Legal Forms of Doing Business in Germany

Legal forms of doing business in Germany

Choosing the right legal form fitting to the venture someone wants to undertake is often a critical point of starting business in a certain country not only because you have big pool to choose of but also because it has a vital impact on your business with several advantages and disadvantages for your business. The right choice might depend on size, foundation costs, tax status and so on, but it is always a case to case decision where there is no general formula for success. Amongst various different legal forms in Germany we chose the most significant for starting a business in Germany. (We picked the 5 most used legal forms in Germany)

* Sole proprietorship (Einzelunternehmen)

* Defines the autonomous activity of a tradesman, craftsman or any other freelancer

* Is by definition founded by a single person

* Can be founded without big fund reserves due to no minimum capital defined by law

* Is mostly financed by equity because of limited creditworthiness

* Has to be announced to the trade office and signed in the commercial register

* The owner bears full responsibility with all his private fortune for potential losses

* Profit is not shared due to the lack of partners

* Ordinary partnership (Offene Handelsgesellschaft OHG)

* Two or more individuals consolidate into a legal entity/person to run a commercial trade business under the umbrella of a joint company

* There has to be at least one partner who is bearing full responsibility or in some cases this person can be another legal form/legal person, but that has to be declared in the company’s name, e.g. GmbH & Co. OHG (here the GmbH is the full responsible partner)

* No minimum capital defined by law

* Has to be announced to the trade office and signed in the commercial register

* Partnership contract/agreement is not mandatory but usual

* The profit is shared in...