Types of German company

Below you can find an introductory guide on the various forms of German company:

Gesellschaft mit beschränkter Haftung – GmbH

Private limited company

Min. share capital (€)

25,000

Min. shareholders

1

Liability

Limited to share capital

A private limited company (Gesellschaft mit beschränkter Haftung, GmbH) is a private company that is limited by shares.  The company has its own legal personality. This means it can sue and be sued, purchase and sell property and generally conduct business in its own name. The company is represented by its directors.

In the cases of company failure, the company’s liability is restricted to its assets and shareholders’ liability is limited to the amount of share capital invested. Shareholders’ personal property is protected.

A private limited company’s shares cannot be offered for sale to the public. The administrative formalities that apply are less stringent than for public limited companies.

If a promoter of a company chooses to trade before the company is incorporated, the promoter assumes unlimited personal liability for the debts incurred before registration.

Forming a GmbH requires notarisation of the articles of association. The costs associated with forming a GmbH can include: fees for drafting the articles of association, notary fee and registration fee.

The shareholders of a GmbH have direct control over the directors. However the shareholders can choose to create a supervisory board and are required to do so once the number of employees reaches a certain level.

There are no prescribed rules as to the nationality or residence of directors, but they should be able to carry out their tasks whilst present in Germany.

Unternehmergesellschaft (beschränkt) – UG

Entrepreneurial private limited company

Min. share capital (€)

1

Min. shareholders

1

Liability

Limited to share capital

An Unternehmergesellschaft (UG) is a sub-category of the German private limited company (GmbH). It is a start-up model designed to make the formation of a private limited company easier and less risky for entrepreneurs, and to improve the international competitiveness of the German GmbH. This type of German company is also known as a ‘mini-GmbH’ or the ‘1 euro GmbH’.

An UG is largely subject to the same rules as the GmbH. Company liability is limited to its assets and shareholders’ liability is limited to the amount invested in the company. One of the major differences between the UG and GmbH, however, is that a minimum of only €1 is required as start-up capital, as opposed to €25,000.

Each year the UG is required to apportion a quarter of its annual net profit, less losses carried forward from the previous year, to a reserve fund. Once the fund reaches the minimum GmbH investment capital of €25,000 the UG can convert into a GmbH through an increase in capital and without changing its legal form. The UG is not obliged to convert to a GmbH, but if it retains its UG status, it must continue to pay 25% of its annual net profit into the reserve fund.

Aktiengesellschaft – AG

Public limited company

Min. share capital (€)

50,000

Min. shareholders

1

Liability

Limited to share capital

A public limited company (Aktiengesellschaft) is a German company which can trade on the stock market and offer its shares to the public. A public limited company has legal personality and has its own rights and responsibilities.

The company’s liability is limited to its assets. Shareholders’ liability is restricted to the amount invested in the company.

The administrative burden on publicly trading companies is higher than that on private limited companies.

Public limited companies in Germany have a two-tier governance system. A supervisory board (Aufsichtsrat) elects an executive board (Vorstand). The supervisory board supervises the executive board and is elected by shareholders at general meetings but can, in some circumstances, be partly elected by employees.

There are no prescribed rules as to the nationality or residence of directors, but they should be able to carry out their tasks whilst present in Germany.

Forming an AG requires notarisation of the articles of association. The costs associated with forming an AG can include: fees for drafting the articles of association, notary fee and registration fee.


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
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Model articles of association – UG; standard partnership agreement – GbR Ja Ja Ja Ja
Modified standard partnership agreements – GbR, oHG, KG, PartG Ja Ja Ja
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Articles of association / partnership agreements – AG, GmbH & Co. KG and other business forms Ja
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Notary referral Ja Ja Ja Ja
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* 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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