All business organizations formed under the law of a Member
State that follows the place-of-incorporation rule – e. G. UK, Ire-
land, and the Netherlands – must be recognized by the German
authorities and German courts.
Under a bilateral agreement (1954 German-American Treaty
of Friendship, Commerce and Navigation), US companies (e. G.
Delaware LLC) are recognized as well.
The formation of a foreign corporation – e. G. A UK Ltd. – might
involve fewer formalities and entail less expense compared with
forming an AG or a GmbH in Germany. However, the operating
costs of a foreign company that conducts its business in Ger-
many often exceed the costs their German counterparts would
incur. In addition, there are legal uncertainties and implications
concerning the taxation of such entities which often render
corporations organized under the law of a foreign jurisdiction less