FAQ
Frequently Asked Questions
Here you will find answers to frequently asked questions about our notarial services.
Why are there notaries?
Notaries are organs of the preventive administration of justice. They are appointed by the state and hold a public office. Their work serves to create legal certainty and avoid disputes. To a certain extent, they act as "judges in advance". While judges only come into play when there is already a legal dispute, it is the task of notaries to prevent disputes.
For particularly important matters in life, the legislator prescribes going to a notary. In doing so, the legislator is following the principle that "prevention is better than cure". It is better to seek legal advice in advance than to end up in a dispute later due to ignorance and legal errors. This is because the costs of a later legal dispute are usually significantly higher than the notary's fees. Disputes are also psychologically stressful.
In the worst case, a mistake in economically significant transactions such as buying a house can also mean financial ruin. Notaries should therefore create legal certainty and legal peace by advising the parties involved and drawing up a legally flawless contract for them.
For which matters do I have to go to a notary?
Notarization or certification is always required if the law prescribes it. The most important notarial responsibilities lie in real estate law, inheritance and family law as well as company law.
In real estate law, notaries are responsible in particular for contracts for the purchase and sale of real estate as well as the creation, termination and amendment of rights in rem to real estate (in particular land charges or usufruct). In family law, marriage contracts (including agreements on the consequences of divorce) and adoptions in particular require notarization. In inheritance law, the notary is responsible for notarizing inheritance contracts as well as inheritance and compulsory portion waiver agreements. Wills can be drawn up before a notary or handwritten, although a notarized will has several advantages. For example, a notarized will can subsequently replace a certificate of inheritance, which does not have to be applied for in the event of inheritance, and offers greater certainty that the last will and testament will be recorded in a legally correct manner. You can also have applications for a certificate of inheritance notarized by a notary. In company law, various transactions require notarization, in particular the formation of a GmbH, UG (haftungsbeschränkt) and AG as well as amendments to the articles of association of these companies (in particular capital increases). Furthermore, all transformation measures require notarization (also for partnerships). Registrations in the commercial, association, partnership and cooperative registers must always be notarized.
What distinguishes notaries from lawyers?
Notaries are appointed by the state and are holders of a public office. In this respect, they are more like judges than lawyers. Unlike judges - and like lawyers - notaries advise the parties involved. Unlike lawyers, however, notaries are obliged to remain neutral. Notaries therefore provide impartial advice and have the interests of all parties in mind. Their task is to work towards balanced regulations. Lawyers, on the other hand, represent interests. Anyone who wants to assert their interests unilaterally against the other side and possibly even take legal action must consult a lawyer. Notaries are responsible for preventing such disputes from arising in the first place.
Can I choose the notary freely?
You are free to choose which notary you visit. You are not obliged to choose a notary in your home town. It also does not matter whether the matter is related to the city in which the notary has his office.
However, notarizations (i.e. the reading out, explanation and signing of the deed) can generally only take place in the notary's so-called official area. The official area is the district of the local court in which the notary is based. For notaries in Celle, the official area is the district of Celle and the city of Celle. In principle, the notary is not permitted to notarize outside his official area.
However, as long as the notarization takes place in the notary's office, it is irrelevant where you live, where the property is located, where the company has its registered office, etc. The principle of free choice of notary applies.
Why does the notary have to read out everything during the notarization?
Reading aloud during notarization ensures that you are fully aware of the content of the transaction and the scope of your declarations. Experience has shown that questions often arise when the deed is read out, which the notary will then answer. Regardless of your questions, the notary will also explain the most important content again when reading out the deed. If necessary, final changes are made to the text. By following this procedure, you can be sure that everything is exactly what you want when you sign the contract.
Do I have to appear in person at the notary's office?
In principle, the parties must appear in person at the notary's office for the notarization. This also makes sense, as the content of the deed is then read out to them (see above for the importance of being read out), you can listen to the notary's explanations and any final questions can be clarified.
However, it often happens that individual parties are prevented from appearing in person, for example because they live far away. In such a case, a party can also be represented at their request. If possible, the parties involved should be represented by a trusted person (e.g. a family member or a lawyer). Representation by a non-authorized representative (representative without power of attorney) is also possible. This can be the other party to the contract and possibly also a notary's employee. In this case, you must subsequently approve the declarations of this unauthorized representative. As a rule, this subsequent approval must be notarized, especially in the case of a house purchase. However, you can then choose a notary in your area to notarize the signature.
Unlike an appointment for notarization, a meeting can also be arranged online or by telephone. Please do not hesitate to contact us.
Can a notary appointment also be made online?
Since August 1, 2022, video notarizations and certifications can be carried out in company law. This applies to the notarization of the formation of a GmbH or UG (haftungsbeschränkt) as well as all applications to the commercial, cooperative and partnership register. The Federal Chamber of Notaries has created a specially secured video communication system for this purpose (further information at https://online-verfahren.notar.de). Video notarization is an additional option. Of course, you can still obtain advice on site.
In other cases, the notarization must still take place in person. However, appointments can always be made online or by telephone on request. Please do not hesitate to contact us.
Is an away date also possible?
If necessary, for example due to physical limitations, we can also make appointments away from home in the district of Celle, for example at your home, in hospital or in a nursing home.
For appointments away from home, an additional fee of 50 euros per half hour or part thereof is charged by law. A special rule applies to wills and powers of attorney: In this case, the fee is a flat rate of 50 euros, regardless of the duration of the appointment.
What is the difference between a notarization and a certification?
When notarizing a signature, the notary only verifies the identity of the person signing the text using a photo ID. However, the notary does not check the content of the text unless this is expressly requested. Therefore, no legal advice is given. The content of the text does not have to be read out, which is why appointments for signature notarization are usually short.
When certifying a copy, the notary certifies that the copy of a deed (= copy) corresponds to the original submitted.
A notarization, on the other hand, covers the entire content of the deed. It is associated with comprehensive legal advice from the notary. The text of the deed must be read out in full (see above for the meaning of reading out).
What does a consultation with a notary cost?
In most cases, a consultation with a notary is free of charge. If the consultation results in a draft or notarization, the consultation is covered by the draft or notarization fee. This applies regardless of how many consultations the notary has held or how many hours he has worked on the matter. The fees therefore remain the same, even if you make use of a further consultation or request changes to the draft. There is a standard fee for the draft or notarization, which is generally determined by the value of the matter (see above). The consultation fees are therefore included in the draft or notarization fee, i.e. "inclusive".
Advisory fees are only incurred for isolated advice, i.e. if the notary does not prepare a draft and does not carry out notarization. The amount of the consultation fee then depends on the effort and complexity as well as the assets of the parties involved. General legal information from the notary, on the other hand, is free of charge.
Here you will find answers to frequently asked questions about inheritance law.
Who receives the compulsory portion and how much is it?
Only next of kin are entitled to the compulsory portion under German inheritance law. In particular, children (including grandchildren if a child is already deceased) and the spouse or registered partner are entitled to a compulsory portion. If there are no descendants, the parents of the deceased can also claim a compulsory portion. Siblings and more distant relatives have no right to a compulsory portion. The amount of the compulsory portion is half of the statutory inheritance share. It is asserted as a monetary claim against the heirs. Example: If a disinherited child would have a statutory share of 50 % in the estate, their compulsory portion would be 25 % of the estate value (as a payment claim).
How can I claim my compulsory portion?
Disinherited relatives do not automatically receive the compulsory portion, they must take action. First of all, the person entitled to the compulsory portion should request the heirs in writing to provide information about the estate (draw up an inventory of the estate) and to pay out the compulsory portion. The heirs are obliged to determine the value of the estate and, if necessary, to pay the person entitled to the compulsory portion a corresponding sum of money. If the heirs refuse or do not respond, the person entitled to the compulsory portion can enforce their claim in court, if necessary by bringing an action for payment. It is often advisable to consult a specialist lawyer for inheritance law in order to enforce the claim with the necessary vigor and expertise.
What is the difference between a handwritten will and a notarized will?
A handwritten (personal) will and a notarized will are equally valid forms of testamentary disposition. A handwritten will must be written and signed in full by the testator personally, ideally with a place and date. It costs no fees, but carries the risk of formal errors or ambiguities. A notarized will is recorded by a notary. The notary advises on the content, ensures that it is effective and automatically forwards the will to the probate court for official safekeeping. This ensures that it can be found and opened in the event of inheritance. In addition, authorities and banks often accept notarized wills more quickly, whereas a certificate of inheritance is often required for private wills.
Where should I keep my will?
A private will can be kept at home (e.g. in a cupboard or safe), but there is then a risk that it will be overlooked or deliberately withheld in the event of an emergency. Official safekeeping at the probate court is safer. Any handwritten will can be deposited with the local court for a small fee (approx. €75). There it will be noted in the Central Register of Wills so that it can be found and opened in the event of death. Notarial wills are always sent to the probate court by the notary and kept there. This ensures that the testator's last wishes are actually taken into account in the event of inheritance.
When do I need a certificate of inheritance?
A certificate of inheritance is always required if you have to prove your status as an heir to third parties (banks, land registry, insurance company, etc.) and there is no public (notarized) will with an opening protocol. If, for example, the testator has only left a handwritten will or no will at all, banks and authorities usually require a certificate of inheritance as official proof of the heirs. However, if there is a notarized will or an inheritance contract that clearly regulates the succession, this can replace the certificate of inheritance in many cases. For example, the Federal Court of Justice has ruled that banks may not demand a certificate of inheritance if there is clear evidence in the form of a notarized will. Tip: If in doubt, ask the probate court or a lawyer whether a certificate of inheritance is required in a specific case.
How do I apply for a certificate of inheritance and how much does it cost?
You can apply for a certificate of inheritance from a notary or the probate court (local court at the last place of residence of the deceased). You must declare who has become the heir (with a will, if applicable) and provide an affidavit that your details are correct. The documents required are typically the death certificate, identity card and proof of relationship (e.g. birth certificates). Costs: The court costs for a certificate of inheritance depend on the value of the estate. They are incurred twice - one fee each for the issue of the certificate of inheritance and for the affidavit. Example: For an estate value of €10,000, the fee is around €150 (2×€75).
What is a community of heirs?
A community of heirs is automatically created if there are several heirs who jointly take over the estate. Until the estate is divided up, the entire estate belongs jointly to all the co-heirs. Rights and obligations: Each co-heir can dispose of their ideal share (inheritance quota), but cannot decide on individual items of the estate alone. Important dispositions - such as the sale of a property - can only be made jointly and unanimously. All co-heirs are obliged to administer the estate and settle the deceased's debts. They are also jointly liable for estate liabilities. In practice, a community of heirs is often a source of conflict, as different interests clash. The aim is usually to dissolve the community as soon as possible by distributing the estate.
How is a community of heirs broken up?
The distribution of the estate is the division of the estate among the co-heirs, which ends the community of heirs. Ideally, all heirs reach an amicable agreement and conclude a settlement agreement that determines who receives which assets or how sales proceeds are distributed. If a unanimous agreement cannot be reached, each co-heir can demand the division of the estate at any time. The law (BGB § 2042) gives each heir the right to demand the division of the estate. If necessary, the estate must be divided by legal action. This can mean that assets - in particular real estate - are realized through a partition auction or sale and the proceeds are distributed among the heirs according to quotas. It is also possible to sell an inheritance share to a third party if an heir wants to leave the community quickly (in this case, the other heirs have a right of first refusal). In any case, legal advice should be sought in order to find the best solution for dissolving the community of heirs.
How do I plan a company succession?
Company succession should be planned at an early stage to ensure the continued existence of the business. First of all, it is advisable to take stock of the situation: who is a possible successor (family members, employees or external buyers)? In many family businesses, it is customary to gradually involve children in the management of the company and hand it over at some point. Legally, the succession can be determined by an entrepreneur's will or an inheritance contract. Clear rules should be made as to who receives the business in order to avoid disputes between co-heirs - e.g. by means of a division order that assigns the business to a specific heir. Alternatively, a transfer during your lifetime (gift) can be considered. This can also make sense for tax reasons. It is important to consider all aspects: in addition to inheritance law, company law (in the case of company shares) and tax law play a major role. Inheritance tax law, for example, provides preferential treatment for business assets. Example: If the heir continues the business for at least five years and meets certain payroll conditions, 85 % of the company value remains free of inheritance tax. Professional advice from a specialist lawyer and tax advisor is almost essential when it comes to company succession.
How and until when can I disclaim an inheritance?
If you do not wish to accept an inheritance (e.g. due to debts), you must renounce the inheritance within the statutory period of 6 weeks. The period begins as soon as you become aware of the inheritance and your right to inherit. If there is a will, the period only begins when the will is sent by the probate court. If the testator lived or you yourself live (permanently) abroad, the deadline is 6 months. The waiver must be declared to the probate court in the correct form, either in person for recording with the judicial officer or in officially certified form (notarized). An informal letter is not sufficient. Important: An application for a certificate of inheritance means that the inheritance is deemed to have been accepted - so do not submit this if you wish to disclaim. You do not have to give reasons for waiving the inheritance. Please note that the waiver is irrevocable (except if it is contested on the grounds of error). If you want to waive your inheritance on behalf of minor children, you may need the approval of the family court.
What are the consequences of a bequest?
If you waive your inheritance, you will be treated as if you had never been an heir at the time of the inheritance. You lose any entitlement to inheritance items - "all or nothing". This also includes any mementos or assets; you cannot keep individual items. You may only be able to retain your claim to a compulsory portion in certain cases. However, you should always seek advice on this. After renunciation, the estate passes to the next heir in the legal or testamentary order of succession. Example: If the designated heir disclaims, the heir named as a substitute or the next of kin succeeds. If all eligible heirs waive their inheritance, the inheritance goes to the state. By disclaiming the inheritance, you avoid liability for estate debts, but you still have to bear your own funeral costs for close relatives, for example (these obligations are not automatically waived). In principle, you can no longer accept an inheritance that has already been waived - only in very exceptional cases can the waiver be contested.
What do I have to consider in the case of an inheritance with a foreign connection?
The EU Succession Regulation (EU 650/2012) has applied to international inheritance cases since 2015. It regulates which national inheritance law applies and which courts have jurisdiction. It is also possible to obtain a European Certificate of Succession. Basic principle: The law of succession of the country in which the deceased last lived (habitual residence) is usually decisive. Example: If a German citizen lived in Spain until their death, Spanish inheritance law generally applies to the entire estate - including assets in other EU countries. However, the testator can make a choice of law in their will and specify that their home country inheritance law should apply (so that German law is applied after all, for example). The EU regulation also simplifies the process: heirs can use the European Certificate of Succession to prove their status in all EU countries (except Denmark and Ireland). Foreign assets: If the estate is located in non-EU countries (e.g. a vacation home in Switzerland or the USA), it is necessary to check which national inheritance law would apply there. It is often necessary to conduct separate probate proceedings there. Due to the complex legal situation in foreign countries, it is highly recommended to seek advice from a lawyer specializing in international inheritance law in order to avoid mistakes and problems of jurisdiction.
Here you will find answers to frequently asked questions about shareholder disputes and conflicts.
What to do in the event of a shareholder dispute?
In the event of a shareholder dispute, you should first try to resolve the differences of opinion internally and objectively. Sit down at a table and discuss problems openly - sometimes misunderstandings can be cleared up this way. Also take a look at the articles of association: they often contain procedures for cases of conflict or compensation clauses for departing shareholders. If internal discussions do not lead to success, mediation by a neutral person can be helpful. Legal advice should be sought at the latest when the fronts have hardened - an experienced lawyer for corporate law can legally classify the dispute and point out possible solutions. In serious cases, the last resort is to take legal action (e.g. the dismissal of a blocking managing director or, in extreme cases, the exclusion of a shareholder for good cause).
How can a shareholder be excluded from the GmbH?
Removing a shareholder from the company against their will is only possible in very exceptional cases. In practice, attempts are often initially made to find an amicable solution - for example, by the other shareholders buying the share from the shareholder concerned. The law only provides for compulsory exclusion for good cause (i.e. in the event of very serious misconduct by the shareholder). The company can then bring an action for exclusion in order to exclude the shareholder in court - however, such an action is only successful if good cause actually exists. Alternatively, if provided for in the articles of association, the redemption of the share can be decided. Both exclusion actions and redemption require strict conditions and usually require legal disputes. In any case, an excluded shareholder is entitled to compensation for their share.
Here you will find answers to frequently asked questions about company law.
How do I set up a GmbH?
The formation of a GmbH takes place in several steps. First, you need at least one shareholder and share capital of €25,000 (of which at least €12,500 must be paid in advance). Then the articles of association are drawn up and notarized by a notary. The shareholders then pay the share capital into a business account and the notary registers the GmbH in the commercial register. Upon registration, the GmbH becomes a legal entity; you must also register the business with the trade office and notify the tax office of its formation. Careful preparation (checking the name, defining the purpose, etc.) helps to ensure that the formation process runs smoothly.
What does it cost to set up a company?
When setting up a company (e.g. a GmbH), various fees and expenses are incurred in addition to the share capital. Notary fees for notarization and court costs for entry in the commercial register must be included. The exact amount of the formation costs depends on the individual case (including the share capital and the number of shareholders); however, in the standard case of a GmbH formation, the total costs are usually less than €1,000. In addition, there may be small costs for mandatory publications and business registration. If you make use of legal advice, you will incur separate legal fees for this - however, these can often be billed via the share capital if the articles of association contain a corresponding clause.
Which legal form is right for me?
There is no general answer to this question. The optimal legal form depends on your individual circumstances and objectives - such as the number of founders, the desired liability protection, the capital requirements and the tax environment. If a single person is setting up a business, a sole proprietorship or a one-person limited liability company are possible options; if there are several founders, partnerships (such as GbR, OHG, KG) or corporations (such as GmbH, UG haftungsbeschränkt) are available. Important differences include liability (unlimited with private assets for sole proprietorships and GbR vs. limited to the capital contribution for GmbH/UG) and the expense (such as accounting obligations and publicity for larger legal forms). If in doubt, seek advice - a corporate lawyer can help you weigh up the advantages and disadvantages of the legal forms and find the right structure for your company.
Do I need a lawyer or notary to set up the company?
The involvement of a notary is required by law for certain company forms. In particular, the formation of a GmbH or UG (haftungsbeschränkt) is not possible without notarization - going to a notary is mandatory here. A lawyer, on the other hand, is not legally required for the formation, but is helpful in many cases. Corporate structuring can be complex: A lawyer will support you, for example, in choosing the right legal form, formulating the articles of association individually and checking all documents for legal conformity. Our law firm provides comprehensive advice to founders and our notaries will support you to ensure that your foundation is legally compliant and efficient.
What is a social contract?
The partnership agreement (also known as the articles of association) is the central founding document of a company. In it, the shareholders lay down the "rules of the game" - e.g. the name and registered office of the company, the purpose of the company, the amount of share capital and the shareholders' shares as well as regulations on management and profit distribution. For corporations (such as a GmbH or AG), a partnership agreement is required by law and must be notarized. For partnerships (e.g. GbR or OHG), a written contract is not required by law, but is strongly recommended in order to clearly regulate the rights and obligations of the partners. A carefully drafted partnership agreement helps to avoid disputes later on, as it clarifies all important issues - from the distribution of votes to exit regulations - in advance in a binding manner.
Here you will find answers to frequently asked questions on the subject of foundations.
What is a foundation?
A foundation is an independent legal entity that is endowed with assets in order to permanently pursue a purpose defined by the founder. Characteristically, a foundation has no owners or shareholders - the endowed assets are legally independent and serve exclusively the purpose of the foundation. The will of the founder is set out in the foundation charter and forms the basis for how the assets are used to realize the purpose. A foundation is usually set up for an unlimited period of time (so-called perpetual foundation), but in certain cases it can also be set up as a foundation for use for a limited period of time.
What types of foundations are there?
A distinction is mainly made between charitable foundations and private foundations. Charitable foundations pursue purposes for the common good (such as the promotion of education, science, culture or social welfare) and can claim tax benefits for this in accordance with Sections 51 et seq. of the German Fiscal Code (AO). Family foundations, on the other hand, benefit private beneficiaries - they serve to support the founder's family and ensure the long-term preservation of family assets over generations. There are also, for example, corporate foundations, which serve to secure a company or company-related purposes, as well as trust foundations, in which the foundation assets are not transferred to a separate legal entity, but are managed in trust by another person. Finally, there are consumer foundations: Here - in contrast to the "perpetual" foundation - the basic assets may also be used for the purpose of the foundation. Consumable foundations only exist for a fixed period of time and, according to the law, must last at least ten years, after which the foundation is dissolved. The type of foundation that makes sense in each individual case depends on the founder's objectives and the planned assets.
How do you set up a foundation and what requirements must be met?
A foundation with legal capacity is established by means of a foundation deed in written form - notarization is not required by law. In the foundation deed, the founder undertakes to permanently dedicate certain assets to a specific purpose. No precise minimum amount is specified by law; however, the foundation's assets must be sufficient to ensure that the foundation's purpose can be fulfilled in the long term. In practice, the foundation authorities require at least a high five-digit or six-digit amount as share capital, often around €100,000, depending on the purpose and expenditure. In addition, the foundation needs a constitution (articles of association), in which the purpose, name, organs, etc. are defined, and a board of directors capable of acting. The foundation must then apply for state recognition from the relevant foundation authority. In particular, the authority checks whether the foundation's purpose can be permanently fulfilled and whether the articles of association meet the legal requirements. After recognition, the foundation acquires legal capacity and thus its own legal personality. From 1 January 2026, all newly recognized foundations will also be entered in a central register of foundations. A foundation can be established during the founder's lifetime or by testamentary disposition (will).
What must be included in a foundation charter?
The foundation charter is the central document of the foundation and sets out all the basic framework conditions. It is required by law that the articles of association regulate at least the following points: Name of the foundation, registered office (location), purpose of the foundation, assets (basic assets) and the foundation bodies. In particular, it must be determined who the board of directors is and how it is appointed, as a board of directors is required by law and represents the foundation externally. The purpose of the foundation should be clearly and specifically formulated; in the case of charitable foundations, care must be taken to ensure that the purpose formulation meets the requirements of the German Fiscal Code in order to obtain recognition as a charitable foundation. In addition, provisions on asset management (e.g. investment of capital, creation of reserves), the use of income for the foundation's purposes and the rights and obligations of the governing bodies are also common. The articles of association should also provide for the possibility of amending the articles of association (e.g. in the event of significant changes in circumstances) and regulations on the dissolution of the foundation or the whereabouts of the remaining assets in the event of dissolution. As the articles of association are binding for generations, they must be formulated with the utmost care in order to avoid later conflicts or the foundation's inability to act.
How is a foundation managed and which bodies are required?
The only legally prescribed body of a foundation is the foundation board. The board manages the foundation's business, decides on the use of the foundation's funds and represents the foundation in and out of court. In the articles of association, the founder can also provide for additional bodies, such as a foundation council, board of trustees or advisory board, which usually have an advisory and/or controlling function vis-à-vis the board of directors. The structure of such bodies (e.g. number of members, powers, terms of office) remains largely up to the founder within the framework of the articles of association and should be adapted to the needs of the respective foundation (size of assets, purpose, etc.). Externally, a foundation with legal capacity is subject to the state foundation supervision of the respective federal state. The foundation authority ensures that the foundation is managed in accordance with the law and the founder's intentions - in particular, it checks that the assets are managed properly and that the foundation's purpose is fulfilled in the long term. Charitable foundations are also under the supervision of the tax office, which regularly checks whether the articles of association and the actual management comply with the tax law provisions on charitable status. As a rule, the foundation must report to the supervisory authority annually (e.g. by submitting annual accounts and activity reports).
Are the founder or the board members liable for the foundation's liabilities?
No. After recognition, the foundation is a separate legal entity and is itself liable for its obligations with its foundation assets. The assets contributed by the founder are definitively transferred to the foundation; the founder is therefore not personally liable for the foundation's debts and is not obliged to make additional contributions. The board members of a foundation (executive board and, if applicable, foundation council) are obliged to exercise due care and are liable to the foundation for damages resulting from a breach of duty (Section 84a BGB, new version). However, the legislator expressly enshrined the business judgment rule in foundation law in 2023: if a board member could reasonably assume, on the basis of appropriate information, that they were acting in the best interests of the foundation, there is no liability - even if a decision turns out to be unfavorable in retrospect. This rule protects both honorary and professional foundation board members when making discretionary decisions. In addition, the liability standards can be partially modified or relaxed by the articles of association (e.g. limitations of liability), insofar as this is permitted by law. In any case, unpaid board members are only legally liable for intent and gross negligence (see § 31a BGB for associations, which also applies to foundations). Finally, the foundation can voluntarily take out directors' and officers' liability insurance (D&O insurance) to further insure the liability risk of the executive bodies.
What are the tax advantages of a charitable foundation?
Charitable foundations enjoy considerable tax privileges in Germany. They are exempt from corporation tax and are not subject to trade tax. Funds that the foundation receives to pursue its charitable purposes (such as donations or investment income) therefore remain untaxed as part of the realization of its purpose. Donations and endowments to a charitable foundation can be claimed by the donor as special expenses to reduce tax. Generous maximum amounts apply for this - § 10b EStG allows a special deduction of 1 million euros for donations to the foundation capital in addition to the normal donation deduction, which can be utilized over ten years. In addition, donations to charitable organizations are exempt from gift and inheritance tax. The foundation itself is also not subject to inheritance or gift tax if it receives transfers of assets upon death or during life, provided it pursues exclusively charitable purposes (§ 13 para. 1 no. 16 ErbStG). In summary, this means that foundation assets in the charitable sector can be used largely tax-free for the beneficiary purposes, and donors receive a considerable tax incentive for endowments.
What does the non-profit status of a foundation mean and how do you obtain this status?
Non-profit status in the tax sense means that the foundation exclusively and directly serves a tax-privileged purpose (e.g. promotion of science, education, culture, welfare, environmental protection, etc.) and does not pursue its own economic (profit-oriented) interests. The specific beneficiary purposes are defined in §§ 52-54 AO. A foundation must specify in its articles of association which of these purposes it pursues and that it complies with the requirements of the tax code (selflessness, exclusivity and directness of purpose). Recognition of non-profit status is carried out by the tax office: The articles of association should be submitted to the tax office for review before the foundation is established or recognized. The authorities will then issue a provisional notice of exemption if all formal criteria are met (in particular correct wording of the articles of association in accordance with § 60 AO). One of the prerequisites is that no person benefits from the foundation's funds in the articles of association and that the remaining assets are returned to tax-privileged purposes upon dissolution. As soon as the foundation is active, it must regularly prove to the tax office that it is using the funds in accordance with the charitable requirements. Only if all these requirements are met will the foundation remain recognized as a charitable foundation and retain its tax benefits. Otherwise, the tax office may revoke the charitable status, which would result in the loss of tax privileges and subsequent taxation.
Can a foundation be used for asset protection?
Yes, a foundation is often used as an instrument for asset protection and succession planning. By transferring assets to a foundation, the founder removes these assets from his personal access and often also from the access of potential creditors. As a foundation has neither an owner nor shareholders, creditors of the founder can no longer access the donated assets after the transfer of assets - provided that the transfer is made in good time and not with the intention of disadvantaging creditors. Particularly in the event of insolvency or possible claims to a compulsory portion in the event of inheritance, the assets must be transferred to the foundation at an early stage (at least 10 years before the event) so that claims for avoidance or supplementation are excluded. A properly structured family foundation can thus act as a "firewall" between private assets and potential liability risks. In addition, the foundation makes it possible to preserve assets over generations and protect them from fragmentation. In contrast to direct inheritance to several descendants, the assets in the foundation remain undivided and are managed in accordance with the founder's wishes. The founder can specify in the articles of association exactly which family members benefit from the foundation's assets and to what extent, without them becoming the legal owners of the assets. In this way, the foundation offers a high level of protection against third-party access (e.g. children-in-law, creditors of family members or inheritance disputes) and ensures that the assets are used for a specific purpose. However, careful planning and advice is important, as the transfer of assets to a foundation is final - once assets have been donated, they can generally no longer be reclaimed by the founder. Asset protection with foundations is legal, but must be carried out in a timely and transparent manner to avoid being challenged as a creditor-damaging measure.
What changes will foundation law bring from 2023?
A comprehensive reform of foundation law came into force in Germany on July 1, 2023. This largely replaced the state foundation laws, some of which had previously been different, with a uniform federal law. A key innovation is the introduction of a nationwide register of foundations from January 1, 2026, which will have a publicity effect similar to the commercial register and in which all foundations with legal capacity will be entered. In addition, the regulations for amendments to the articles of association and changes of purpose have been relaxed: in future, the purpose of the foundation can be adapted if it is no longer possible or reasonable to fulfill the original purpose in the long term (previously, a change of purpose was only permitted if it was objectively unattainable). Other structural changes have also been made easier - such as the merging or merging of foundations and the conversion of an existing perpetual foundation into a consumable foundation if the capital is no longer sufficient to permanently fulfill the purpose. Another important point is the clarification of the liability rules for foundation bodies: the legislator has expressly included the business judgment rule in the law and specified the liability of board members and trustees in the new Sections 84a et seq. of the German Civil Code. As a result, foundation board members now enjoy similar legal certainty as company directors, provided they act for the benefit of the foundation. Furthermore, limitations of liability may be agreed in the articles of association, which was previously controversial. Finally, it should be noted that the reform has not made the formal establishment procedure more difficult - the foundation business can still be carried out without any formal requirements (in writing without a notary). Overall, the reform leads to more flexibility and legal certainty for founders and foundation bodies, but may require a review of existing foundation statutes to determine whether they need to be adapted to the new regulations.
Here you will find answers to frequently asked questions about company succession and termination.
How does a company succession work?
A company succession should be planned with foresight and ideally prepared over several years. The first step is to find a suitable successor - either within the family or the company (e.g. children or employees) or externally by selling the business to a third party. Once the successor has been identified, the transfer modalities must be specified: These include assessing the value of the business, selecting the form of transfer (gift, sale, anticipated succession, etc.) and contractual implementation (for example in a transfer agreement or will). It is often advisable to optimize or restructure the company before the transfer - for example by converting a sole proprietorship into a limited liability company - in order to facilitate the transfer in legal and organizational terms. During the entire succession process, you should consult experienced notaries, lawyers and tax advisors at an early stage to ensure that both the legal contracts and tax issues (e.g. inheritance or gift tax) are optimally resolved and that there are no nasty surprises later on.
How is a company dissolved?
The dissolution (liquidation) of a company - e.g. a GmbH - is usually carried out by a resolution of the shareholders' meeting with the required majority (usually a three-quarter majority of votes in the case of a GmbH). The dissolution is then filed with the commercial register and the company is labeled "i. L." ("in liquidation"). ("in liquidation"). One or more liquidators are appointed (often the previous managing directors), who then wind up the company. This means that the liquidator terminates the ongoing business, collects receivables, sells the assets and settles all of the company's liabilities. In addition, a call to creditors must be made - the dissolution is made public so that creditors can register their claims, and there is a statutory blocking year (waiting year) for creditor protection. Only after this period has expired may any remaining assets be distributed to the shareholders and the company finally deleted from the commercial register.