You are here :Doing Business in GermanyCorporate Forms

Corporate Forms

Germany generally offers the option of acting in different company structures. These structures are subject to different basics. The company structures are as follows:

  • I. Individual Enterprises
  • II. Business premises (Betriebsstätte)
  • III. Capital Companies/Companies limited by shares
  • IV. Partnerships

I. Individual Enterprises

Individual enterprises include all independent activities pursued by a single natural person. The individual entrepreneur is liable without limitation with his entire assets. The individual enterprise is the simplest corporate structure, since there usually are no special/specific requirements. The individual entrepreneur simply registers with the respective local authorities. Registration in the commercial registry is only required if the individual enterprise has a commercially organised business operation. Founding an individual enterprise does not require any statutory minimum capital. Profit is taxed via income tax.

II. Business premises

If a foreign company becomes active in Germany without founding a separate company, this is generally called business premises (branch) of the main company. The German term “Betriebsstätte” is particularly important when determining taxation law for cross-border issues. Business premises mean any fixed business facility or plant that serves the company’s operation in Germany. The corresponding profits from the business premises in Germany are subject to German taxation unless exceptions apply according to individual double taxation agreements.

III. Capital Company/Company limited by shares

The capital company is an independent legal entity. The most important form of capital company in Germany is the private limited company (GmbH). Capital companies may be founded by one or several persons. The articles of association are notarised at the formation and entered in the commercial register. Liability is limited to the company’s assets. The minimum capital of a GmbH is 25.000 €. It should be noted that there are special requirements for providing the capital. Profit is generally taxed according to the corporation tax law.

Other capital companies are the public limited company (Aktiengesellschaft AG), the association limited by shares (Kommanditgesellschaft auf Aktien), the European public company (SE Societas Europaea).

IV. Partnerships

A partnership is established when at least two natural person and/or legal entities cooperate to achieve a joint purpose. The partnership is a legal entity. In contrast to a capital company, partners of a partnership are generally liable without limitation. The only exception is an association limited by shares (KG). Here, the partners comprise general partners and limited partners. The general partner is liable without limitation. The limited partners are reliable only at the amount of their registered guaranteed amount (commercial register).

The most common type of partnership is that of the GmbH & Co. KG. The (fully liable) general partner is a GmbH which in turn is only liable with its assets. The benefit of this legal form is in using the benefits of a partnership while also limiting the liability.

A partnership is generally taxed according to the transparency system. This means that the profits of the company are taxed at partner level, except for trade tax.

Typical partnerships are GbR/BGB-Gesellschaft (company constituted under civil law), offene Handelsgesellschaft (OHG – general partnership), Kommanditgesellschaft (KG – limited commercial partnership) and Partnerschaftsgesellschaft (partnership company).