General overview of German companies

General overview of German companies
Corporize.com December 27, 2012.

German company law (Gesellschaftsrecht) is an influential legal regime for companies in Germany. There are a number of different business structures in Germany. All business entities have to be registered at the local trade office (Gewerbeamt) and be entered into the commercial register (Handelsregister), except for private partnerships, freelancers and individual trade persons. 

A business must register with the local tax office within one month of start-up when a tax identification number will be issued. 

Germany Limited Liability Company (GmbH)

The GmbH (Gesellschaft mit beschränkter Haftung) is the most common form of incorporated company in Germany. This is effectively the same type of company as the Spanish SL, the French Sàrl, the Dutch BV, or the Private Limited Company in the UK .With an ordinary GmbH, share capital must total a minimum of €25,000 and be divisible into shares with a minimum face value of €100. Capital contributions may be made either in the form of cash subscription, or in the form of investments in kind. When incorporating, your bank account must be opened immediately after signing the deed of incorporation with the notary, and the share capital must be deposited into the account. Also, a bank statement showing the amount of capital used for the company incorporation needs to be filed with the Court of Registration, along with the Company Statutes. One person can set up a Limited Liability Company and be its shareholder. Shareholders are liable up to the level of their invested capital. Once entered into the trade register, the Limited Liability Company becomes a legal entity. Shares of a GmbH are not traded on the stock exchange and are not certificated. Their ownership may be transferred through notarial documents.

Germany Joint Stock Company (AG)

A start up capital of EUR50,000 is required for setting up a Joint Stock Company (Aktiengesellschaft). An individual may set up a Joint Stock Company and may list the company shares on the stock exchange. The founding shareholder(s) must appoint a first auditor and a supervisory board. These appointments must be notarized. The supervisory board in turn appoints the first management board. The shareholders’ liability is limited to their capital contribution. Notary certification is required for articles of association and the company becomes a legal entity once it is registered into the Register of Companies.

Germany Limited Partnership (KG)

The minimum start capital for a Limited Partnership (Kommanditgesellschaft) is EUR 50,000. The contract between the partners must be notarized and the business entered into the trade register. Strict guidelines are laid out in the Companies Act (Aktiengesetz) as to the wording of the contract. There are two different types of partners: a general partner, who is wholly liable; and limited partners, who are liable up to the value of their holdings in the company. The general partner is the representative of the company.

Germany Limited Partnership with a Limited Liability Company as General Partner (GmbH & Co KG)

This is a separate form of the Limited Partnership where the general partner is not an individual but a Limited Liability Company, in order to minimize the financial risk to the individual. It is advisable but not compulsory to have a written partnership agreement between the general partner and the limited partners. Usually the shareholders of the Limited Liability Company are identical to those of the limited partners of the Limited Partnership.

Germany General Partnership (oHG)

No start-up capital is required to establish a General Partnership (Offene Handelsgesellschaft). There is no possibility to minimize the financial risk, because each partner is liable without limit. A General Partnership may be created by individuals or a coming together of two separate businesses pursuing the same interest. It must be entered into the trade register and the name must be suffixed by oHG for clarification of liability. All partners are obliged to play an active part in the partnership unless otherwise specified in the partnership contract.

Germany Civil Law Partnership (GbR)

A minimum of two partners is required to establish a Civil Law Partnership. All partners have unlimited liability for debts incurred by the company. A written partnership agreement is not required by law but is recommended. A Civil Law Partnership must register with the local trade office if it is to carry out a small trade business. 

Germany Subsidiary

A Subsidiary (Tochtergesellschaft) is a company that is located separately from its parent company. It has its own management, assets and accounting systems. A subsidiary must be entered into the Register of Companies.

Germany Branches

A Branch (Zweigniederlassung) is closely linked to the head office and does not have its own assets or accounting systems. The head office runs its administration. A Branch does not have to be entered into the register of companies.

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