal form requires this or if you wish the entry to be made for other reasons (e.g. to demonstrate reputability to your customers). The registration also protects your company name on a local level to a certain extent.

Tip: Nevertheless, check a real trademark registration as quickly as possible (word-picture material, internet domain). For more information, please contact the German Patent and Trade Mark Office or the chambers of commerce.

Chambers of Commerce and Industry

Membership of the competent chambers is mandatory for some professional groups.

Utility companies

Water, electricity, gas, and refuse collection: You can obtain the basic supply for your company premises from your local utility company.

Contracts and drafting of contracts

You are confronted with the subject of law not only when choosing the legal form, but of course also with every contract you conclude. Its concrete form might be vital for your survival and requires a lot of experience.

The old adage that all important agreements should be recorded in writing, even if this is not always prescribed, remains true. This helps you to avoid difficulties at a later stage.

Employment contracts

Your rights and obligations towards an employee must be regulated in an employment contract, which should in particular contain the start and place of work, a rough job description, salary, working hours, leave, notice periods and agreements on a probationary period. If the employment contract is not concluded in writing, you must inform the employee of the main terms and conditions of the employment relationship in writing no later than one month after conclusion of the employment contract. Always conclude fixed-term contracts in writing. The contract is usually based on collective agreements. As an employer, you are bound by it if you are a member of the employers' association or if the collective agreement has been declared generally binding by the Federal or State Minister of Employment. Otherwise, you can also base the contract on a collective agreement on a voluntary basis.

As an entrepreneur, you should observe the following structure when it comes to employment relationships:

Field of activity

  • Define the field of activity—e.g. through a concrete job description or a description of responsibilities that becomes part of the contract.
  • In any case, make sure that you include a transfer clause. This gives you the option of transferring the employee to another location at any time by virtue of your management rights.

Start of activity

  • Determine the start date.
  • If an examination is a prerequisite for employment, you should include this in your employment contract (“Recruitment will take place on .... provided that ...”).

Working time

  • Determine the number of hours per week.
  • Also determine the number of hours per day: When does work start and when does work end?
  • Write a valid works agreement, if necessary.
  • Check whether collective agreement regulations apply to you.
  • Regulate the overtime issue.


  • Is an open-ended contract concluded? If so, how long is the probationary period?
  • Is there a fixed-term contract that expires automatically if it is not renewed?


  • Specify the amount of the remuneration (incl. bonuses).
  • Note the relevant pay scale conditions.
  • When is the salary paid?
  • Will you pay a holiday bonus?
  • In the case of fringe benefits, such as Christmas bonuses, you can agree a repayment clause and determine whether it is a firm commitment or a revocable voluntary benefit from the employer.

Illness and continued payment of wages

  • Anyone who is absent for more than two days due to illness must present a medical certificate.
  • In the event of illness, the statutory six-week rule applies to continued payment of wages (after which the health insurance fund assumes responsibility).

Annual leave

  • Determine the number of holiday days per year (according to the Federal Leave Act [Bundesurlaubgesetz], at least 24 days of annual leave are required by law)
  • Arrange the necessary coordination with operational conditions (e.g. company holidays during the summer holidays).

Contractual penalties

  • Is it possible or impossible to terminate the contract before starting work?
  • Should the payment of a contractual penalty (e.g. one month’s salary) be agreed in the event of termination before commencement of work?
  • Do you have to reserve additional claims for damages against the “almost-employee”?


  • Notice periods are subject to legal regulations. The periods are extended depending on the length of service with the company.
  • In the case of executive employees, longer periods are agreed in order to bind them.
  • The termination must be in writing for both parties to the contract.
  • Non-disclosure agreement
  • Employee's obligation to maintain secrecy about internal company information, customer data, etc., even after the end of the employment relationship.


  • This allows you to commit your employee, for example, to refrain from working for a competing company for a period of two years after termination of the employment relationship.
  • Important: Such a clause is only effective if compensation of at least 50% of the remuneration is granted for this.

Secondary activities

  • A restriction of secondary activities is only permissible if these would collide with the work duties.
  • Wordings according to which the employee is obliged to report the secondary activity are useful. If he fails to do so, claims for damages may arise.


  • These agreements exclude the possibility that claims under employment contracts may still be asserted after a certain period of time. Such clauses are included in almost all collective agreements.

Other agreements

  • All individual agreements should be recorded in writing.

Tip: Arrange a probation period in order to be able to terminate the employment relationship at short notice if you and your new employee do not fit together well.

Labour law issues

Further rights and obligations: You have to comply with the occupational health and safety regulations towards the employees. Trade inspectorates, professional associations and medical officers do verify this. Furthermore, additional laws for the protection of different groups of persons (e.g. law on the protection of minors, maternity protection, severely disabled persons) must be observed and in some cases displayed. If you want to hire a freelancer, employ a part-time employee or a temporary employee or employ someone for occasional requirements only, you must pay attention to other particularities, such as the contribution to the artists' social insurance fund for freelance, creative employees (graphic artists, journalists, media designers, etc.).


Franchising is a special form of incorporation. With this business model, you use the finished concept of a franchise holder and pay a license fee for this (well-known examples): McDonald's or Blume2000). Fees and costs are often incurred by the franchisee for the following items:

  • entry fee
  • ongoing fee (usually a percentage of turnover)
  • advertising
  • Investments

Franchise systems are generally a promising model for business start-ups, because you can build on a proven concept and concentrate on the important details of your branch opening (e.g. location, selecting staff, adjusting advertising measures). Because every franchising system is different, there are no generally valid standard contracts. Therefore, obtain sufficient expert advice before signing a contract, e.g. from the Franchise Association and your chamber of commerce.

Sample text: Other legal issues
The partners are liable with their private assets; in the notarially certified partnership agreement it is agreed that each partner has to make a contribution of EUR 15,000. A business registration at the local district office is required. The district office will then inform the tax office of our registration. According to commercial and tax law we are obliged to keep accounts. Our business is subject to turnover tax.