What types of companies are there in Germany? A comparison for investors

Investors who want to set up a company in Germany have various options. Legal forms for selection. The choice of the right company form influences Liability, capital requirements, tax burden and administrative costs. Here is a comprehensive comparison of the most important types of companies in Germany.

1. overview of the types of company

Company form  Minimum capital  Liability  Taxation  Commercial register Administration
 Individual companies  No minimum capital Personal liability  Income tax  No  Simple
 Company under civil law (GbR)  No minimum capital Personal liability Income tax  No  Simple
 General partnership (OHG)  No minimum capital Personal liability  Income tax
&trade tax
 Yes  Medium
 Limited partnership (KG)  None
Minimum capital
Complementary: Unlimited
Limited partner: Limited liability
 Income tax
&trade tax
 Yes  Medium
 GmbH ( limited liability company )  25.000€ Limited to the company's assets Corporation tax (15%) & trade tax  Yes  High
 UG
(Company - Mini GmbH)
 1€  Limited to the company's assets  Corporation tax
(15%) & trade tax
 Yes  Medium
 AG ( stock corporation)  50.000€ Limited to the company's assets  Corporation tax (15%) & trade tax  Yes  Very high

2. detailed comparison of the company forms

a) Sole proprietorship - ideal for small businesses and the self-employed

Easy to set up, no entry in the commercial register necessary
Low administrative costs
Unlimited personal liability
Income tax can be expensive for high profits

Suitable for: Self-employed, small retailers and service providers

b) GbR (partnership under civil law) - The simple multi-person partnership

No minimum capital required
Simple foundation with contract
All shareholders have unlimited personal liability
Not suitable for larger stores

Suitable for: Small companies with several shareholders

c) OHG (general partnership) - For merchants with full liability

Suitable for larger companies than the GbR
Every shareholder has a full say
Full personal liability
Obligation to keep accounts & entry in the commercial register

Suitable for: Medium-sized companies, commercial enterprises

d) KG (limited partnership) - mixture of full and limited liability

Limited partners (investors) are only liable for their capital contribution
Suitable for family businesses and investors
General partner (main shareholder) has unlimited liability
Obligation to keep accounts and file tax returns

Suitable for: Companies with external investors

e) GmbH (limited liability company) - The most popular legal form for investors

Limited liability (only with company assets)
Suitable for large & small companies
More favorable tax treatment than sole proprietorships with high profits
Minimum capital € 25,000 (of which € 12,500 must be paid in upon formation)
High administrative costs (annual financial statements, commercial register, notary)

Suitable for: Medium-sized and larger companies, start-ups with capital requirements

f) UG (entrepreneurial company - "Mini-GmbH") - The favorable GmbH alternative

Foundation possible from € 1
Same limitation of liability as the GmbH
Suitable for small start-ups with little capital
Obligation to set aside reserves (25 % of the profit must be saved for capital growth)
Less trustworthy than a limited liability company

Suitable for: Startups and entrepreneurs with little capital

g) AG (public limited company) - For large companies and investors

Capital can easily be raised via shares
Liability is limited to the company's assets
Suitable for IPOs and large investments
Very high administrative costs (Management Board, Supervisory Board, Annual General Meeting)
Strict legal regulations & high tax burden

Suitable for: Large companies with expansion plans

3. tax consideration of the company forms

 Type of company  Tax type  Tax rate
 Sole proprietorship/ GbR/OHG/KG  Income tax  14-45% ( depending on the amount won)
 GmbH/UG/AG  Corporate income tax  15%+5.5% Solidarity surcharge
 All commercial enterprises  Trade tax  7-17 depending on the city

 

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