TypesofCompaniesinGermany—GmbH,UG,AG,KG,OHG,SEExplained

Overview — Germany's Main Legal Forms

German law distinguishes between Kapitalgesellschaften (capital companies with limited liability and legal personality) and Personengesellschaften (partnerships where partners bear personal liability). The choice of legal form determines: minimum capital, who bears liability, tax treatment, governance requirements, and how shares are transferred. Foreign investors overwhelmingly choose the GmbH for its familiar limited liability structure, credibility, and manageable formation cost. The right form depends on capital availability, number of founders, planned investor structure, and whether tax transparency is advantageous.

GmbH — Gesellschaft mit beschränkter Haftung

The GmbH is Germany's dominant commercial legal form with approximately 1.4 million registered entities. Governed by the GmbHG (Gesetz betreffend die Gesellschaften mit beschränkter Haftung), it provides limited liability to shareholders, requires €25,000 minimum capital (€12,500 paid-in before registration per GmbHG §7), and mandatory notarial formation. Ownership interests are called Geschäftsanteile (quota interests) — not shares. Transfer of Geschäftsanteile requires notarisation under GmbHG §15. The GmbH has two mandatory organs: Geschäftsführer (director/s) and Gesellschafterversammlung (shareholders' meeting). A Aufsichtsrat (supervisory board) is optional below 500 employee co-determination thresholds.

• Minimum capital: €25,000 (GmbHG §5); €12,500 paid-in before Handelsregister filing
• Formation: notarisation + Amtsgericht HRB entry — 2–4 weeks
• Share transfer: notarised Abtretungsvertrag required per GmbHG §15
• Audit: only mandatory for medium/large GmbHs under HGB §316 (turnover >€8M, balance sheet >€4M, employees >50 — 2 of 3 criteria)
• Dissolution: shareholders' resolution + notarisation + Handelsregister de-registration + Liquidation

UG (haftungsbeschränkt) — Unternehmergesellschaft

The UG was introduced by MoMiG in 2008 as a low-capital variant of the GmbH, making Germany competitive with the UK's £1 company. It can be formed with as little as €1 capital. The key restriction under GmbHG §5a: 25% of each year's net profit must be retained as a Pflichtreserve (mandatory reserve) until the accumulated reserve plus paid-in capital reaches €25,000 — at which point the UG can convert to a full GmbH by shareholder resolution and notarisation. The UG is identical to the GmbH in every legal respect except the capital amount and the accumulation requirement. Formation process and ongoing obligations are the same. Banks and large B2B counterparties sometimes view the UG with less confidence than a GmbH.

• Minimum capital: €1 (GmbHG §5a) — but practically €500–€1,000 recommended for credibility
• 25% of annual net profit must be retained as Pflichtreserve until €25,000 threshold
• Conversion to GmbH: shareholder resolution + capital increase + notarial deed — typically €800–€1,500 cost
• Musterprotokoll (standard template) strongly recommended for UG — reduces notary costs
• Cannot use in-kind contributions for share capital (UG must be cash-funded per GmbHG §5a Abs.2)

AG — Aktiengesellschaft

The Aktiengesellschaft (AG) is governed by the AktG (Aktiengesetz) and requires €50,000 minimum share capital, of which at least €12,500 must be paid in before registration (AktG §36a). Unlike the GmbH, the AG issues Aktien (shares) that are freely transferable without notarisation — making it suitable for stock option programmes, broad employee participation, and eventual stock exchange listing. The AG has a mandatory two-tier governance structure: Vorstand (management board — executive function) and Aufsichtsrat (supervisory board — oversight). The Aufsichtsrat must have at least 3 members. Annual audit by a Wirtschaftsprüfer is mandatory regardless of size. This governance complexity and cost makes the AG inappropriate for most SMEs and foreign investors unless a public listing or institutional investor participation is planned.

SE — Societas Europaea (European Company)

The SE is a European company form created by EU Regulation 2157/2001, operating identically across all EU member states. In Germany, it is supplemented by the SEAG (SE-Ausführungsgesetz). Minimum capital: €120,000. Key advantages: a single governance structure and set of statutes across EU subsidiaries, and the ability to transfer the registered office between EU member states without dissolution. DAX and MDAX companies extensively use the SE form — Volkswagen AG, Allianz SE, BASF SE, and many others. The SE requires mandatory employee involvement procedures under SEBL (SE-Beteiligungsgesetz) — negotiations with employee representatives are required before formation. For most foreign SME investors, the SE is operationally unnecessary — the GmbH or AG is more practical and less expensive.

• Minimum capital: €120,000 per EU Regulation 2157/2001 Art.4
• Can be formed by merger of existing EU companies, conversion from AG, or joint formation of AG-equivalent companies
• Cross-border SE registered address transfer possible without dissolution — major benefit vs national forms
• Mandatory employee involvement under SEBL (Gesetz über die Beteiligung der Arbeitnehmer in einer Europäischen Gesellschaft)
• Taxed as a German company if registered in Germany — no EU-wide single tax treatment

OHG and KG — German Partnerships

German partnerships are Personengesellschaften — legal entities registered in the Handelsregister but without the full legal personality of a capital company. The OHG (Offene Handelsgesellschaft) is a general partnership where all partners bear unlimited joint and several liability with all personal assets. The KG (Kommanditgesellschaft) is a limited partnership with two classes of partner: the Komplementär (general partner, unlimited liability) and Kommanditisten (limited partners, liability limited to their capital contribution under HGB §171). Both are transparent for German income tax — profits flow directly to individual partners and are taxed at personal rates. Neither is appropriate for foreign investors who require liability protection without also holding a GmbH.

• OHG: all partners jointly and severally liable — unlimited personal liability with all personal assets
• KG: Komplementär = unlimited liability; Kommanditisten = limited to registered capital contribution
• Both must be registered in the Handelsregister (HRA number — Abteilung A for partnerships)
• Tax-transparent: no Körperschaftsteuer at entity level; profits taxed as personal income of partners
• OHG and KG both subject to Gewerbesteuer with €24,500 annual exemption for non-corporations

GmbH & Co. KG — The Tax-Transparent Hybrid

The GmbH & Co. KG is Germany's most popular hybrid structure, combining the liability protection of a GmbH with the tax transparency of a KG partnership. A GmbH acts as the Komplementär (general partner with unlimited liability) of a KG — but since the GmbH limits actual personal exposure, no natural person bears unlimited liability. The KG is tax-transparent: profits flow directly to Kommanditisten (limited partners) and are taxed at their personal income tax rate, avoiding the 15% Körperschaftsteuer at company level. This makes it highly attractive for German real estate investment, family business succession, and professional investor fund structures. Complexity: two separate legal entities must be maintained, each with their own Handelsregister entry (HRB for the GmbH, HRA for the KG), annual accounts, and Steuerberater.

• Two entities: GmbH (Komplementär, unlimited liability borne by GmbH not individuals) + KG (transparent for tax)
• Profits taxed at partner (individual) level — no corporate Körperschaftsteuer at KG level
• GmbH & Co. KG pays Gewerbesteuer at KG level (with €24,500 exemption for non-corporations)
• Used for: real estate investment, family businesses, private equity fund structures
• Each entity requires separate Handelsregister entry, annual accounts, and tax filing

PartGmbB and Sole Trader Forms

Professional firms (Rechtsanwälte, Steuerberater, Wirtschaftsprüfer, Architekten, Ärzte) that want limited liability for professional negligence can use the Partnerschaftsgesellschaft mit beschränkter Berufshaftung (PartGmbB) under PartGG §8 Abs.4. Only the partner directly responsible for a negligent act bears personal liability — not all partners. It requires professional liability insurance meeting minimum thresholds. For very small professional practices and solo consultants, the Freiberufler route (direct Finanzamt registration, no GmbH, no Gewerbesteuer) is the simplest and cheapest option. The Einzelkaufmann (e.K. — registered sole merchant) is for larger sole traders who want Handelsregister credibility without the GmbH structure.

• Freiberufler (§18 EStG): no GmbH, no Gewerbesteuer, no IHK — register with Finanzamt only
• Einzelunternehmer: sole trader with Gewerbeanmeldung and unlimited personal liability
• e.K. (eingetragener Kaufmann): sole trader in Handelsregister (HRA) for commercial credibility
• PartG: professional partnership — joint unlimited liability
• PartGmbB: professional partnership with limited liability for negligence claims per PartGG §8 Abs.4

Genossenschaft — German Cooperative

The Genossenschaft (eG — eingetragene Genossenschaft) is a cooperative form under the GenG (Genossenschaftsgesetz) requiring a minimum of 3 founding members. It operates on democratic principles: one member, one vote regardless of capital contribution. Annual audit by a Genossenschaftsverband (cooperative audit association) is mandatory under GenG §53 — this is a significant ongoing cost. Used extensively for: energy cooperatives (Bürgerenergiegenossenschaften — over 1,000 in Germany), housing cooperatives (Wohnungsbaugenossenschaften), credit unions (Volksbanken Raiffeisenbanken), agricultural cooperatives, and worker cooperatives. For commercial investors, the Genossenschaft is rarely the right choice — the mandatory audit and democratic governance make it unsuitable for most foreign business structures.

• Minimum 3 founding members required under GenG §4
• Registered in the Genossenschaftsregister (not Handelsregister)
• Democratic governance: one member one vote (GenG §43)
• Mandatory annual audit by accredited Genossenschaftsverband — cost €2,000–€10,000/year
• Popular for energy, housing, and agricultural cooperatives

Choosing the Right Form — Decision Matrix

The choice of legal form should be made before engaging a notary. The primary factors are: capital availability, number of founders, liability exposure tolerance, tax optimisation goals, and planned exit strategy. The GmbH dominates for foreign investors across almost all commercial use cases. The UG is appropriate only when capital is genuinely constrained. The GmbH & Co. KG is specifically valuable for real estate and tax-transparent fund structures. The AG is reserved for companies with institutional investor participation or public listing plans. Sole trader forms suit individual professionals only.