Types of Companies in Germany

Germany recognises approximately ten legal business forms. Capital companies include the GmbH, UG, AG, and SE. Partnerships include the GbR, OHG, KG, and the hybrid GmbH & Co. KG. Additionally, sole proprietorships (Einzelunternehmen) and cooperatives (eG) are available. The GmbH is by far the most commonly registered form, accounting for the majority of new business formations.

The GmbH requires EUR 25,000 minimum share capital and is governed by the GmbHG. It has a simpler governance structure with shareholders and one or more managing directors. The AG requires EUR 50,000 minimum capital, is governed by the AktG, and mandates both a management board (Vorstand) and a supervisory board (Aufsichtsrat). The AG can issue shares to the public, while GmbH shares are transferred through notarised agreements. For most small and medium-sized businesses, the GmbH is more cost-effective.

The GmbH is the preferred choice. It does not require shareholders or managing directors to reside in Germany, offers full limited liability, and carries strong credibility in the German market. Since 2022, GmbH formation can also be completed via online notarisation (§2 Abs. 3 BeurkG). The UG is an alternative for those with limited starting capital.

A GmbH & Co. KG is a limited partnership (KG) where the general partner is a GmbH. This structure caps all partners’ liability while retaining the tax treatment of a partnership: profits are taxed at the individual partner level rather than at the corporate level, avoiding the double taxation that applies to a GmbH distributing dividends. It is widely used for family businesses, real estate holdings, and investment structures.

It is technically possible, but practically difficult for non-EU citizens. A sole proprietorship conducting a trade requires a Gewerbeschein from the local Gewerbeamt, which may require proof of a German address or valid residence permit. EU/EEA nationals benefit from freedom of establishment. For non-residents, a GmbH or UG is generally more practical, as neither requires the founder to live in Germany.

The UG requires just EUR 1 (though higher amounts are advisable). The GmbH requires EUR 25,000 (EUR 12,500 must be paid in at registration). The AG requires EUR 50,000, and the SE requires EUR 120,000. Partnerships (GbR, OHG, KG) and sole proprietorships have no statutory minimum capital requirement. Cooperatives (eG) also have no fixed minimum.

The UG, often called the “mini-GmbH,” is a variant of the GmbH introduced in 2008 under §5a GmbHG. It can be founded with share capital as low as EUR 1 but must retain 25% of its annual net profit until reserves reach EUR 25,000. At that point, the company may convert into a standard GmbH. The UG has the same legal structure and liability protections as a GmbH.

The key differences are liability and taxation. In an OHG, all partners bear unlimited personal liability. In a KG, general partners have unlimited liability while limited partners are liable only up to their registered contribution. Corporations (GmbH, AG) limit liability to company assets. Partnership profits are taxed at the partner level (income tax), while corporations pay corporate tax (15%) plus solidarity surcharge and trade tax, with dividends taxed again upon distribution.

The SE is a European public limited company established under EU Regulation No 2157/2001. It requires minimum capital of EUR 120,000 and can only be formed by merging existing companies from at least two EU member states, converting an existing public company, or creating a holding or subsidiary SE. The SE can choose between a one-tier or two-tier board structure and can transfer its registered office between EU member states without dissolution.

The Einzelunternehmen (sole proprietorship) has the lowest setup costs — a Gewerbe registration costs EUR 15–65 and no notary or Handelsregister filing is required. Among limited liability forms, the UG is cheapest: share capital starts at EUR 1, and notary plus registration fees total approximately EUR 350–500. A standard GmbH formation costs EUR 800–1,500 in fees, plus the EUR 25,000 share capital.