The Ltd. as an English legal form
The Limited is the English variant of the limited liability corporation and is comparable with the German GmbH or the small AG.
It offers several advantages:
- Very quick establishment possible within 24 hours
- No notarial certification required for contractual changes
- No minimum capital
However, there are also some disadvantages when setting up a limited company if it operates domestically:
- Two different legal systems within which collisions can occur. As a result, it is possible that the British company will be sued.
- It must be entered in the German commercial register, which entails notarial effort and costs. The other documents are also required as for the establishment of a German company.
- Two bookkeeping, one in accordance with the German Commercial Code and one in accordance with UK GAAP
- High penalties for business reports that are submitted too late
Legal forms for charitable purposes
If you pursue a charitable purpose with your company – such as supporting the church – there are special legal forms for this project. These include above all the non-profit GmbH (gGmbH) and the non-profit UG (gUG). This is essentially a GmbH, which is structured accordingly. The difference to the “normal” society is that its income may only be used for charitable purposes. In return, the gGmbH enjoys tax advantages, for example it is exempt from corporation tax and trade tax.
Examples of non-profit limited companies are kindergartens, social stations and old people’s homes.
The gUG is the little sister of the gGmbH and will be converted into such after reaching 25,000 euros in start-up capital. In order to increase the share capital, the gUG has to put 25 percent of its profits into this pot.
A partnership is created when you join forces with another person to achieve a specific goal. It does not matter whether it is a natural or a legal person. When it comes to liability, partnerships don’t care too much: some partners have unlimited liability. This means that your private assets can also be used for business debts.
In the following, we will introduce you to the most popular types of partnerships in more detail.
The GbR as the simplest legal form
The civil society is the simplest form of grouping together for business purposes. A common goal is sufficient; formalities such as a contract are not required. Basically, you are already setting up a GbR when you carpool with friends. The advantages in brief:
- Suitable for any type of business partnership
- A lot of room for maneuver
- No minimum capital
The main disadvantage is the liability. At the GbR, you and all other partners are liable with their entire assets.
The KG – the legal form for decision-makers
With a limited partnership, as an entrepreneur, you remain the most important decision-maker. You are the so-called general partner and can let limited partners participate in your company. These are financially involved and are liable with their contribution. In return, they receive a share of the profit. For you as a general partner , the freedom to make decisions is a big plus. You keep the strings in hand and don’t have to give up a large part of your power to others, as is the case with the AG. In return, however, you also bear the full entrepreneurial risk and are liable as a general partner with all of your assets. If limited partners are not satisfied with their work, if in doubt they will jump out and you will lose an important part of your capital.
The OHG as a legal form with residual risk
According to psyknowhow, the general partnership has a high reputation, but you bear a risk that is not to be neglected. You are liable with all of your assets. In addition, as a small business owner, you cannot set up a general partnership. On the other hand, there are the advantages. There is no minimum capital and through personal liability you enjoy a certain respect in public.
The GmbH & Co. KG
In contrast to the typical limited partnership, in the limited liability company & Compganie Kommanditgesellschaft (GmbH & Co. KG) the personally and indefinitely liable partner is the GmbH and therefore not a natural person. The people behind the company are thus to be protected from liability risk.
Facts and figures on the legal forms in Germany
Germany is a globally respected industrial nation with an abundance of companies and corporations. The Federal Statistical Office carried out a census in September 2018 and statistically evaluated the number of different legal forms. A total of 2.1 million people work as sole proprietorships in the Federal Republic of Germany. The majority of them, two million, work alone or with a maximum of nine employees. Only around 66,000 sole proprietorships have more than ten employees.
In the case of corporations, around 700,000 companies were recorded nationwide. The majority of them also have fewer than nine employees. There are around 400,000 partnerships in Germany. More than 250 employees can only be around 3000 companies. Here, too, the lion’s share is between zero and nine employees.