The man who started all was Karl Friedrich Rapp in October 1913. Not everybody knows that BMW started as a manufacturer of aircraft engines. Rapp establishes "Rapp-Motorenwerke" in a former bicycle factory near Munich. He starts manufacturing his own aircraft engines but unfortunately they suffered form problems with vibrations. Close to Rapp´s factory, Gustav Otto, the son of the inventor of the four-stroke internal combustion engine, sets up a business building small aircrafts. Otto enjoys great success with "Gustav Flugmaschinefabrik".
Rapp Motoren Werke had problems with the reliability of the engines. They have secured a contract with Austro-Daimler, who was unable to meet its demands that of building V12 Aero engines under license. The company expanded too quickly, and by 1916 Karl Friedrich Rapp resigned from the company because of financial troubles. The company was taken over by two Austrians Franz-Josef Popp and Max Fritz backed by a Vienna financier, Camillo Castiglioni. They managed to convince Gustav Otto´s "Gustav Flugmaschinefabrik" to merge with "Rapp-Motorenwerke". Together they formed Bayerische Flugzeug-Werke or BFW, in English "Bavarian Aircraft Works". Shortly afterwards the company was renamed BMW and in 1918 becomes BMW AG (The German term Aktiengesellschaft means a corporation that is limited by shares, i.e., owned by shareholders. It may be traded on the stock market. The term is used in Germany, Austria, and Switzerland. The U.S. equivalent term is "public company", source Wikipedia) the company that we know and admire today.