Before I write the second part on foreclosures at the end of May, I would like to give you a brief overview of German company forms and their special features. I have noticed that the many abbreviations lead to confusion, which I hope will be a thing of the past after this article.
Some information first:
Under German law, there are a number of different legal forms that a company can choose. Some of these companies do not have to be entered in the commercial register. The majority, however, do. The German register system consists of the Commercial Register A, the Commercial Register B, the Register of Associations and the Register of Partnerships. These are kept at the local court by the department for register matters.
Commercial register A mainly contains sole traders and partnerships (oHG + KG). In commercial register B, these are the corporations, i.e. mainly the GmbH and the AG. The register of associations logically contains the registered associations and the partnership register contains the partnerships.
Now we come to the special features of selected companies. I will discuss the characteristics and possible advantages and disadvantages. I will also try to give an example in each case. However, I will not discuss associations and partnerships, as these do not quite fit in with the topic of this article.
Outline:
1. registered merchant (e.K)
2. civil law partnership (GbR)
3. general partnership (oHG)
4. limited partnership (KG)
5. GmbH & Co. KG
6th KGaA
7. limited liability company
8TH AG
9TH SE
1. the registered merchant §§ 1 ff. HGB
This refers to an individual who operates a commercial business. From a certain size, it is mandatory to be entered in the commercial register. In contrast to corporations, there is less of an obligation to keep accounts here, but the merchant has unlimited liability with all his (including private) assets.
Example: Micro-enterprise with one owner (baker, butcher ...)
2. civil law partnership (GbR) § 705 ff. BGB
Also known as a BGB company, this is a simple form of company that does not even have to be founded in writing or by a notary. If the GbR wishes to engage in legal transactions, which is possible according to current case law of the Federal Court of Justice, it must also appear to the outside world as a GbR (so-called external GbR). As things stand at present, a GbR does not have to be entered in the register. This will change with the new law (MoPeG), valid from 2024. The advantage is that the GbR is easy to set up. The disadvantage, however, is that each partner has unlimited liability with their assets.
Example: Law firms with several lawyers as partners or craft businesses. Not very common, however.
3. general partnership §§ 105 ff. HGB
Similar to the GbR, but must be entered in the commercial register. This must be a commercial enterprise, which may initially be a GbR, but from a certain size is an oHG. The partners (owners) represent the company externally. There must always be at least 2 people involved (otherwise an e.K.). In contrast to corporations, bookkeeping is also simplified here, but the partners are liable with all their assets, which is why the oHG is not very common.
Example: book publisher, car dealer
4. limited partnership §§ 161 ff. HGB
Similar to the oHG, but here there must be at least one partner (general partner) and one limited partner. The general partner represents the company externally and is liable with all its assets. The limited partner makes a contribution (limited partner's share) and is liable for a maximum of this. He is not authorized to represent the company and receives a share of the profits (dividend). The advantage here is that the company can accumulate a large amount of capital through the limited partners.
Examples: Wind farm operator or as with the oHG
5. GmbH & Co. KG
Like the KG, but with the exception that the general partner here is not a natural person, but a limited liability company. Sub-companies are often founded by the parent company in order to spin off a division and thus generate capital through the limited partners. It does not necessarily have to be a GmbH (also possible as AG & Co. KG, SE & Co. KG or even with the participation of a foreign company as Ltd. & Co. KG).
Examples: Food manufacturers, wind farm operators, solar park operators, real estate groups
6. KGaA §§ 278 ff. AktG
This is a partnership limited by shares. A fully liable person (general partner) is also involved here, as well as the other partners as limited shareholders in the share capital divided into shares. As this is a corporation, the formation is somewhat more complex and expensive. However, it is rarely used in practice.
Example: Borussia Dortmund as a GmbH & Co. KGaA, Merck KGaA
7. GmbH, §§ 1 ff. GmbHG
The limited liability company is the most popular form of company in Germany. It can be established by one or more persons. The owners are the shareholders, the GmbH is represented by the managing director(s). A minimum share capital of EUR 25,000.00 is required for formation. The shareholders are not liable with their personal assets, but only with the share capital. The formation must be notarized and the GmbH must then be entered in the commercial register. This incurs formation costs of around EUR 2,000.00.
Examples: Medium-sized companies, QUIN Technologies GmbH 😉
8. public limited company AG §§ 1 ff. AktG
A distinction is made between unlisted stock corporations and listed companies. Require a large amount of capital (at least EUR 50,000.00 share capital). Are represented by the Management Board and have a Supervisory Board. The partners (shareholders) are the owners. This means that anyone who acquires shares also becomes a small part owner. Only suitable for large companies.
Examples: Mercedes-Benz Group AG, Siemens AG
9 European Company (SE)
The abbreviation SE comes from the French Societas Europaea and stands for European public limited company. It is based on EU Regulation No. 2157/2001 from 2001. Comparable to a German AG, but with a minimum share capital of EUR 120,000.00 divided into shares. Representation is by the Board of Directors and the Managing Directors.
Recently, German stock corporations have frequently converted into an SE.
Examples: Allianz SE, SAP SE, Airbus SE
If you have any questions, please ask them in the comments. I will then try to answer them as best I can. If necessary, my girlfriend (a specialist lawyer for commercial and corporate law) will certainly help me.
I apologize for any minor spelling mistakes (despite corrections). It's been a hard day at work.
Hopefully it could help some of you. I look forward to your feedback 🚀
