Not every foreign entrepreneur, who has built a strong network in Germany, wants to set up a new corporation to do business in Germany. The required amount of work and capital to incorporate a company may seem rather high. Opening up a representative office would be a viable alternative.
A representative office does not have its own legal personality, but it can perform certain activities on behalf of its parent company, such as market research, customer support, or advertising. This option allows a foreign entrepreneur to establish a presence abroad, without the need for significant capital investment.
However, German law is not familiar with the term "representative office". Depending on the office's organization, different options should be taken into account. The foreign entrepreneur can choose between opening an independent branch, a dependent commercial unit or an office managed by a commercial agent.
- An independent branch functions as unincorporated body. From an organizational standpoint, it belongs to the parent company, but may engage in business transactions independently. This shows through separate accounting and balances. You have to register the branch with the Gewerbeamt (local trade office) und the Handelsregister (commercial register).
- A dependent commercial unit is entirely connected to headquarters. In most cases, it engages in business transactions and thus needs to be registered with the local trade office.
- If the office is managed by an independent commercial agent, said individual engages in business transactions on behalf of the company.
To explore the German market and gain a first impression, opening a representative office might be a suitable solution. However, if you regularly engage with German clients, you should strongly consider registering a German corporation.
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