Germany

Pascal Köstner

[to be double-checked]

Germany

There are many legal forms in Germany (e.g., civil‑law partnerships like GbR, commercial partnerships like OHG/KG, and corporations). In practice, the key distinction for founders is often between (i) sole proprietorships and (ii) companies (corporations) such as a GmbH/UG (haftungsbeschränkt) or an AG.

Sole proprietorship

A sole proprietorship is a business structure in which one individual owns and manages the entire business.

Here are some key points about a sole proprietorship:

• Limited access to outside capital: Bringing in classic “investors” isn’t really possible; you can take loans, but no equity co‑owners without changing legal form.

• Liability: Unlimited personal liability for business debts; your private assets are on the hook.

• Taxes: Profits are taxed on your personal income tax return. If you run a trade, trade tax (Gewerbesteuer) applies, but natural persons can credit it (up to a cap) against their income tax (§ 35 EStG). Small e.K.s can benefit from book‑keeping relief (§ 241a HGB).

A sole proprietorship might end up in personal liability

Keep in mind that a sole proprietorship does not create a legal separation between you and the business. This means that you are personally liable for your business. If you want limited liability, choose a corporate form (see next section).

Companies (corporations)

The big advantage of incorporating is limited liability: shareholders are shielded from company debts (subject to narrow exceptions like wrongful payments after insolvency).

When incorporating in Germany you’ll typically choose between a GmbH, a UG (haftungsbeschränkt) (a special GmbH variant), or an AG:

• GmbH: Minimum share capital EUR 25,000 (§ 5 GmbHG).

• UG (haftungsbeschränkt): Can be formed from EUR 1 (special rules, e.g., retention to build capital; § 5a GmbHG).

• AG: Minimum capital EUR 50,000 (§7 AktG).

How German companies are structured:

Structure of a GmbH (company with limited liability)

• Managing Directors (Geschäftsführer): Run the company; appointed by the shareholders.

• Shareholders’ Meeting (Gesellschafterversammlung): The supreme body -appoints/removes managing directors, approves key matters, and typically approves the annual financial statements (the management must present the annual accounts to shareholders, § 42a GmbHG). There is no statutory rule that a GmbH must hold an annual meeting on a fixed timetable, but approval of accounts is required by law and the articles.

• Supervisory Board (Aufsichtsrat): Not mandatory by default. It becomes mandatory if co‑determination applies (e.g., > 500 employees – one‑third employee representation – or under the Co‑Determination Act for larger companies), or if the articles voluntarily create one (§ 52 GmbHG; DrittelbG/MitbestG).

Decision‑making & shareholder protection in a GmbH

• Articles changes usually require a 75% majority and notarization (§ 53 GmbHG). Your articles can add stricter requirements.

• Transparency: GmbHs must keep the shareholder list up to date and file it with the Commercial Register (§ 40 GmbHG). It is publicly viewable via the Unternehmensregister/Handelsregister.

Audit & disclosure (GmbH)

• If the company qualifies as medium or large under § 267 HGB, the annual financial statements must be audited (§ 316 HGB). Small companies are exempt.

• The annual accounts and related documents must be filed electronically with the Unternehmensregister within the statutory deadline (§ 325 HGB).

Structure of an AG (stock corporation)

• Management Board (Vorstand): Manages the company independently (§ 76 AktG).

• Supervisory Board (Aufsichtsrat): Appoints/supervises the Management Board (§ 111 AktG). Employee co‑determination can make the board one‑third employee‑elected (> 500 employees; DrittelbG) or parity employee‑elected (MitbestG), depending on headcount and legal form.

• General Meeting (Hauptversammlung): Must be held within the first eight months of the financial year (§ 175 AktG). Certain decisions require 75% majorities (e.g., articles changes, § 179(2) AktG; capital increases, § 182 AktG).
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Audit & disclosure (AG)

Medium/large AGs are audited under § 316 HGB; disclosure to Unternehmensregister under § 325 HGB.

Registers & transparency

• Commercial Register (Handelsregister): Central online platforms where incorporation deeds, articles, manager appointments, capital measures, shareholder lists (GmbH), and annual accounts are accessible. Public search is available.

• Transparency Register (Transparenzregister): All German entities must report their beneficial owners and keep data current (full register since 1 Aug 2021).

• GbR Register (Gesellschaftsregister, since 2024): GbRs can (and for some transactions must) register; registered GbRs use the suffix eGbR (§ 707 BGB; MoPeG). Real estate deals and similar transactions require registration.

Corporate Documents

• Articles of association/Statutes: Articels of association, statutes, and changes are available via the commercial register.

• List of shareholders: For a GmbH, the list of shareholders (§ 40 GmbHG) is public and shows holdings.

• Annual financial statements: Annual financial statements must be filed with the Federal Gazette (Bundesanzeiger) and are accessible through the Unternehmensregister (deadlines vary by size).

• Shareholders’ Agreements (SHA): Confidential between the shareholders; commonly include voting/ pooling arrangements, vesting (good/bad leaver), drag‑along/tag‑along, consent rights, and vetoes. These clauses fine‑tune the distribution of power and money beyond what the articles provide.