You are the sole proprietor of a company and are considering whether to convert your business into a GmbH or a GmbH & Co. KG? You have already gathered information about different formation scenarios and thereby came across the “GmbH-Vorratsgesellschaft”?
However, does the acquisition of such company really make sense, or is it just a “scam” of notaries to generate additional income?
As a tax consultant in Hamburg with many years of experience with corporate transformation I can tell you this much: buying a shelf company is certainly not the right option for every entrepreneur and indeed, in many cases it is a waste of money.
However: In some cases, a GMBH-Vorratsgesellschaft can definitely bring advantages for your company. Unfortunately, most companies and tax consultants are not even aware of these special cases. Therefore, a lot of potential is lost here.
This is exactly where I would like to start with today’s post. You will learn:
- What a shelf company is
- What costs you have to expect for setting one up
- What the difference is between a shelf company (Vorratsgesellschaft) and a shell company (Mantelgesellschaft)
- In which 2 situations the acquisition of a shelf company makes sense
- What mistake you must avoid
This post was updated on 5 August 2021.
What is a GmbH-Vorratsgesellschaft?
A shelf company (GmbH-Vorratsgesellschaft) is an “empty” GmbH, which has already been registered in the commercial register.
Therefore, the GmbH already has a tax number and a VAT ID. However, the shelf company does not contain any assets and the GmbH is not engaged in any business activities either.
The GmbH exists just on paper.
Such shelf companies are often formed by notaries and sold to their clients as and when they need them.
The advantage: A shelf company is already “ready for use” and immediately enjoys all the advantages of a GmbH, such as limited liability, tax advantages or the possibility to form retirement provisions.
If, on the other hand, one were to form a new GmbH from scratch, it would usually take a few weeks until the formation is formally completed and the GmbH is operational.
What are the costs you have to expect in connection with a GmbH-Vorratsgesellschaft?
The costs for setting up a GmbH-Vorratsgesellschaft are usually around EUR 3,000.
For this price, you are provided with a company that has been formed by a notary and is definitely free from inherited liabilities.
Please beware of cheaper offers found online and be extremely cautious. While the price may be lower, under certain circumstances you may even be buying a GmbH that was not established in a legally secure manner or that was already insolvent in the past.
Shelf and shell company: What is the difference?
Caution: The two terms are often used synonymously. However, this is not the same legal form.
The main difference is that a shell company was already operationally active in the past. However, all activities were stopped and the company continuous to exist on paper only. The remainder is referred to as the shell.
And this is exactly the shell you are buying when you buy a shell company (Mantelgesellschaft).
The guarantee that this company has never existed is only provided in the case of a shelf company (Vorratsgesellschaft). It has just been formed for whenever it might be needed and is now offered for sale.
What are the 2 situations in which the acquisition of a shelf company makes sense?
Situation 1: Quick formation necessary
If you wish to convert your company in a manner that is as fast and uncomplicated as possible, the acquisition of a shelf company can be a good idea.
You avoid waiting periods and thanks to the fact that you already have a VAT ID, you are in a position to start your business immediately and issue invoices.
Below the line you will save a few weeks of waiting and are sooner able to benefit from the advantages of a GmbH.
Situation 2: Uncomplicated formation from abroad
Foreign entrepreneurs sometimes face the problem of not being able to open an account at a German bank. Without a German bank account, however, there is no “place” where you can deposit the required share capital of EUR 25,000, and the GmbH cannot be established.
This problem can be avoided by reverting to a GmbH-Vorratsgesellschaft. You simply acquire an already existing GmbH and the business account of the shelf company comes with it.
However, this is mainly relevant for people from high-risk areas such as Iran or Iraq. For German entrepreneurs, this is usually not a very relevant reason.
A possible exception: You would like to set up a company together with a business partner from abroad and both pay in the share capital separately. In such a case, the above-mentioned complications could also play a role.
Caution with regard to liability: This is the most common mistake when a shelf company is involved
In practice, shelf companies are not only sold by notaries but also by rather untrustworthy companies.
For example, such companies would buy insolvent GmbHs, transfer the assets from the GmbH and sell this company, which has been active for years, as a shelf company, even though it is actually a shell company.
It is often difficult to differentiate such scam from a real shelf company at first glance.
However: Even if the supposed shelf company appears to be empty, it can still be fraught with legacy burdens such as tax proceedings or other illegal activity. As soon as you have taken over the company, you are personally liable for these illegal activities because of your personal liability as the managing director.
And whether or not you knew about these activities is of no relevance.
My advice: If you want to buy a shelf company, buy it from a notary. This is the only way to guarantee that the GmbH is unencumbered and that you cannot be held responsible for legacy debt or illegal activities.
Conclusion: A GmbH-Vorratsgesellschaft is ideal for a quick and easy business set-up
If you quickly wish to convert your sole proprietorship or partnership into a GmbH without further ado, buying a shelf company is ideal. You skip the waiting period for the formation and get a ready-made GmbH with a tax and VAT number, which allows you to start your business immediately.
Buying a shelf company can also be the ideal situation if you wish to set up a GmbH from abroad, as nationals from high-risk areas are often unable to open a bank account in Germany. This means that these persons have no “place” where they can deposit the necessary share capital, which makes founding a GmbH impossible.
Buying a shelf company solves this problem.
In most other situations, however, a shelf company is not necessary and only causes unnecessary additional costs for the formation.
Would you like to find out more about shelf companies?
Please feel free to contact me personally if you have any questions about shelf companies beyond the scope of this blog post, or if you would like to know whether buying a shelf company could be worthwhile for you.
You can reach me at any time by phone (+49 040 443311), e-mail (anfrage@steuerberatung-breit.de), via my contact form or at my tax consultancy office in Hamburg.
Kind regards,
Thomas Breit
Photo: © deagreez – stock.adobe.com
