Which company types exist?

Before starting a business, the choice of the right legal form is a decisive factor. There are different costs and tax aspects to be considered. We will show you the most important forms and will be happy to advise you in more detail.

Commercial and corporate law provides entrepreneurs with the available forms of business (legal forms) by law. It is not possible to invent a new legal form and introduce it to the market. However, the legally prescribed basic structures can be partially changed and thus adapted to individual needs. In the following, the characteristic features of various legal forms of organization are presented. Details are left out: they should be clarified with a consultant in each individual case.

Commercial enterprises must be entered in the commercial register. In principle, the German Commercial Code (HGB) applies to their business. Non-commercial enterprises can be entered voluntarily in the commercial register and are then treated like merchants. If they do not make use of this option, they are generally subject to the German Civil Code (BGB) and not the German Commercial Code (HGB) in their legal transactions.

The question of whether an enterprise is of a commercial nature depends on whether the nature and scope of the business requires a commercial establishment.

A small commercial enterprise can be operated by an individual as a small trader or by a civil law partnership in the form of a BGB-Gesellschaft or GbR. Commercial partnerships are the sole trader (e.K. = e.Kfm.), the general partnership (oHG), the limited partnership (KG) and the limited liability partnership (GmbH & Co. KG, GmbH & Co. oHG).

Small business owners Individuals The fastest and easiest way to become an entrepreneur is to register a small business. There is no entry in the commercial register. The company is not an independent company. The entrepreneur is liable with his private assets.

  • The BGB company (GbR)
    For the partnership under civil law, BGB-Gesellschaft or GbR, similar principles apply as for the small trader. The GbR is an independent legal subject. It can be founded orally. However, it is advisable to conclude a written contract. At least two partners are required. There is no entry in the commercial register. There is no limitation of liability.
  • Sole trader (e.K.)
    The sole trader is entered in the commercial register. The sole trader is liable with his entire private assets.
  • The general partnership (oHG)
    The oHG is the continuation of the GbR as a commercial enterprise with full liability of the partners. It is entered in the commercial register and is an independent legal entity.
  • The limited partnership (KG)
    Like the OHG and GbR, the KG is a partnership, which is entered in the commercial register. One partner, the general partner, is fully liable. The other partners, limited partners, are only liable up to the amount of the original capital contribution taken over. To limit the liability of the general partner, a GmbH can become a general partner (GmbH & Co KG). There is no minimum share capital for the KG.
  • The limited liability company (GmbH)
    The GmbH is a corporation with at least 25,000 EUR share capital. It needs at least one shareholder. Only half of the share capital must be paid up. The liability is limited to the amount of the share capital. The partner is liable to the GmbH only for the capital contribution, not to third parties. A quasi Unterform of the GmbH is the UG (haftungsbeschränkt). UG = entrepreneurial company means that the minimum share capital here is only 1 EUR.
  • The stock corporation (AG)
    The AG is a corporation with at least EUR 50000 of share capital. It is a legal person or a corporate body, i.e. a legal entity based on membership but with independent legal capacity as an association, which itself acts as a bearer of rights and obligations and can sue and be sued in court. The share capital is divided into shares held by shareholders.
  • As your company grows, you can change the legal form by converting it to another legal form at a later date. However, this is associated with considerable consulting costs, expenses and possibly also taxes.

Which company types exist?

Before starting a business, the choice of the right legal form is a decisive factor. There are different costs and tax aspects to be considered. We will show you the most important forms and will be happy to advise you in more detail.

Commercial and corporate law provides entrepreneurs with the available forms of business (legal forms) by law. It is not possible to invent a new legal form and introduce it to the market. However, the legally prescribed basic structures can be partially changed and thus adapted to individual needs. In the following, the characteristic features of various legal forms of organization are presented. Details are left out: they should be clarified with a consultant in each individual case.

 

Commercial enterprises must be entered in the commercial register. In principle, the German Commercial Code (HGB) applies to their business. Non-commercial enterprises can be entered voluntarily in the commercial register and are then treated like merchants. If they do not make use of this option, they are generally subject to the German Civil Code (BGB) and not the German Commercial Code (HGB) in their legal transactions.

The question of whether an enterprise is of a commercial nature depends on whether the nature and scope of the business requires a commercial establishment.

A small commercial enterprise can be operated by an individual as a small trader or by a civil law partnership in the form of a BGB-Gesellschaft or GbR. Commercial partnerships are the sole trader (e.K. = e.Kfm.), the general partnership (oHG), the limited partnership (KG) and the limited liability partnership (GmbH & Co. KG, GmbH & Co. oHG).

Small business owners Individuals The fastest and easiest way to become an entrepreneur is to register a small business. There is no entry in the commercial register. The company is not an independent company. The entrepreneur is liable with his private assets.

 

  • The BGB company (GbR) For the partnership under civil law, BGB-Gesellschaft or GbR, similar principles apply as for the small trader. The GbR is an independent legal subject. It can be founded orally. However, it is advisable to conclude a written contract. At least two partners are required. There is no entry in the commercial register. There is no limitation of liability.
  • Sole trader (e.K.)
    The sole trader is entered in the commercial register. The sole trader is liable with his entire private assets.
  • The general partnership (oHG)
    The oHG is the continuation of the GbR as a commercial enterprise with full liability of the partners. It is entered in the commercial register and is an independent legal entity.
  • The limited partnership (KG)
    Like the OHG and GbR, the KG is a partnership, which is entered in the commercial register. One partner, the general partner, is fully liable. The other partners, limited partners, are only liable up to the amount of the original capital contribution taken over. To limit the liability of the general partner, a GmbH can become a general partner (GmbH & Co KG). There is no minimum share capital for the KG.
  • The limited liability company (GmbH or UG)
    The GmbH is a corporation with at least 25,000 EUR share capital. It needs at least one shareholder. Only half of the share capital must be paid up. The liability is limited to the amount of the share capital. The partner is liable to the GmbH only for the capital contribution, not to third parties. A quasi Unterform of the GmbH is the UG (haftungsbeschränkt). UG = entrepreneurial company means that the minimum share capital here is only 1 EUR.
  • The stock corporation (AG)
    The AG is a corporation with at least EUR 50000 of share capital. It is a legal person or a corporate body, i.e. a legal entity based on membership but with independent legal capacity as an association, which itself acts as a bearer of rights and obligations and can sue and be sued in court. The share capital is divided into shares held by shareholders.

As your company grows, you can change the legal form by converting it to another legal form at a later date. However, this is associated with considerable consulting costs, expenses and possibly also taxes.

GmbH and UG which is right for you?

GmbH

Sharecapital of 25.000 EUR minimum, at least 12.500 EUR must be deposited, but are available for business. Most common company type, shows reliability due to sharecapital. Limited liability, only one person need for formation.

 

UG (Mini-GmbH)

Has all advantages of a GmbH like one person requirement and limited liability but lower sharecapital requirement of just 1 EUR, usually formed with a sharecapital of 100 EUR or 1000 EUR to be able to divide share later for more shareholders, if needed. Con: shows that shareholders had not sufficient funds for a GmbH formation.

Liesegang & Partner mbB, Rechtsanwälte