Euro 2016 Rematch! Can France win against Germany when it comes to incorporating a business?
Many entrepreneurs may consider Paris or Berlin when launching their new business. Once market fit, language barriers, and any financial blockages are removed, the decision may become easier; but what about all the details when it comes to running the business?
Think of the incorporation process as the entrance door to launching a business. How complex are the steps between having an idea and starting to sell? How fast can it be done?
In both countries, you’ll need to prepare (and agree upon) bylaws, and usually you can add a partnership agreement. Depending on the level of detail needed and whether or not legal experts are involved in the drafting and discussion process, in both countries this can take anywhere from an hour up to three months.
Although in Germany you can save discussion time by using the Standard Record (setting up the very basic rules for the governance of your company), you will still have to organize a face-to-face meeting with a notary. Note that this meeting has no equivalent in France, and so making the German CEO see a notary in person can be seen as a time-consuming inconvenience.
In terms of social capital, both countries require it to be deposited.
In France you deposit your social capital into an escrow account (held by banks, notaries or lawyers). Fortunately, no matter what you choose, this can be completed online. Again, in Germany there is a bit of extra time and complexity to this process. There you will need a copy of the signed and certified bylaws to open the bank account and deposit the money; here, you’ll again need to plan on some extra time, as some documents need to be sent by post and the bank may require additional time to proceed with ID checks.
So is the process really much simpler in France?
Although France allows for digital signatures and online filing for administrative documents, French CEOs will still have to produce many documents based on their personal situation. You also face costs for the publication of a legal announcement, and must wait for the Trade Registry to communicate with all of the various administrations and tax authorities before you receive your Trade Certificate (K-Bis).
By contrast, in Germany the notary handles all the required documents for being entered into the commercial register. Unfortunately, another application at the trade office is necessary to obtain the trade licence. Whereas some cities such as Berlin and Hamburg provide an entire online application service, others require you to send the Trade application by post.
It is with the reception of the VAT number — within two months in France and after one month in Germany — that marks the completion of the incorporation process.
So is the legal process a blockage?
Even if legal processes are not the main argument for deciding upon the location of your business, it will have an impact the speed of your launch and the simplicity of your company governance.
As described, the incorporation process in France and Germany is comparable; nonetheless, the French process is a little easier and can now be paperless. To keep up with the times, the old fashioned incorporation in Germany needs to undergo a modernisation to approach paperless processing. Providing for the online filing of documents and using digital signatures should be the goal in the immediate future, and ultimately Germany should follow France’s example of successfully streamlining the processes in order to make incorporation there more attractive for entrepreneurs.
Co-author Sabine Zylberbogen & Selina Schultz
