Legal Forms of Companies in Germany [Full List Explained]

Choosing the right legal structure is crucial when starting a business in Germany. Your form affects your business’s legal standing, liability, tax obligations, and even its credibility in the market. Germany also has well-defined legal structures tailored to business needs, from individual entrepreneurs to large corporations.

In this guide, we’ll go through the main types of legal forms for companies in Germany, breaking down the benefits, requirements, and differences between each one.

1. AG (Aktiengesellschaft)

An Aktiengesellschaft (AG) is the German equivalent of a public limited company (PLC) in many other countries. It is a corporation where the shareholders’ shares and liability are limited to their investment.

• Minimum Share Capital: €50,000
• Governance: AGs must have a supervisory board (Aufsichtsrat) and a also management board (Vorstand).
• Best For: Large businesses looking to raise significant capital by issuing shares to the public.
• Advantages: Ability to raise large amounts of capital; high credibility.
• Disadvantages: Complex and costly to set up and maintain due to stringent regulations.

2. GmbH (Gesellschaft mit beschränkter Haftung)

Furthermore, a GmbH is Germany’s most popular legal form, similar to a limited liability company (LLC).

• Minimum Share Capital: €25,000 (with at least €12,500 to be paid upon formation).
• Governance: Can be managed by one or more directors.
• Best For: Small to medium-sized businesses, especially those wanting to protect owners from personal liability.
• Advantages: Limited liability protection for shareholders.
• Disadvantages: Requires more formalities than sole proprietorships.

3. GmbH & Co. KG

A GmbH & Co. KG is a hybrid form that combines aspects of a GmbH and a limited partnership (Kommanditgesellschaft, or KG).

• Structure: The general partner is a GmbH, limiting the liability of the partners.
• Best For: Medium-sized businesses that want flexibility but need limited liability for the general partner.
• Advantages: Combines the flexibility of a partnership with the limited liability of a GmbH.
• Disadvantages: Complex to set up and manage.

4. e.K. (eingetragener Kaufmann)

The eingetragener Kaufmann (e.K.) is a legal form for individual merchants or sole proprietorships registered in the commercial register.

• Liability: The owner is personally liable for the business’s debts.
• Best For: Small businesses or individual entrepreneurs.
• Advantages: Easy to set up and manage.
• Disadvantages: There is no distinction between personal and business assets, meaning personal liability is a risk.

5. Einzelunternehmer ohne Handelsregistereintrag (Sole Proprietor without Registration)

This form refers to sole proprietors who are not required to register in the commercial register, typically because their business activities do not meet the legal requirements for registration.

• Liability: The owner has unlimited liability.
• Best For: Freelancers and small service providers.
• Advantages: Simple setup, minimal formalities.
• Disadvantages: Full personal liability for debts and obligations.

6. GbR (Gesellschaft bürgerlichen Rechts)

A GbR is a simple partnership between at least two individuals or entities for a common purpose.

• Liability: All partners are personally liable.
• Best For: Small business partnerships, such as freelancers or professionals working together.
• Advantages: Simple to form, low costs.
• Disadvantages: Unlimited personal liability for all partners.

7. KG (Kommanditgesellschaft)

A KG is a limited partnership consisting of at least one general partner with a high liability and multiple partners whose liability is limited to their investment.

• Structure: The general partner is fully liable, while limited partners are only liable for their share.
• Best For: Businesses needing capital from external investors but with limited liability for those investors.
• Advantages: Flexibility for limited partners; allows capital to be raised without giving up control.
• Disadvantages: Complex legal structure, with the general partner bearing full liability.

8. KGaA (Kommanditgesellschaft auf Aktien)

A KGaA is a limited partnership on shares. It combines the features of a KG and an AG.

• Structure: General partners are fully liable, and shareholders have limited liability.
• Best For: Large businesses that want to attract shareholders while maintaining some general partners with full control.
• Advantages: Combines the benefits of a public limited company and a partnership.
• Disadvantages: Complex governance and high regulatory requirements.

9. OHG (Offene Handelsgesellschaft)

An OHG is a general partnership where all partners are personally liable for the business’s obligations.

• Liability: All partners are personally liable without limitation.
• Best For: Businesses with multiple owners want to share profits and liabilities equally.
• Advantages: Simple structure, easy to form.
• Disadvantages: Unlimited liability for all partners.

10. SE (Societas Europaea)

An SE is a European public limited company that can operate across EU countries under a unified legal framework.

• Minimum Share Capital: €120,000
• Best For: Large businesses operating in multiple EU countries want a single European legal form.
• Advantages: Cross-border flexibility, simplifies multi-country operations.
• Disadvantages: High initial capital and regulatory complexity.

11. UG (haftungsbeschränkt) -Unternehmergesellschaft

A UG (haftungsbeschränkt) is a mini-GmbH designed for startups and small businesses that cannot meet the capital requirements of a full GmbH.

• Minimum Share Capital: €1 (though higher is recommended for practicality).
• Best For: Small businesses and startups looking for limited liability with minimal capital requirements.
• Advantages: Low-cost alternative to a GmbH; offers limited liability protection.
• Disadvantages: Some profits must be allocated to reserve funds until they reach GmbH status.

12. Other Legal Forms

The list above represents Germany’s most common legal forms, but other specialized forms may exist based on business needs, including hybrid models like SE & Co. KG and UG & Co. KG.

Wrap-up!

The legal form you choose for your company in Germany has far-reaching consequences. While a sole proprietorship or a GbR might be suitable for freelancers and small teams looking for simplicity, larger companies need more robust structures like a GmbH or an AG to raise capital and limit liability.

When making this decision, you must consider your business’s size, risk tolerance, need for capital, and growth plans. Consulting with a legal or financial advisor is often recommended to ensure you choose the most appropriate form for your business.