Starting a business in Germany can be a promising venture due to the country’s robust economy and supportive entrepreneurial environment. Among the various types of business entities available, Partnership companies are often favored by entrepreneurs for their simplicity and flexibility. This article provides an in-depth guide on how to incorporate German Partnerships and take your business to new heights in the European market.
What is a Partnership Company?
A partnership company is a business entity where two or more individuals share ownership and management responsibilities. In Germany, there are mainly three types of partnership companies:
- General Partnership (Offene Handelsgesellschaft or OHG)
- Limited Partnership (Kommanditgesellschaft or KG)
- Civil Law Partnership (Gesellschaft bürgerlichen Rechts or GbR)
Each of these types has its unique features, advantages, and legal obligations which we will discuss in the following sections.
General Partnership (OHG)
A general partnership (OHG) is a legal entity where all partners are held accountable with their personal assets for the company’s debts. It’s usually employed to set up small or medium-sized enterprises.
Legal Obligations of Partners in OHG
In an OHG, partners have equal rights in managing and representing the company. They don’t have their own legal status, and it depends on the partners’ legal status. However, an OHG can be considered a legal entity when it comes to its legal responsibility before a German court of law.
How to Form an OHG?
Forming an OHG requires at least two natural individuals or corporate entities. There are no minimum requirements when it comes to the share capital of a German partnership. As any other company conducting business activities, general partnerships must register with the German Trade Register.
Limited Partnership (KG)
A limited partnership (KG) is a form of partnership with limited liability. It consists of at least one general partner (Komplementär) with unlimited liability and one or more limited partners (Kommanditisten) whose liability is limited to their contributed capital.
Advantages of a KG
The KG model brings about several benefits. It combines the advantages of a partnership with limited liability protection for some partners (Kommanditisten). Furthermore, the operational control of the KG typically rests with the general partner(s), providing more flexibility in running the business.
Establishing a KG
Setting up a KG is relatively straightforward compared to a GmbH or AG. The partnership agreement should outline the roles of partners and the purpose of the company. Then, the partnership must be registered with the notary, the Trade Office, the Tax Office, and the Commercial Register.
Civil Law Partnership (GbR)
A Civil Law Partnership (GbR) is another form of partnership that can be used for various purposes, including non-commercial ones. It’s governed by the Civil Code (BGB) rather than the Commercial Code (HGB).
Benefits of a GbR
A GbR is a flexible and straightforward form of partnership that is easier to set up and manage than a GmbH or OHG. It doesn’t require a minimum capital, and the partners have the freedom to manage the company as they see fit.
Drawbacks of a GbR
One of the main disadvantages of a GbR is that partners have unlimited personal liability for the company’s debts. Moreover, it’s not as highly regarded by banks and other financial institutions as a GmbH or OHG, making it harder to secure financing.
The German House of Companies Self-governance Portal
To make the process of starting a business in Germany easier, the German House of Companies provides a self-governance portal that allows entrepreneurs to start their business without visiting Germany, at a fixed yearly fee. This platform simplifies the process of company formation in Germany and offers a range of services for international entrepreneurs.
Founded by Dennis Vermeulen in Cyprus in 2007, the House of Companies has expanded to multiple European countries and Dubai, setting up over 10,000 entities. The company is dedicated to empowering entrepreneurs by making legal processes more understandable and actionable, disrupting traditional consultancy practices.
The brand’s vision of ‘Globalisation as a Service’ involves offering services, a supportive community, and educational resources to entrepreneurs expanding overseas. House of Companies caters to global entrepreneurs, positioning itself as reliable, diplomatic, and empowering. It aims to be an indispensable partner for those expanding overseas.
Conclusion
Starting a business in Germany can be a fulfilling and profitable venture. By understanding the different types of partnership companies and their features, you can make an informed decision about the best type of business entity for your venture. Remember, the House of Companies is there to support you throughout your company formation journey in Germany. So, don’t hesitate to start your journey to success today!