When starting a business or choosing a German vehicle for a certain operation/transaction, one can choose from the following legal forms:
General Partnership (Offene Handelsgesellschaft, OHG)
You can set up a general partnership (OHG) with one or more partners. All partners in a OHG shall be jointly and severally liable for any debt that the company may incur and/or other personal assets. As long as there are no particular and/or special agreements within the company that indicate the contrary, all partners shall be entitled to carry out the management of said company.
Limited Partnership (Kommanditgesellschaft, KG)
The limited partnership or KG provides for a limitation of liability when we compare it to an OHG. At least one of the partners results and unlimitedly liable (that is, the general partner), while the limited partner’s liability is only limited to the contribution said partner has carried out in said partnership. Only those with unlimited liability carry out managerial duties in the KG, while the rest limited partners are prohibited from doing so.
Limited liability company (Gesellschaft mit beschränkter Haftung, GmbH)
Limited liability companies in Germany are usually utilized to reduce personal risk. A new entity is formed, which acts as a shield regarding the personal lability of its shareholders. Liability, in this case, is restricted to the share in the company each shareholder has contributed. In principle, shareholder creditors have no recourse to the private assets of the shareholders. You may form a limited liability (GmbH) company alone or with other partners. The minimum equity of a limited liability company in Germany is of 25,000 euros. Said equity is formed from the shareholders’ initial investment, which could be in sum or in form (that is, by providing tangible assets as initial investment).
Managerial duties in the case of GmbHs are performed by their managing director/s, which are influenced by the directions imparted by the company’s shareholders.
Entrepreneurial company with limited liability/UG (limited liability)
A UG (limited liability) under German law is a model usually utilized in the case of startups, considering the low amount of initial capital needed to begin its business. Said initial investment must be of at least EUR 1.00 and, as in the case of the GmbH, the liability is limited to the company’s assets.
Limited partnership with a limited liability company as general partner (GmbH & Co. KG)
A GmbH & Co. KG, that is, a limited partnership with limited liability as a general partner is a limited partnership whose personally liable partner is a GmbH. This allows for everyone to hold limited liability, even though the company is essentially a partnership.
Joint stock company (Aktiengesellschaft, AG)
A joint stock company may be founded by one or more people who acquire shares in exchange for contributions. The original capital broken down into shares must be at least 50,000 euros. The minimum value of a share is 1 euro; the issue of no-par shares is not permitted.
The liability of a joint stock company is limited to its corporate assets. Ongoing business is managed only by the board of directors which is appointed and monitored by the Supervisory Board.
An AG, better known as a joint-stock company, is usually funded by or more persons who purchase shares against contributions. The initial capital which is to be divided into shares must be of at least EUR 50.000. The minimum value of a share is EUR 1. One important thing to mention here is that the issuance of non-par shares is not permitted in this case.
In the case of AGs, liability is limited to the joint stock company’s assets and management is carried out by a board appointed by a supervisory board.
Cooperative
The cooperative is a legal entity whose legal framework is based on the provisions of the cooperative law (GenG). In this case, as is the case in a GmbH, liability is limited to the cooperative assets. Special features of the cooperative include the minimum number of members (at least three) and entry in the Register of Cooperatives.
Professional partnership
A professional partnership is considered as a new form of company under German law in which its members come from liberal professions. These partnerships can be compared to OHGs since all partners are jointly and severally liable for the company’s liabilities.
Additionally, all of them are allowed to carry out managerial duties. The partnership company is a relatively new form of company in which members of the liberal professions can come together.
In these cases, it is imperative that the partnership contains at least the name of one of its partners and the addition “and partner” or “partnership” as well as the designation of all professions represented in the partnership.