A closer look at company types in Germany
By Simon O' Connor, 25th Aug 2015
Europe is the largest market in the world with nearly 500 million consumers. Within Europe, Germany is the state with largest and most important economy making it arguably the most attractive location for business in the European Union.
Company formation in Germany can be significantly cheap. From office overheads to the cost of living, Germany is notoriously cheaper than the majority of its European counterparts.
There are 4 main business entities in Germany:
- Limited Liability Corporation (GmbH)
- Mini – GmbH
- Stock Corporation (AG)
Limited Liability Corporation (GmbH)
The Limited Liability Corporation (GmbH) is the most widely used business entity in Germany. The minimum share capital required is €25,000 but this can be made up of contributions in kind. At least €12,500 must be contributed when incorporating the GmbH. The company only requires one director and one shareholder.
Mini – GmbH (AnUnternehmergesellschaft -UG)
A "mini-GmbH" (AnUnternehmergesellschaft -UG) can be incorporated with capital of as little as €1 or any amount up to the €25,000 required for a regular corporation (GmbH). This company type is extremely popular among International investors who are finding the low investment an advantage in their strategy to develop and grow business in Germany. One quarter of a mini-GmbH's annual profit has to be contributed to its capital reserves until they reach €25,000, at which point the UG can become a regular GmbH.
Stock Corporation (AG)
A Stock Corporation (AG) is the standard corporate form for major public companies in Germany. The minimum share capital for an AG is €50,000 and the company may have a minimum of one shareholder. This type of company is subject to heavy regulation as a listed company. AG’s have a “two-tiered board” structure, consisting of a supervisory board and a management board. The supervisory board is normally controlled by shareholders. The management board runs the company directly, but members on this board may be removed by the supervisory board.
Partnerships are available in two main legal forms; A General Partnership (OHG) or a Limited Partnership (KG). In the OHG, all partners are fully liable for the partnerships debts, while in the KG there are general partners who have unlimited liability and limited partners whose liability is restricted to their fixed contributions to the partnership. Partnerships are widely used in Germany for family-owned and small businesses.