Austria is a landlocked western European country bordering Germany, Liechtenstein, Switzerland, Slovakia, Hungary, Slovenia, Italy, and Czechia. One can easily imagine the strategic importance of Austria’s geographical location; having amazing trade relations and land trade routes with each neighboring country. Austria is one of the wealthiest nations and has the most developed economy in all of Europe; very naturally then, it’s a businessman’s dream to operate from Austria, given the country’s economic ecosystem.
As appealing as it may sound, setting up or branching out a business in a new territory is always challenging. A series of legal requirements and government procedures have to be followed throughout the process. It is the responsibility of the businesses to be aware of and prepared for the host country’s laws, procedures, and policies.
Austria has a free economic policy that provides equal growth opportunities to all businesses, local and foreign alike. In this article, we will focus on the permissible business structures and the costs involved in setting up a business in Austria.
Types of corporate structures
It is important to understand that any business, regardless of size, capital, and resources has to follow a certain basic structure. This structure is known as the corporate structure; rules applicable to one structure may not necessarily apply to the other and vice versa.
The corporate law of Austria permits the following corporate structures – corresponding to each type, paid-up capital is also displayed.
| Type of business structure | Local name | Req.paid-up capital(approx.) | |
| 1. | Limited Liability Company (LLC)/Private Limited Company (PVT.Ltd.) | Gesellschaft mit beschränkter Haftung (GmbH) | €500-€35,000*[varying from case and subtype of LLC chosen] |
| 2. | Stock Corporation (Public Limited) | Aktiengesellschaft (AG) | €75,000 [25% to be paid in cash via bank deposit] |
| 3. | General Partnership | Offene Handelsgesellschaft (OG) | No minimum paid-up capital required |
| 4. | Limited Partnership | Kommanditgesellschaft (KG) | No minimum paid-up capital required |
| 7. | Societas Europa (Public Limited Company) | SE | €120,000 |
| 8. | Sole Proprietorship | No minimum paid-up capital required |
The minimum amount of share capital (paid-up capital) must be credited to a temporary bank account before the documents are submitted to the authorities.
Private Limited Company GmbH
A private limited company is a legal business entity that has a memorandum of association at its foundation. The owners are not personally responsible for any liabilities, and in case of bankruptcy, the company is obligated to pay by the sale of assets or bankroll. Note that a GmbH can be a Pvt.Ltd. or LLC, both are recognized separately, similar in basic structure but differing in operations and applicable policies.
The chart below highlights the differences between Pvt.Ltd. and LLC.
| Particulars | Pvt. Ltd. Co. | LLC |
| Members required | Min: 2 | Max: 200 | Min: 2 | Max: no limit |
| Directors required | Min: 2 | Max: 15 | Two designated partners. No maximum limit |
| Board meetings | Minimum 4 meetings per annum; each can’t be separated by more than 120 days | Not applicable |
An LLP is easier to set up and manage, has a low cost of registration, and has fewer formalities than a Pvt.Ltd.co., suggesting that new businesses can highly benefit from an LLP rather than a Pvt.Ltd.
*The minimum required share capital for GmbH is €35,000, of which €17,500 must be paid in cash as a bank deposit. However, “privileged” GmbH can be formed (foundation) with a minimum share capital of €10,000, where at least €5,000 must be in form of cash. The privileged status of the foundation stays for 10 years, after which the share capital must be raised to €35,000.
Public Limited Company
A public limited company is often formed when a company needs to raise a large amount of capital, distribute risks, and/or both. It is a process by which a company pledges to the bank a certain sum and presents its shares for public trade on a stock exchange. From the amount collected through sales of shares the amount pledged to the bank is returned (depending on the terms and conditions of the bank) and the remaining amount is invested back in the business.
KG & OG
A partnership, as the name suggests, is a company formed by two or more individuals to promote a common financial interest. A partnership can be General (OG) or Limited (KG), both similar in formation while differing the operations.
In an OG, all partners assume unlimited liabilities in the course of business; in case of a loss, partners are personally responsible to compensate. An OG is usually short-lived and mostly formed to achieve a time-sensitive goal, such as subject to the happening of a certain event, executing a specific exhibition, etc. An OG company must use the suffix OG with the company name; eg: ABC OG.
A KG, on the other hand, is a partnership where few partners are general (fully liable in a personal capacity) while others have limited liabilities (no personal liability). Suffix KG is used with the company’s name so the public may recognize the type of partnership.
Societas Europa (SE)
Introduced in 2004, specifically catering to the companies established in the European Union, SE is a form of Public Limited Company that enables businesses to expand to Austria and other EU countries. An SE is governed by the Corporate Law of the European Union instead of the host country. In most cases, an SE is a result of a merger or a takeover by two or more European companies. The minimum paid-up capital for an SE is € 120,000
Costs involved in establishing a company
Establishing a company, regardless of what structure it may be, includes various costs. The cost may be the state fee, court fees, documentation, etc. It is advised that provisions for sundry expenses shall be planned to avoid surprises.
The most common expenses to account for are:
- Notarizing documents (agreements, contracts, articles of association, etc.)
- Registration of business in the local commercial courts (copyrights, trademarks, secret formulation, etc.)
- Translation of documents (only documents that are in German language are considered binding)
Local business costs
Regardless of the structure, any business that plans to operate in Austria must obtain a trade license. Details of the business office, type of business, product or services of the business, and a registered name shall be provided to the authorities along with the state fee of approximately €47.30
The fee and procedure described above, pertain to businesses termed as ‘regular’ for other trades such as arms and ammunition, civil engineering, gas, chemicals, travel operator, etc., are a few occupations that may require specific specialized licenses.
Working hours and wages
Unlike many developed countries, Austria does not have a statutory minimum wage, wages are governed by the collective agreements negotiated by social partnerships or the prevailing trends. Having said that, an average daily wager in Austria does not earn less than €1,500 a month.
It is also considered the responsibility of the individual to know its worth, and be aware of the market situation, and the overall economic state to determine his/her minimum wage determine his/her minimum wage.
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