Forming a German GmbH &
Articles of Association
For startups, labels, and creators
Fashion label, music brand, creator business, e-commerce—no matter what you’re building: Choosing the right legal structure from the start determines how far you’ll go. We’ll explain what you need to know.
Note: If there are multiple founders, we can only represent one party at a time. We will let you know upfront during the initial consultation which party we can represent.
Important to know: A limited liability company (GmbH) is not officially established until it is entered in the commercial register. Anyone who enters into contracts or issues invoices before that point remains personally liable until then.
The first real turning point
GmbH or UG – which one is right for you?
Both legal structures protect you from personal liability—that is the key advantage over sole proprietorships or general partnerships. The difference lies in the registered capital, the company’s public image, and how quickly you want to grow.
Share capital
€25,000 (at least €12,500 immediately)
Liability
Only the company's assets—not your personal
Public image
Banks, suppliers, and partners take you more seriously
Who is this for?
If you're looking for investors, have a team, or want to scale up
LLC (limited liability)
Share capital
Starting at €1 – realistically €500–€2,000
Liability
Also limited—that’s the advantage
Requirement
25% of annual profits allocated to common stock (up to €25,000)
Who is this for?
Anyone who is starting out on their own or is still testing whether the concept works
Which legal structure is right for which startup?
Fashion & Merch
Drops, collections, collaborations – a limited liability company (GmbH) offers better protection when suppliers are involved
Music Label / Artist
Often begins as a sole proprietorship and later transitions into a GmbH as the business grows — or starts directly as a GmbH with investor backing.
Influencer / Creator
Once revenue reaches a certain level, a limited liability company makes more sense than a sole proprietorship from both a tax and liability perspective
E-commerce / D2C
Stores with supply chains and customer data – A limited liability company is the safer choice from the start
What's in it—and why it matters
The Articles of Association: The 5 Key Provisions
According to Section 3 of the German Limited Liability Companies Act (GmbHG), every articles of association must include certain provisions. What do these mean for you specifically—as the founder of a label, shop, or creative studio? The basics, explained in plain language.
Company & Business Purpose
Your name in the commercial register—and what your LLC is actually allowed to do. The company’s stated purpose determines how you can make money. If it’s too narrowly defined, you won’t be able to expand your business.
Share Capital & Shares
How much capital are you each contributing—and what percentage does each person own? For a three-person startup: Is it split evenly? Or does it depend on each person’s role and contribution? The distribution of shares also determines voting rights.
Representation & Management
Who is authorized to sign on behalf of the LLC? Who enters into contracts, opens bank accounts, and negotiates with suppliers? Whether decisions are made by a single representative or only jointly—this must be clearly defined.
Non-compete clause
Is a partner allowed to start a similar business on the side or work for a competitor? In the absence of any specific provision, the answer is generally yes. But if the contract includes a clear prohibition, the answer is no.
Appropriation of Profits
When does a GmbH distribute profits—and according to what formula? The legal standard is distribution based on shareholdings. However, you can also agree to reinvest profits for the time being.
What the notary does not handle
The articles of incorporation are public—anyone can view them in the commercial register. That is why they cover only the bare minimum. Any agreements you make among yourselves should be included in a shareholders’ agreement.
The Shareholders' Agreement
- the cornerstone of your partnership
In addition to the articles of association filed with the notary, there is a second, often more important document: the shareholders’ agreement. It is not a public document and is not filed with the commercial register—and that is precisely why you can use it to address the truly important matters.
- What happens if someone wants to leave?
- Who is allowed to sell their shares to whom?
- How are decisions made in the event of a dispute?
- Who owns the intellectual property: music, design, code, that you developed together?
- What happens if a founder gets sick or something changes?
- How does the process of bringing in investors at a later stage work?
From real-world experience
This is what real clauses look like—and what they mean
Articles of association often sound complicated. Here are four common clauses from everyday practice—explained in simple terms so you know exactly what you’re signing off on at the notary’s office.
Business Purpose
"The company's purpose is the development, production, and distribution of music, audio, and media productions, as well as the organization of events and the management of artists."
What that means
The company's purpose must cover everything you intend to use to make money—both now and in the future. If you define it too narrowly, you'll end up having to go through a time-consuming process of amending the articles of incorporation at a notary's office later on.
Representation of the Company
"If only one managing director has been appointed, he or she represents the company alone. If several managing directors have been appointed, the company is represented by two managing directors jointly or by one managing director together with an authorized signatory."
What that means
If there are two founders serving as managing directors, you must always sign jointly—unless you grant one of them sole signing authority. This has major implications in day-to-day operations: Who will sign the lease for the studio?
Non-compete clause
"Shareholders and managing directors may be exempted from non-competition clauses by a resolution of the shareholders. The specific details are set forth in the shareholders’ resolution."
What that means
In the absence of an explicit non-compete clause, shareholders are theoretically permitted to work for competitors. A shareholders’ agreement allows for clearer and more customized provisions than a standard articles of incorporation.
Share Capital & Shares
"The company's share capital amounts to EUR 25,000.00. It is divided into 25,000 shares, each with a par value of EUR 1.00."
What that means
25,000 shares at €1 each makes it easier to transfer shares later on. For example, if you give an investor 10%, you’re transferring 2,500 shares. The share denomination also determines how finely you can divide up your equity stakes.
The Big Picture
From Idea to Exit:
What You Need to Know Legally
Those who fare well at exit have usually already laid the groundwork in the articles of association.
Founding
LLC, Articles of Incorporation, List of Shareholders
You’re setting up your business legally. Notary appointment, commercial register, list of shareholders. If you cut corners here, you’ll run into problems later.
- Your first record deal
- The first collection
- The store is going live
What is legally important
Articles of Incorporation, list of shareholders, application for registration in the commercial register—and the shareholders’ agreement. All of this must be completed before the company generates its first revenue.
Getting Started & Growth
First sales, first contracts, first external partners
First customers, first partnerships, external developers, or suppliers. Now you’ll see if your structure holds up. Who is authorized to sign what? Who owns what you create together?
- Brand Deal
- Contract designer
- Supplier Agreement
What is legally important
Anyone who hires a contractor must clarify: Who owns the deliverables—the design, code, and music? Without an IP clause in the contract, this can end up being costly.
First round of external funding
Someone believes in you—and gives you money
Family, friends, a business angel. Who gets in? At what valuation? What does the new shareholder get in return for their investment—in terms of rights and a say in the company? A convertible loan is often the fastest route: a loan that is later converted into equity—without having to set a valuation right away.
- Family & Friends
- Business Angel
- Seed funding
What is legally important
The terms of a convertible loan—interest rate, discount, cap—must be clearly negotiated and set out in writing before you sign.
Scaling & Venture Capital
Real funding rounds – new investors, new complexities
Venture capital means that a fund invests large sums of money in exchange for equity. In return, investors demand a say in the company’s decisions, the right to information, and protective clauses. What rights are you giving up? What happens if there is a second or third round of funding?
- Seed Fund
- Series A VC
- Shareholders' Agreement
What is legally important
Investors bring contracts with them—drafted by their lawyers, in their best interests. You need someone on your side who understands these documents and can negotiate on your behalf.
Exit
The moment you've been building up to
Whether it’s a sale to a strategic buyer, a large fund, or an IPO—that’s the dream. How much you end up receiving depends largely on how your contracts were drafted from the very beginning. When it comes time to exit, all past mistakes come to light.
- Trade Sale
- Initial Public Offering (IPO)
What is legally important
If you’ve set things up properly from the start, you’ll be able to walk away with what you’ve earned when the time comes. If you haven’t, you’ll be negotiating from a weak position.
What Founders Really Ask Us
Honest answers to your questions
Do you have any questions? We're happy to help.
Initial consultation is free—we’ll work with you to determine what your startup needs and how much it will cost.
Do you really need to have €25,000 in your bank account to start a limited liability company (GmbH)?
Not entirely. You must contribute at least €12,500 (half) when you incorporate—the remaining €12,500 can be paid in later. You can start a UG with as little as €1, but too little share capital leaves you vulnerable. €500–€2,000 is a realistic amount to start a UG with.
Can you incorporate a limited liability company (GmbH) from a private address?
Yes, that’s possible. A residential address is sufficient as a registered office—many early-stage startups do this. However, as soon as you have an office or warehouse, you should update your registered office. Some coworking spaces also offer business addresses.
How much does a notary charge for incorporating a limited liability company (GmbH)?
Notary fees depend on the share capital and are regulated by law. For €25,000 in share capital, you can expect to pay roughly €500–800 for the notary and commercial register entry. On top of that, there are attorney fees for a customized articles of association—which are well worth the investment.
We are two founders—does one of us have to be the CEO?
A limited liability company (GmbH) must have at least one managing director—this can be one of you or an outside individual. Both founders can serve as managing directors. In that case, however, you must decide: Can both sign on their own, or only jointly? This has significant practical implications.
My co-founder is my best friend—do we really need a written contract?
Yes. Not because you don’t trust each other—but because circumstances change. One person might lose motivation, get a job offer, or move away. Without a contract, a friendship can quickly turn into a legal dispute. A good contract protects your friendship.
What is a convertible loan, and when does it make sense?
A convertible loan is a loan that is automatically converted into shares in your LLC at a later date. It’s useful for an early funding round because you don’t have to determine a company valuation yet. In return, the investor usually receives a valuation discount in the next round. It sounds straightforward—but it’s a complex document that should be reviewed by a lawyer.
Question: As an influencer, I’m already generating revenue—when does it make sense to form a limited liability company (GmbH)?
Once your annual revenue reaches approximately €40,000–€60,000, things start to get interesting—both from a tax and liability perspective. Especially if you hire employees, enter into partnership agreements with brands, or develop your own product, a GmbH protects your personal assets.
Can we amend the articles of association at a later date?
Yes—but it requires a shareholder resolution, another notary appointment, and the consent of all shareholders. That makes changes time-consuming and expensive. So, from the very beginning, draw up a contract that fits your actual business.
Note on Legal Representation When There Are Multiple Founders
As a law firm, when it comes to start-ups with multiple partners, we can only provide legal representation to one party at a time—not all founders simultaneously. This is for legal reasons. During the initial consultation, we will clearly explain who we can assist and, if necessary, recommend that the other founders also seek legal advice.
Your next step
When You Need a Lawyer
In any case—these situations:
- You're starting a business as a duo or trio and want everything to be clear
- Some people contribute more than others—money, connections, intellectual property
- You've already worked together on code, designs, or music
- You're talking to your first investor or business angel
- You want to hire your first employee
- You will receive your first major partnership agreement
At the very latest then—when things get serious:
- Before you sign a sample contract you found online
- Before you give shares to your friends or family
- Before you hire a service provider for your core product
- Before you sign your first licensing agreements for music, design, or software
- When someone on the founding team starts to have doubts
- Before you expand into new markets or countries
Let's talk –
before things get complicated.
A no-obligation initial consultation. We’ll take a look at your situation and tell you straight away what you need—and what you don’t.
