Limited liability company (GmbH)
The GmbH is the most frequently selected german company form.
Share capital
The required minimum capital, the so-called share capital, is €25,000. It is comprised of the capital contributions of the partners.
Liability
As a rule, the GmbH is liable with respect to its creditors solely to the extent of the company assets. The partners are not liable for the company’s debts to the extent of their personal fortunes. However, they are liable to the extent of their personal fortunes for personal loans or guarantees. They are also personally liable in the event of violations of the strict rules regarding the GmbH capital and in the event of the so-called piercing of the corporate veil (explanation: piercing the corporate veil refers to a case in which someone is personally liable with his/her personal fortune, without restrictions and jointly and severally, for the company’s debts although the form of the pertinent company includes a limitation of liability, e.g. for certain damage compensation claims).
Formalities
The partnership agreement must be notarised by a civil-law notary. A GmbH can be formed by means of a simple standard formation (such as cash formation, no more than three partners) on the basis of a standard record which must be certified. The standard record combines the partnership agreement, list of partners and appointment of the managing director. The standard records — one for formation by one person, another for formation by more than one person — are provided as appendices to the GmbH-Gesetz (German Act Regarding Limited Liability Companies). The GmbH must be entered in the Commercial Register.
Advantages
Limited liability, tax advantages in the event of higher profits.
Disadvantages
Minimum capital of €25,000 required. Formation formalities and accounting are more extensive.
The GmbH is the most frequently selected german company form.
Share capital
The required minimum capital, the so-called share capital, is €25,000. It is comprised of the capital contributions of the partners.
Liability
As a rule, the GmbH is liable with respect to its creditors solely to the extent of the company assets. The partners are not liable for the company’s debts to the extent of their personal fortunes. However, they are liable to the extent of their personal fortunes for personal loans or guarantees. They are also personally liable in the event of violations of the strict rules regarding the GmbH capital and in the event of the so-called piercing of the corporate veil (explanation: piercing the corporate veil refers to a case in which someone is personally liable with his/her personal fortune, without restrictions and jointly and severally, for the company’s debts although the form of the pertinent company includes a limitation of liability, e.g. for certain damage compensation claims).
Formalities
The partnership agreement must be notarised by a civil-law notary. A GmbH can be formed by means of a simple standard formation (such as cash formation, no more than three partners) on the basis of a standard record which must be certified. The standard record combines the partnership agreement, list of partners and appointment of the managing director. The standard records — one for formation by one person, another for formation by more than one person — are provided as appendices to the GmbH-Gesetz (German Act Regarding Limited Liability Companies). The GmbH must be entered in the Commercial Register.
Advantages
Limited liability, tax advantages in the event of higher profits.
Disadvantages
Minimum capital of €25,000 required. Formation formalities and accounting are more extensive.