Business & Finance
We provide legal and tax advice before, during, and after the formation of your GmbH, UG, GbR, KG, OHG, and AG
Our experts assist you in selecting the appropriate corporate form and coordinate notarial certifications in cooperation with reliable partners when required. This enables us to respond flexibly to your needs.
Together with our tax advisors, we support you in economic and tax restructuring within and between different companies.
Furthermore, we assist you with daily business decisions and represent you when necessary in judicial or extrajudicial disputes before state courts or arbitration tribunals.
Overview of Possible Legal Forms for Founders in Germany
In Germany, entrepreneurs have several legal forms available, each with its own advantages and disadvantages. This article focuses on the GmbH, UG (haftungsbeschränkt), GbR, and sole proprietorship, as these are the most relevant options for many founders. Below, we examine each of these legal forms and address their characteristics, liability, and typical problem areas.
GmbH vs. UG vs. GbR (Brief Overview):
- GmbH: Limited liability, €25,000 share capital
- UG: Limited liability, formation from €1
- GbR: Personal liability, at least two persons
- Sole proprietorship: Personal liability, simple start without a company
Forming a GmbH: Advantages, Liability, and Requirements
The GmbH is a limited liability company with a share capital of €25,000.
The GmbH (Gesellschaft mit beschränkter Haftung) is the most common limited liability company in Germany. Its defining feature is the limitation of liability to the company’s assets; the personal assets of the shareholders remain fundamentally protected. A share capital of €25,000 is required, of which at least half must be paid in before registration, along with a notarially certified articles of association. The GmbH legally comes into existence only upon registration in the commercial register.
Unternehmergesellschaft (UG): Mini-GmbH Explained
The Unternehmergesellschaft (UG) is a limited liability entry-level form of the GmbH and can be formed with minimal capital (“Mini-GmbH”). Unlike the GmbH, it does not require share capital of €25,000 but can be formed from as little as €1. However, full payment in cash before registration is required; contributions in kind are excluded (§ 5a para. 2 sentence 2 GmbHG). Additionally, there is a retention obligation: 25% of the annual surplus must be allocated to a reserve until €25,000 is reached; subsequently, conversion to a GmbH is possible.
The UG offers limited liability but must include the designation “haftungsbeschränkt” (§ 5a para. 1 GmbHG). Failure to do so may result in personal liability (BGH, judgment of January 13, 2022 – III ZR 210/20). Formation is simplified, for example through the standard protocol for up to three shareholders and one managing director, but this does not replace individual contractual arrangements. Disadvantages include lower reputation and trust in business transactions.
Legal Forms and Business Formation
Forming a GmbH & Co. KG
The GmbH & Co. KG is a special form of limited partnership: the general partner, who in a simple KG would be personally liable with their private assets, is here a GmbH.
Forming a Stock Corporation
To form an AG, you need articles of association, a management board, supervisory board and shareholders, registration in the commercial register, and €50,000 in share capital. Upon formation, the AG is liable only with its corporate assets and often enjoys high esteem among stakeholders.
Forming a GbR: When This Legal Form Is Worthwhile
The GbR is a simple partnership in which the partners are personally liable.
The GbR (Gesellschaft bürgerlichen Rechts) is the basic partnership under German law and is formed pursuant to § 705 BGB by contract between at least two persons for the pursuit of a common purpose. It can be formed informally, even orally, and requires neither minimum capital nor commercial register entry, provided no commercial business is conducted. This makes it particularly attractive for small enterprises, freelancers, or project companies. Although a written partnership agreement is not mandatory, it is strongly recommended to establish internal regulations such as profit distribution or management.
The greatest disadvantage is liability: partners are personally, unlimitedly, and jointly and severally liable with their private assets—comparable to § 128 HGB. Creditors can hold each partner fully liable. Insurance or contractual provisions only partially mitigate the risk. If the GbR exceeds a commercial threshold, it becomes an OHG with registration requirements. Without clear contracts, conflicts are likely. Therefore, the GbR is simple to start but carries significant risk.
The external presentation and legal classification of the GbR can also present challenges in practice. If you have further questions about forming a GbR, please feel free to contact us at any time!
Forming a Sole Proprietorship: Advantages and Risks
The sole proprietorship is the most straightforward form of self-employment, but without limited liability.
Here, a single person establishes a business without creating a separate legal entity. The start is simple: business registration or freelance activity is sufficient; minimum capital and notarial certification are not required. The sole proprietor makes all decisions independently but, due to the lack of legal separation between person and business, is unlimitedly liable with both business and private assets for all debts and claims for damages; in the worst case, personal insolvency may result. This legal form is particularly attractive for small business owners and solo self-employed individuals due to the low administrative burden.
However, commercial law obligations must be observed, particularly business registration and, where applicable, registration as a merchant in the commercial register if a business is operated in a commercial manner (§ 1 HGB). Tax relief may also be available for small revenues, such as through the small business regulation. As the business grows, loans, employees, and liability risks increase; at that point, a transition to a limited liability legal form such as GmbH or UG is often advisable. Insurance and contractual clauses only partially reduce risks.
Our Services
- Formation & Choice of Legal Form: GmbH, GmbH & Co. KG, UG, AG, GbR, sole proprietorship
- Corporate Governance: Duties of corporate bodies, preparation, review, and amendment of articles of association, rules of procedure, managing director service contracts, etc.
- Capital Measures: Capital increases and reductions, conversion of equity and debt capital
- Structural Measures & Conversions: Mergers, divisions, changes of legal form, cross-border transfers of registered office
- Liability & Responsibility of Corporate Bodies: Prevention and defense in liability cases
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