Overview of the possible legal forms

One of the most important questions in connection with the establishment of a company is the question of the correct legal form, i.e. the legal form of the company. In the following, we would therefore like to present the most important and most common legal forms for company founders, particularly in the SME sector, together with their key features:

Sole proprietor and sole trader

If you want to set up and run your business on your own, you can do so in the legal form of a sole trader. The person concerned is the direct owner of the company and the associated rights and obligations. Accordingly, he is personally responsible for all liabilities arising from the entrepreneurial activity, namely with all his assets. From a legal perspective, there is no distinction between private and business assets, only from a tax perspective. If the business activity carried out is a commercial activity, the nature or scope of which usually requires a commercially organized business operation, the entrepreneur is automatically a merchant within the meaning of the German Commercial Code (HGB) and must be entered as such in the commercial register. Anyone who does not fulfill this requirement can do so voluntarily and thus also becomes a merchant. Special regulations apply to merchants under the HGB, for example on bookkeeping. They are therefore entitled to use a company name that differs from their actual name.

Civil law partnership (GbR)

The partnership under civil law is the basic form of partnership. Its formation requires at least two persons who must join together to pursue a common purpose. This common purpose can be any permitted activity. All partners are personally liable for the full amount of the company's liabilities.

General partnership (OHG)

If the common purpose is to carry out a commercial business, i.e. a commercial activity which, by its nature or scope, requires a commercially organized business operation, it is no longer a GbR but a OHG. The OHG thus represents a modification of the GbR for the area of commercial transactions. Its formation also requires at least two persons; here too, the partners are personally liable for the full amount of the company's liabilities. The OHG is a merchant within the meaning of the HGB and must be entered in the commercial register.

Limited partnership (KG)

A variation of the OHG is the limited partnership (KG). Its special feature is that there are two different types of partners. In addition to (at least one) partner, who is personally liable in full for the company's liabilities like an OHG or GbR partner and is called a general partner, at least one other partner is required whose liability to the company's creditors is limited to the amount of a specific, freely selectable capital contribution; he is called a limited partner. For the limitation of liability to be effective, however, the limited partner's limitation of liability must be entered in the commercial register.

Limited liability company (GmbH)

The main feature of a limited liability company (GmbH) is, as its name suggests, the limitation of liability. However, it is not the liability of the company that is limited, but that of the shareholders. They are generally not liable for the company's liabilities (except in special cases). To compensate for this, the shareholders must raise a certain amount of capital when the company is founded, i.e. contribute to the company. This amounts to at least EUR 25,000.00. The GmbH can be founded by several persons, but also by one shareholder alone. The formation requires notarization, as does the subsequent transfer of shares and any amendment to the articles of association.

Entrepreneurial company (limited liability)

The Unternehmergesellschaft, or UG for short, (haftungsbeschränkt) is a special form of GmbH that was introduced a few years ago and is an interesting alternative, especially for founders. The difference to the .normal. GmbH is that its share capital can be lower than the minimum amount of EUR 25,000.00, i.e. only EUR 1.00. To compensate for this, the somewhat unwieldy designation with the addition .(haftungsbeschränkt). must be used. In addition, a reserve must be formed in the annual financial statements, into which a quarter of the annual surplus must be transferred. In this way, equity is to be built up over the years to compensate for the low initial capital resources. Otherwise, the same regulations apply to the UG (haftungsbeschränkt) as to the GmbH, i.e. also with regard to notarization.

GmbH & Co KG

The GmbH & Co. KG is a development in contractual practice. This is a limited partnership which is characterized by the fact that the role of the personally liable partner is not assumed by a natural person, but by a GmbH (which is only liable with its assets). In this way, the advantages of a partnership can be combined with those of limited liability. Instead of a GmbH, a UG (haftungsbeschränkt) can also be the personally liable partner.

Public limited company

The public limited company is better known as the legal form of larger, particularly listed companies, but is also of interest to SMEs. Here too, liability is limited to the company's assets and shareholders are only liable for their contributions. Compared to the GmbH and partnerships, the law gives the founders significantly less freedom when drafting the articles of association. A public limited company has three mandatory bodies whose powers are defined by law, namely the general meeting (of shareholders), the management board, which manages the business, and the supervisory board as a supervisory and control body. Unlike GmbH shares, shares can be transferred without notarization.

Other legal forms

In addition to those mentioned, there are a number of other company forms which, such as the partnership company, are only suitable for certain sectors or larger companies. The use of all legal forms from other member states of the European Union and the European Economic Area is also permitted. The best-known example of this is the English limited company, which experienced a certain boom in Germany a few years ago. In such a case, however, it should be borne in mind that the company is subject to its respective law of incorporation, i.e. foreign law, register applications and evidence must be submitted in the language of the country of incorporation and qualified advice can only be provided by consultants from the respective country of incorporation, which generally leads to significantly higher costs.

Shelf companies - when time is of the essence

A key feature of various company forms is the limited liability of their shareholders. For example, the shareholders of a GmbH or an entrepreneurial company (haftungsbeschränkt) are generally not personally liable for the company's liabilities with their private assets. Limited partners in a limited partnership or GmbH & Co. KG have limited liability up to the amount of their contribution, provided that this has not yet been paid to the company, and no further liability thereafter. However, all of these limitations of liability only come into effect in the external relationship once the respective company has been entered in the commercial register by the competent registry court. Depending on the register court, this can take up to several weeks. If business operations are commenced during this period, the shareholders run the risk of being held personally liable.

For company founders who want to avoid this risk but still want to start their business activities as quickly as possible, the acquisition of a so-called shelf company is therefore an option instead of founding their own company. Shelf companies are companies that were founded solely for the purpose of resale. Their formation is complete, the necessary contributions have been made, the companies are entered in the commercial register but do not carry out any operational business activities of their own. You can acquire such a company at short notice so that you immediately have a fully established, fully existing corporate entity with immediately effective limitation of liability at your disposal.

Through VOELKER Service GmbH, we currently offer such shelf companies in the legal forms of GmbH, Unternehmergesellschaft (haftungsbeschränkt) and GmbH & Co KG. The purchase price is EUR 27,900.00 for a GmbH (with a share capital of EUR 25,000.00), EUR 2,500.00 for a UG (haftungsbeschränkt) with a share capital of EUR 12.00 and EUR 29,900.00 for a GmbH & Co. KG (with a share capital of the general partner GmbH of EUR 25,000.00 and an additional limited partnership capital of EUR 500.00).

This purchase price includes the respective company with the stated share capital or limited partner's capital, the preparation of all documents required in connection with the transfer (shareholder resolutions to change the company name, object, registered office and management, purchase and transfer agreement, commercial register application, etc.) as well as the organization of the necessary notary appointment.

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