What Does Company Formation Cost? Fees, Share Capital and Additional Costs

Those who set up a company usually budget for the share capital, but rarely for everything else that comes with it: notary, commercial register, trade office, insurance, software. Many of these items only become visible once the formation is already under way. That is exactly when unplanned costs can become unpleasant. This overview shows which costs arise, which of them are mandatory and where you have room for manoeuvre.

At a glance

The costs of a formation do not consist only of the share capital. Depending on the legal form, statutory fees apply, and there are often further expenses that many founders initially underestimate.

Mandatory costs are above all the notary fees under the Court and Notary Fees Act (GNotKG), the commercial register fees and, for commercial activities, the trade registration.
The share capital belongs to the company’s assets and is not a formation fee.
The amount of the mandatory costs depends, among other things, on the legal form and the design of the articles of association.
Further costs, for example for tax advice, business address or software, arise depending on the business model.
After formation, running expenses are added, for example for bookkeeping, insurance and chamber contributions.

The four cost blocks of a formation

Formation costs can be sorted well by dividing them into four blocks:

Mandatory costs: notary fees, commercial register fees and, for commercial activities, the trade registration.
Capital: the share capital of a UG or GmbH or the share capital of an AG. It stays in the company and is not an expense.
Practical additional costs: tax advice, business address, website, software, insurance and business bank account. Not prescribed, but regularly needed in practice.
Running costs: chamber contributions, employers’ liability insurance association, bookkeeping, account management and software licences from day one.

Those who go through these four blocks early avoid the typical situation of invoices arriving shortly after formation that nobody expected.

Statutory mandatory costs

Notary fees

The costs of notarisations follow from the Court and Notary Fees Act (GNotKG). The fees are calculated according to statutory rules; there is no individual pricing. The same calculation bases therefore apply to comparable notarial services, regardless of which notary’s office you use. The specific amount, however, depends on the individual case, for example the share capital, the number of shareholders and the scope of the required declarations. The main part is made up of the notarisation of the articles of association or model protocol and the application to the commercial register.

Commercial register fees

Court fees are payable for the registration of a corporation in the commercial register. The specific amount depends on the respective registration procedure and the legal form. As a rough guide, corporations can expect a low three-digit amount.

Trade registration

The fees for trade registration are set by the respective municipality. They are usually in the low double-digit range, roughly between 20 and 60 euros. Activities requiring a licence, for example in skilled trades or catering, may trigger additional fees.

An important distinction: freelancers generally do not have to register a trade, but notify the tax office of their activity. In case of doubt, the tax office decides whether an activity is commercial or freelance.

Share capital: capital, not an expense

Share capital is often misunderstood as a cost factor. In fact, it is neither a fee nor a payment to the notary or register court. It is made available to the company, usually by payment into a company account, and then belongs to the company’s assets. In return, the shareholders receive their shares. The company can use the capital for business purposes, such as purchases or running expenses. At the same time, the capital maintenance rules apply: the share capital is company property and not a private reserve of the shareholders.

GmbH

The minimum share capital of a GmbH is EUR 25,000. In a cash formation, at least a quarter of the nominal amount of each share taken over must be paid in before the application to the commercial register, in total at least EUR 12,500. The obligation to pay the outstanding amount remains. The basis for this is Section 7(2) of the German Limited Liability Companies Act (GmbHG).

UG (haftungsbeschränkt)

Legally, a UG is possible with share capital of one euro. In practice, that rarely makes sense. Notary, register court, business account, initial software or advisory costs alone can immediately exceed the capital. Those who start too tight risk liquidity problems very early. So plan the share capital not according to the legal minimum, but according to what your business actually needs in the first months.

With a UG, the specified share capital must be fully paid in before the application; contributions in kind are excluded (Section 5a(2) GmbHG). In addition, under Section 5a(3) GmbHG a statutory reserve must be formed in the annual balance sheet, into which a quarter of the annual net profit, reduced by any loss carried forward, must be placed.

Sole proprietorship

Sole proprietors do not need any statutory minimum capital. Sufficient financial means for investments and running expenses should nevertheless be planned, because the invoices of the first months arrive regardless of the legal form.

Cost differences between the legal forms

How much the formation costs in total depends heavily on the chosen legal form and the need for individual provisions. The choice between model protocol and individual articles of association has a major influence: the model protocol can save costs in simple formations, but is only suitable for certain standard cases with up to three shareholders and one managing director. Anyone who needs provisions on voting rights, share transfers, compensation, succession or special shareholder obligations usually needs individual articles of association. Which legal form suits your project is examined in more detail in the article on choosing a legal form.

Legal form	Minimum capital	Notary and commercial register	Typical mandatory costs	Special features
Sole proprietorship	no minimum capital	generally not required	usually only trade registration, about 20 to 60 euros	Freelancers notify the tax office of their activity and generally do not need trade registration.
UG (haftungsbeschränkt)	from 1 euro, in practice considerably more is sensible	required	with a model protocol usually several hundred euros, correspondingly more with individual articles of association	statutory reserve under Section 5a(3) GmbHG
GmbH	EUR 25,000, in a cash formation at least EUR 12,500 before the application	required	regularly higher than for a UG, depending on share capital and design of the articles of association	broad recognition in business dealings

All amounts are rough guide values. They refer to the pure formation fees: notary, commercial register and, if applicable, trade registration, plus possible expenses and VAT. Not included are the share capital, tax advice, the business account and running software. The specific amount follows from the GNotKG and depends on the individual case, for example the amount of share capital, the number of shareholders and the scope of the documents.

Further one-off costs of formation

Besides the mandatory fees, there are costs that are not prescribed by law but regularly arise in the course of a proper formation. Typical items are:

Fees for a business address or a virtual office, often around 30 to 90 euros per month.
Costs for initial tax advice. Corporations also regularly need an opening balance sheet, the preparation of which is usually part of the tax advice in practice.
Expenses for domain, hosting and a basic website.
Investments in bookkeeping and administration systems.

How high these expenses are depends on the business model. Those who plan them early avoid bottlenecks in the first weeks. Read more about the business address in the article on incorporating with a virtual office.

Running costs from day one

With registration, ongoing operations begin, and with them come recurring costs that are missing from many financial plans:

Contributions to the Chamber of Industry and Commerce (IHK) or Chamber of Skilled Crafts (HWK). Whether and how much is payable depends on the activity, chamber membership and the respective contribution rules.
Registration with the competent employers’ liability insurance association. Whether and which contributions apply depends on the industry, employees and the statutes of the respective association.
Business insurance, such as business liability or D&O insurance for the management.
Ongoing tax advisory costs for bookkeeping and annual financial statements.
Fees for the business account and bookkeeping software.

A structured overview of these items makes financial planning easier and helps to avoid bottlenecks before they arise.

The formation of a stock corporation (AG) involves the highest requirements:

Share capital: at least EUR 50,000, of which at least a quarter (EUR 12,500) must be paid in for a cash formation
Total costs significantly higher than for a GmbH due to more complex statutory requirements

Sole proprietorships are among the most cost-effective forms of formation, as no notarisation is required and lower running costs arise.

Typical cost traps after formation

Many founders only notice after the notary appointment how many smaller costs start running in parallel: register fees, business account, tax registration, software, perhaps a business address. None of these items is surprisingly high on its own. Together, however, they can put pressure on you precisely in the phase when no income is flowing yet. These points are particularly often overlooked:

UG share capital set too low, which is largely used up by the formation costs alone
unplanned costs for initial tax advice and the opening balance sheet
ongoing fees for the business address or virtual office
chamber contributions and registration with the employers’ liability insurance association
software subscriptions that add up over the year
additional fees for activities requiring a licence
amendments or further notarisation appointments due to unclear wishes regarding the articles

Those who have clarified the key points before the notary appointment often avoid queries, amendments or further appointments. These include the number of shareholders, the amount of share capital, the company purpose and the question of whether the model protocol is sufficient. Prompt payment of the contribution after notarisation also helps to avoid delays in registration in the commercial register.

Clarify costs before they arise

Many cost questions can be settled before formation with a few answers: which legal form fits, whether the model protocol is sufficient or individual articles of association make sense, and how high the share capital should be set. Many of these points can be assessed in a conversation with the notary, insofar as they concern the notarial process, the articles of association and the commercial register application. The notary’s office assesses the expected fees under the GNotKG in advance and accompanies the notarisation, the design of the articles of association and the application to the commercial register. Questions about the tax treatment of the costs are best clarified in parallel with your tax adviser.

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Frequently asked questions about formation costs

Which costs are unavoidable in a formation?

For corporations, these are the notary fees and the commercial register fees, and for commercial activities additionally the fees for trade registration. Freelance activities are instead notified to the tax office. All other items depend on the business model.

How do notary fees differ between a UG and a GmbH?

The fees are based on the transaction value and thus usually on the share capital. A UG with low capital therefore usually incurs lower notary fees than a GmbH with EUR 25,000 share capital.

Is formation with the model protocol cheaper?

Often yes, because the model protocol bundles the articles of association, appointment of the managing director and shareholder list in one simplified document. However, it is only suitable for standard cases. Those who need individual provisions are often better off with their own articles of association.

How much money should I plan in addition to the share capital?

That depends on the business model. A reserve for notary, register, trade registration, tax advice, business account, software and the first running costs makes sense, especially for the months in which no income is flowing yet.

Is the share capital freely available after formation?

It belongs to the company and can be used for business purposes. However, it is not a private reserve of the shareholders and is subject to the capital maintenance rules.

Are formation costs paid from the share capital?

This may be possible if the formation expenses are expressly regulated in the articles of association or model protocol and are reasonable in amount. Without such a provision, founders should not simply assume that all formation costs can be borne from the company’s assets. The appropriate arrangement belongs in the advice on the articles of association at the notary.

Can I deduct the formation costs for tax purposes?

Formation costs can be taken into account for tax purposes in many cases. How this works in the individual case and which receipts are required is best clarified with your tax adviser.

What applies to formations with contributions in kind?

Anyone who contributes the share capital not in money but in assets must expect additional effort, for example for the valuation and documentation of the contributed items. Formations in kind are therefore generally more expensive and complex than cash formations. For a UG, contributions in kind are excluded.

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Start your formation with realistic figures

The mandatory costs of a formation are easy to plan. A realistic cost overview helps to take additional costs into account early and to prepare the next steps securely. You will also find more in-depth information in our articles on the business idea and self-employment and on the structure of a company.

If you want to set up a UG or GmbH, the notary supports you in preparing the formation documents and the application to the commercial register.