Preparing a GmbH Annual Financial Statements: Key Points to Consider

The annual financial statements close off your bookkeeping for the past financial year. For GmbHs, these annual financial statements — which are relevant under both tax and commercial law — are mandatory, and there is also a disclosure obligation. The specific rules depend on the size of your company.

Prepare the annual financial statements for your GmbH yourself, or leave this task to a tax advisory firm? In most cases, the answer is clear. By delegating this work to tax advisers, you relieve yourself of a complex and time-consuming task. In addition, tax experts ensure the correct preparation of the GmbH's annual financial statements and make full use of the available structuring options in your favour.

The components of the annual financial statements are:

- Profit and loss account (P&L): This document provides an overview of income and expenditure.

- Balance sheet: This is divided into an assets side and a liabilities side. The assets side shows how funds have been deployed, while the liabilities side shows their origin. Assets comprise items such as the individual positions within fixed and current assets. Examples include tangible assets and financial assets (fixed assets) as well as receivables and securities (current assets).

- Notes to the accounts: Almost all GmbHs must include notes to the accounts; only micro-GmbHs are exempt. The notes contain various disclosures relating to the individual line items in the P&L and the balance sheet.

- Management report: Medium-sized and large GmbHs also prepare a management report. This report paints a detailed picture of the current economic position and describes opportunities and risks. The management report is not an integral component of the annual financial statements as such, but is associated with them.

Please note that there are two types of annual financial statements: those prepared under commercial law and those prepared under tax law. These financial statements are similar in many respects, but differences do exist. This is due to their differing purposes.

The aim of the commercial-law annual financial statements is transparency. Investors, lenders, customers, and suppliers should obtain precise insights into the company's financial position. Reporting and disclosure obligations ensure this. Banks, for example, use this as the basis for deciding whether to extend credit to a business.

The addressee of the tax-law annual financial statements is the locally competent tax office (Finanzamt). Taxation of profits is based on these figures. The information is relevant for corporation tax (Körperschaftsteuer) and trade tax (Gewerbesteuer). In inheritance cases, the business assets shown in the balance sheet are also of interest for calculating inheritance tax.

The differences between the two sets of financial statements arise from certain statutory requirements under tax law. It is also in a company's interest to present a more favourable picture in the commercial balance sheet than in the tax balance sheet.

Specific deadlines apply for the preparation and disclosure of the annual financial statements. For GmbHs, the deadline falls three or six months after the end of the financial year. The specific deadline depends on the size of the company.

Please bear in mind that different deadlines apply for submitting your tax return. Your Guhr Steuerberatung will ensure that you meet the relevant deadlines!

As managing director of a GmbH, you must file the annual financial statements in the electronic company register of the Bundesanzeiger (Federal Gazette). This step serves the purpose of transparency — lenders, investors, suppliers, and others should be able to access the figures.

The extent of the disclosure obligation is based on the company's size. The legislator provides for a total of four company size categories (micro, small, medium, and large). Ask your Guhr Steuerberatung which size category your GmbH falls into and what this means for the disclosure of the annual financial statements.

As a general rule, preparing the GmbH's annual financial statements is a complex undertaking. Commercial and tax law contain numerous provisions, and court decisions on special cases add a further layer. There is much to be said for entrusting this task to a competent tax advisory firm! This is also true for another reason: a variety of election rights exist that you can exercise in your favour. Tax experts know which option is most advantageous for you.

The balance sheet and the profit and loss account close off the bookkeeping for a financial year. A fundamental prerequisite is orderly bookkeeping throughout the reporting period. Only with proper bookkeeping can you or your tax adviser prepare an accurate set of annual financial statements for the GmbH!

When preparing the annual financial statements, it is important that those responsible correctly allocate the various line items. The correct value for each individual balance sheet and accounting item also matters. Does your company own land? Does your firm hold a patent? You must state the respective value in the balance sheet on a well-founded and comprehensible basis. The same applies to outstanding receivables from customers — the question here is whether to include these at 100% or to make write-downs.

In preparing the balance sheet, the legislator grants certain freedoms of structuring. Particular significance attaches to the various options to capitalise or defer items (Aktivierungs- und Passivierungswahlrechte). As a rule, the corresponding decisions in the commercial balance sheet also govern the tax balance sheet — you must proceed identically. Divergences may nevertheless occur where tax law prescribes different requirements.

As managing director, you have a strong interest in exercising these options in your favour. This allows you, for example, to present your commercial balance sheet in the best possible light within the limits permitted by law. At the same time, tax law also provides scope for manoeuvre on certain aspects. Ideally, you should engage a tax advisory firm to optimise your annual financial statements!

Whereas all freelancers (members of the liberal professions) and sole traders with low turnover or profit may prepare a cash-basis income statement (EUER — Einnahmenüberschussrechnung), the position is different for a GmbH: tax and commercial law require a complex and detailed set of annual financial statements.

It goes without saying that preparing the GmbH's annual financial statements requires expertise and experience. Almost all managing directors find this beyond their capabilities and need competent support. Working with a reputable tax advisory firm provides the solution!

Tax advisers ensure the correct and timely preparation and disclosure of the annual financial statements. In addition, the experts provide comprehensive advice and explain the various options available for drawing up the accounts. They also take on numerous further tasks such as preparing tax returns and handling bookkeeping. All services from a single source: turn to your Guhr Steuerberatung!

Do you need an opening balance sheet? Are you looking for a service provider for your existing business to prepare your GmbH's annual financial statements going forward? Get in touch with Guhr Steuerberatung!

What must be included in a GmbH's annual financial statements?

The annual financial statements comprise at minimum a balance sheet and a profit and loss account. Notes to the accounts are also mandatory for most GmbHs, and a management report may be added. The annual financial statements provide detailed information on assets as well as the origin and deployment of funds. These figures allow the financial position to be analysed — something lenders, suppliers, and other stakeholders value. In addition, the annual financial statements serve as the basis for the tax office's tax assessment.

Can I prepare the annual financial statements myself?

In theory, you can prepare the annual financial statements for your GmbH yourself; in practice, this is not advisable. As managing director, you are responsible for producing an accurate set of annual financial statements whilst also making use of election rights in the interest of your company. Expert knowledge of commercial and tax law is indispensable for this. For this reason, outsource the preparation of the annual financial statements to experienced tax professionals!

How much does a GmbH's annual financial statements cost at a tax adviser?

The fees for preparing a set of annual financial statements are based on the fee framework set out in the Tax Advisers' Fees Ordinance (Steuerberatergebührenverordnung). Two factors are decisive: first, the specific services you require. It matters in particular whether your tax adviser prepares a unified balance sheet, derives the tax-relevant information from the commercial balance sheet, or draws up a separate tax balance sheet. Second, the fees are based on the scope of your business activities.

By when must a GmbH's annual financial statements be prepared?

For medium-sized and large GmbHs, commercial law provides for a maximum period of three months after the end of the financial year. For micro and small GmbHs, this deadline may be extended to six months, although this does not apply to every company. To be safe, check with your tax advisers! Also bear in mind that preparing the GmbH's annual financial statements promptly is in your own interest — it gives you a quick overview of your financial position.