Other operating forms

Eingetragener Verein – e.V.

Registered associations and societies

Min. share capital (€)

n/a

Min. members

7

Liability

Unregistered = personal liability of representatives

Registered = association liable

The German constitution (Grundgesetz) guarantees all Germans the right to freely form associations and societies. An association is defined as an affiliation of persons for the realisation of a common goal and incorporated by constitution.

There are two kinds of association in Germany: registered and unregistered associations. Registered associations (eingetragener Verein, e.V.) have legal personality and carry liability. Non-registered associations are an affiliation of natural persons. They do not have legal personality and those who represent the association are personally liable.

Associations are also divided into commercial and non-commercial associations. Non-commercial associations obtain legal personality once they are entered in the register of associations. Commercial associations are granted legal personality only by law. A commercial association may only arise where other business forms, such as a GmbH, are inappropriate (e.g. collecting societies under copyright law).

Registered associations must have a minimum of 7 members who must be over the age of 18. They must also have a constitution, an association name, a registered office and an official association objective. A committee is appointed by the members at a general meeting and is comprised of at least a chairman, vice-chairman and treasurer.

If a registered association pursues charitable aims, it can apply for various tax reliefs.

Eingetragene Genossenschaft – e.G.

Registered cooperative

Min. share capital (€)

n/a

Min. members

3

Liability

Limited to cooperative

A registered cooperative (eingetragene Genossenschaft) is an association of natural or legal persons set up to promote the commercial, social or cultural interests of its members through the joint conduct of business. Natural persons, limited partnerships (Kommanditgesellschaft, KG) and general commercial partnerships (Offene Handelsgesellschaft – oHG) can participate in a registered cooperative.

Registered cooperatives can be found in various industry sectors including: credit unions, purchasing cooperatives, housing associations, consumer associations and farming cooperatives.

At least three persons are required in order to set up a cooperative. There is no minimum share capital required. The cooperative must have a written statute and be entered in the register of cooperatives.

Cooperatives are subject to tax including corporation tax and trade tax, although some cooperatives are exempt.

There is also the possibility to found a European Cooperative Society (see above).

Stiftung

Foundation

Min. share capital (€)

n/a

Min. members

n/a

Liability

Limited to cooperative

A foundation is an institution which is financed by a donation and which pursues the objectives set by the donor.

Many foundations in Germany assume a private-law form and pursue charitable aims.

Foundations can be divided into those which offer grants to third persons to undertake an activity (Föderstiftung) and those which themselves carry out projects and activities to achieve their aims (operative Stiftung).

In Germany, a foundation with legal personality generally has no members and is subject to the supervision of the Foundations Supervisory Authority. A foundation with legal personality requires a statute and a management board. Other organs can also be created if necessary.

Although no legal minimum capital is required in order to create a foundation with legal personality, in practice many federal states in Germany require a minimum capital funding of 25,000 euros.

Foundations without legal personality, or trusts, are not explicitly regulated under German law. However, they are subject to general civil law rules on gifts. Trustees are subject to the general rules on agency. Trusts are not subject to the supervision of the authorities.

German franchise

Min. share capital (€)

Governed by contract

Min. members

n/a

Liability

Governed by contract

Some of the most famous names operate under franchise systems, including Subway and McDonald’s. There are many different franchise models and it is important to take legal advice before making an investment in a German franchise.

The person setting up in business and making the investment is referred to as the franchisee. The owner of the existing business is called the franchisor.

A franchise business involves the franchisee paying a fee to make use of an existing business model. To ensure uniformity across the franchise, franchisees are usually subject to the franchisor’s policies and directives.

Franchising offers a number of advantages for the franchisee. These include: quick market entry, investment in a tried and tested business model, access to and use of the franchisor’s trademarks and know-how, continual training through the franchisor and guaranteed geographical exclusivity.

Some of the disadvantages for franchisees include the requirement to pay an ongoing fee to the franchisor, less entrepreneurial freedom, the lack of influence over the overall business model, the risk that one franchise’s image could be damaged through the independent action of another franchisee or the franchisor. Also, franchisees often have to bear the risk of franchise failure.

The benefits for the franchisor include: the ability to maintain control over the business concept, trademarks and business know-how, the creation of a tailored distribution network without the need to create a chain and less risk of failure.

There is no specific legislation in Germany governing franchises and in particular pre-contractual disclosure. Instead, the relationship between the franchisor and the franchisee is governed by the franchise contract. In turn, the franchise contract is governed by the general legal provisions on the law of contract. In addition, guidance published by the German Franchise Association concerning pre-contractual disclosure and other franchise topics is applied by the courts. Consequently, if a franchisor misleads the franchisee in relation to the state of the franchise before the contract is signed, the franchisee is entitled to terminate the contract without notice and claim compensation.

Despite being protected in this manner, a franchisee should always conduct due diligence on the franchise before investing. A franchisee should assess the success rate of the franchise model, whether the fees being demanded by the franchisor are reasonable, whether support is offered to set up and run the franchise, whether training is offered, and whether penalties apply for early termination of the contract.


Here you can find an overview of our services in the area of starting a business in Germany. For further information, contact our team of German lawyers on +49 (0) 221 / 951 563 0 or use our contact form.

BASIC STANDARD PREMIUM BESPOKE
Advice on choosing suitable business form Ja Ja Ja Ja
Model articles of association – UG; standard partnership agreement – GbR Ja Ja Ja Ja
Modified standard partnership agreements – GbR, oHG, KG, PartG Ja Ja Ja
Bespoke partnership agreements/articles of association – GbR, oHG, KG, PartG, UG, GmbH Ja Ja
Articles of association / partnership agreements – AG, GmbH & Co. KG and other business forms Ja
Review of company name Ja Ja
Standard directors’ service contracts Ja Ja
1 hour additional legal advice Ja Ja Ja
Assessment of whether all important aspects have been considered (incl. directors’/representatives’ liability) Ja Ja Ja Ja
Provision of documents required for entry in the commercial register Ja Ja Ja Ja
Notary referral Ja Ja Ja Ja
Assistance with filling in documents required by notary Ja Ja Ja Ja
Advice on next steps Ja Ja Ja
Assistance with searching for grants and investors Ja
Legal notices Ja Ja Ja
Information pack on your chosen business form Ja Ja Ja Ja
Preis €495.00* €980.00* €1580.00* Available on request

* plus 19% VAT


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Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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