The German law provides various legal forms for doing business. In this post, we will provide you with an overview of the most common legal forms and inform you of the criteria how to choose the „right“ legal form to enter the German and European market.
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In 2008, the German Limited Liability Companies Act was reformed and a new option to enter a GmbH by way of founding an Unternehmergesellschaft (haftungsbeschränkt), abbreviated to UG (haftungsbeschränkt) was introduced (hereinafter „UG“). However, the UG is not a new legal form but rather a GmbH to which only certain special provisions in the German Act on Limited Liability Companies apply. The most important difference compared to a GmbH is that the UG can be founded with a theoretical minimum share capital of one Euro, which is why it is sometimes called „Mini-GmbH“. In the following, we explain the legal structure of a UG and the process of forming that legal company form.
The GmbH is a Limited Liability Company, thus a form of corporation - and by far the most widely used one in Germany. The name of the legal form GmbH emphasizes the fact that the shareholder(s) of the entity are not personally liable for the company's debts. In this article, we inform you about its legal structure and the formation process.
To form a German GmbH various documents have to be drafted, signed by the Founder(s) and Managing Director(s), notarized and forwarded to the German Commercial Register in order to register the new company. In this article, we explain the additional requirements for a company formation from abroad and the various legal forms of document certification required for different countries.
A GmbH or UG - since being a corporation - is a legal entity meaning that the holder of rights and obligations is not the individual shareholder, but the company itself. The corporation itself concludes contracts, holds assets and is liable for taxation. Due to that, a distinction must be made between the taxation of the profits or trade earnings of the company and the taxation of the company’s payments to its shareholders in the form of profit distributions or remuneration of managing directors which we will explain in this article.