> For example to make sure that a company can be held responsible when it breaks the law.

This is the reason Germany hates small companies. Germany wants you to be a sole trader with no liability shield.

Some people hack the system by registering a company in another EU state such as Lithuania.

That's not a hack, if you operate the entity from Germany, it must be registered in Germany. It's often touted as a tax loophole, but it's not. Tax authorities do not care about you unless you actually make money, then they will come after you.

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jkaplowitz 27 minutes ago | parent | next [-]

Would the liability shield not generally apply to a foreign entity registered in Germany? Sure there may be special rules for non-compliance with specific tax obligations, but I'm talking about for general liability for other purposes, like a contract signed by the entity where no personal guarantee was given, or a harm caused by the corporation where the owner was not personally involved or negligent in causing the harm.

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direwolf20 2 hours ago | parent | prev [-]

Which law says it must be registered in Germany?

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johannes1234321 2 hours ago | parent [-]

It must be seated where the business happens for compliance with tax laws. But you may have a French S.a.r.l. in Germany and thus fall under their company law (with impact on publication responsibilities, company governance etc.)

While for some cases there is room for abuse (like Amazon Kindle eBooks are sold to Germany by a company situated in Luxembourg, while only selling via amazon.de to audience with German residency) However my employer is a Dutch B.V. with headquarters in Germany, thus they avoid having to form a board with works council representatives as a German GmbH (or AG) of comparable size would require.

	▲	jkaplowitz 30 minutes ago \| parent [-]
		Specifically, it must be seated where the principal management of the business occurs. So if the executives and board meetings and books and records are strategically located in one country and most of the business operations are in a second, it's valid and probably even required for the business to have its tax residence in the first country rather than the second. It may very well have a permanent establishment and therefore some tax obligations in the second country, but that's different from the second country being the primary tax residence.