Legal Forms In Germany
Opening a company/business alone is a momentous task to go through to begin with. The hurdles and uncertainties of which legal form to choose for to suit your needs best is just one of it. In this comprehensive guide we give you a overview of what legal forms are available in Germany, their pro and cons and for what type of business they are best suited.
After going through this article we hope you will be in the position to make a more informed decision for your business ventures in Germany.
Which legal forms are available in Germany?
At the moment of writing this article Germany offers 10 legal forms for your business venture. From forms for individuals to big companies with multiple shareholders/partners. They are categories by the amount of shareholders/partners involved as well as the type of the financial and legal liability.
Solo Business
If you plan to start your business as a single entrepreneur to explore how it is going or want to keep it a one-person business, Germany offers the following legal forms:
Einzelunternehmen (Kleingewerbetreibender)
Einzelkaufmann (e.K.)
Partner/Shareholder
For businesses or entrepreneurs that plan to open a business with one or more partner/shareholder they can choose from the following legal forms:
Gesellschaft des bürgerlichen Rechts (GbR)
Offene Handelsgesellschaft (OHG)
Partnergesellschaft
Limited Liability
If your focus is to limit your and your companies legal and financial liability the following legal forms help you establish this:
Gesellschaft mit beschränkter Haftung (GmbH)
Unternehmergesellschaft (haftungsbeschränkt)
Kommanditgesellschaft (KG)
GmbH & Co. KG
kleine Aktiengesellschaft (AG)
Note: Some of this legal forms can also be established without a partner. They are just commonly used for businesses/entrepreneurs who want to start a business with a partner.
Like to know more about your legal forms for businesses and how to open one in Germany?
What does each legal form stand for?
Einzelunternehmen "Kleingewerbetreibender"
Solo Proprietorship
The Einzelunternehmen is the simplest and most straightforward business form in Germany, ideal for individual entrepreneurs embarking on small-scale business ventures. It requires minimal bureaucratic effort and no minimum capital. The owner has full control but also bears unlimited personal liability for debts and obligations.
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Einzelkaufmann (e.K.)
Registered Sole Trader
The e.K. is a legal form for individual entrepreneurs who wish to register their business in the commercial register, offering a more formal status than a simple sole proprietorship. Suitable for single-person ventures with a commercial aspect, the e.K. requires registration in the Handelsregister (Commercial Register), providing a more professional image. The owner has unlimited personal liability, but this form allows for greater business growth and credibility.
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Gesellschaft des bürgerlichen Rechts (GbR)
Civil Law Partnership
The GbR is a flexible and informal partnership model, ideal for small collaborations without the need for a commercial business structure. It's often used for joint ventures, project-based collaborations, or small businesses run by a group. There's no minimum capital required, and partners share unlimited joint liability. The GbR is simple to establish and offers a flexible management structure.
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Offene Handelsgesellschaft (OHG)
General Partnership
The OHG is a form of partnership where each partner is actively involved in managing the business and shares unlimited liability. This structure is chosen for its simplicity in formation and operation, and it's ideal for small and medium-sized partnerships without the need for separate legal entity status.
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Partnergesellschaft (PartG)
Professional Partnership
The PartG is an ideal legal form for professionals in recognized fields who wish to collaborate while retaining individual professional status. Similar to a general partnership, it's designed for lawyers, doctors, tax consultants, etc. The liability structure can vary, and it offers a simpler administrative setup than corporate entities.
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What is the ideal legal form for your business?
Einzelunternehmen "Kleingewerbetreibender"
Einzelkaufmann (e.K)
Gesellschaft des bürgerlichen Rechts (GbR)
Offene Handelsgesellschaft (OHG)
Gesellschaft mit beschränkter Haftung (GmbH)
Limited Liability Company
The GmbH is a popular choice for small to medium-sized businesses, offering a balance between operational flexibility and liability protection. It requires a minimum share capital of €25,000, and the shareholders' liability is limited to their investment. The GmbH is subject to corporate tax and offers a professional image for the business.
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Unternehmergesellschaft (haftungsbeschränkt)
Mini-GmbH
The UG is a cost-effective and flexible legal form for startups and small businesses, often seen as a stepping stone to a GmbH. It can be founded with minimal capital (as low as €1) but is required to build a reserve to reach the standard GmbH capital requirement over time. The liability of shareholders is limited.
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Kommanditgesellschaft (KG)
Limited Partnership
The KG combines elements of partnerships and corporations, suitable for family businesses and certain types of joint ventures. It includes at least one general partner with unlimited liability and limited partners whose liability is restricted to their investment. The KG provides a flexible management structure.
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GmbH & Co. KG
Solo Proprietorship
The GmbH & Co. KG is a hybrid legal form combining elements of a GmbH and a KG, offering an innovative structure for businesses seeking limited liability while maintaining the flexibility of a partnership. In this model, the general partner with unlimited liability is replaced by a GmbH, limiting the overall liability exposure. It's a popular choice for family-owned businesses and medium-sized enterprises, combining the operational flexibility of a KG with the liability protection of a GmbH.
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Aktiengesellschaft (AG)
Stock Corporation
Ideal for large-scale business ventures, the AG is designed for companies looking to expand significantly, possibly through public trading. It requires a minimum share capital of €50,000. Shareholders benefit from limited liability, and the company is managed by a board of directors. It involves complex reporting and compliance requirements.
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