European business structures: How to find the right one for your business

Every business needs a legal foundation. If you operate across Europe, there are various corporate structures available to you. Depending on the legal form you choose, however, you must comply with different regulations and consider different risks. In this article, we explain which structure is suitable for whom.

Ask the right questions

The chosen business structure has long-term implications for your company. Thus, you should first take stock by asking yourself:

• Which legal requirements affect you in areas like administration, accounting, and taxation?
• How important is your independence as a founder?
• Are you starting alone or with partners?
• What risks do you face?
• How much initial capital can you contribute?
• What image do you wish to present externally? What matters most to you in your business activities, and what qualifications do you bring to the table?

Overview of corporate structures

Some corporate structures apply throughout the European Union. National legal forms, such as the German GmbH, also exist alongside these. Generally, you can choose a European structure if your business has a presence in at least two EU member states. Taxation, however, still occurs in the country of your establishment.

European Company / Societas Europea (SE)

This structure is suitable if you operate in multiple EU states. Its special feature is that you can relocate your SE’s registered office to another EU country without first dissolving the company. This is a practical alternative to the typically complicated approach of establishing subsidiaries under different national laws in separate states.

The company's shares are divided into stocks. An SE can be listed on the stock exchange, similar to the German AG. However, it requires minimum starting capital of €120,000. Shareholders' liability is limited to their investment. This form is often used in holding structures across Europe. Here, the SE acts as a parent company holding stakes in firms in other countries. These subsidiaries do not have to be European companies and can retain their national legal forms.

There are several ways to establish an SE:

• Merge public limited companies from at least two EU member states.
• Set up a holding SE using public limited companies (AGs) or private limited companies (GmbHs). It’s essential that at least two of them are governed by different member state laws. Alternatively, two of them could have had a subsidiary governed by another member state’s law for at least two years. A branch office in another member state is also possible.
• Establish a joint subsidiary by public limited companies or private limited companies, provided at least two of them fall under different national laws. Alternatively, a subsidiary could have been governed by another state's law for at least two years, or you could have a branch office in another member state.
• Convert a national public limited company (AG) into a European public limited company (SE). This is possible if the AG has had a subsidiary governed by another member state’s law for at least two years.
• Set up a subsidiary SE from a parent SE.

Note: As an individual, you cannot found an SE through cash or asset contributions. An SE is established through merging or converting existing businesses.

Your SE is registered in the commercial register of the country where your headquarters are located, and it is also taxed there. If you maintain establishments in other countries, you become subject to limited tax obligations there, meaning separate tax profit calculations must be prepared.

European Cooperative Society (SCE)

Typically, at least five people or companies join together to form a cooperative. This structure makes sense when pursuing a common goal—such as maintaining certain quality standards. You need minimum capital of €30,000 to establish an SCE, and liability is limited to the contributions. Important: A cooperative may not generate profits! Revenues must be distributed to members.

This legal form allows companies to carry out joint activities while remaining independent. The SCE is a private law entity with its own legal personality.

You can establish an SCE as follows:

• At least five individuals or entities (natural or legal persons), with their residences or registered offices located in at least two different EU member states.
• By merging at least two existing cooperatives (provided they are based in different EU member states).
• By converting an existing cooperative into an SCE, provided it has had a branch or subsidiary in another member state for at least two years.

European Economic Interest Grouping (EEIG)

An EEIG requires at least two members from different EU countries. The participants should remain legally independent. Sole proprietorships, partnerships, corporations, associations, and public-law entities can all form an EEIG. The EEIG’s purpose is collaboration among the members—commercial activities or profit-making must not be the EEIG’s principal objective.

Another requirement is a written founding contract, including:

• Name of the EEIG
• Registered office location
• Purpose of the grouping
• Members
• Duration of the EEIG

After its formation, the EEIG is registered in the commercial register of its country of establishment. No minimum capital is required for this form, but members are personally liable for the EEIG’s obligations.

Changing your legal form

Once you’ve chosen a legal form, it doesn’t mean you'll never have to reconsider it. A corporate structure suitable now may no longer be ideal as your business evolves.

For example, entering a new, riskier area of business could mean a form that limits personal liability might be more appropriate. Partners may leave or join your business, too.

Wanting to list your company on the stock market typically requires changing to a public limited company (AG). Alternatively, the European SE structure could be suitable—it facilitates cross-border operations and is also eligible for listing. Significant revenue growth can also necessitate changing your corporate form, as it often leads to different tax regulations.

Whenever changing your chosen corporate form becomes necessary, take sufficient time and consider potential costs for consulting, notarisation, and public announcements. A timeframe of three to four months for such projects is not unusual.

The right form for every business

Choosing the appropriate corporate structure is a vital step in establishing your business successfully.

Never rush this decision. Don’t hesitate to seek legal advice or consult tax experts. This way, you can ensure the best choice for your business.

Sandra Löhning is Senior Partner Manager at exali, responsible for strategic partnerships and exali’s multiplier sales channel across Europe. As a speaker and insurance specialist, she supports freelancers and digital businesses with practical expertise on liability risks, cyber protection and the realities of modern independent work.

Author: Vivien Gebhard is a digital content editor at exali, specialising in e-commerce risks, legal pitfalls and real claim cases affecting freelancers and digital professionals. She translates complex insurance topics into practical, easy-to-use insights for self-employed experts in IT, media and consulting.

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