Choosing the right legal structure for your business in Germany has personal, financial, tax and legal consequences. The two basic structures are shown below:
- Sole proprietorships and partnerships with personal liability
- Corporations with limited liability
Sole proprietorships and partnerships are mainly divided into the following types of businesses:
- Gesellschaft des bürgerlichen Rechts (GbR – company constituted under civil law)
- Kommanditgesellschaft (KG – limited partnership)
- Offene Handelsgesellschaft (OHG – general partnership)
-
Gesellschaft mit beschränkter Haftung & Co. KG (GmbH & Co. KG – limited commercial partnership with a general partner and a
limited partner)
Types of corporations with limited liability include mainly the following:
- Gesellschaft mit beschränkter Haftung (GmbH – limited liability company)
- Unternehmergesellschaft (UG – entrepreneurial company), also referred to as “Mini-GmbH” (mini LLC)
- Aktiengesellschaft (AG – joint stock corporation)
- Societas Europaea (SE – European company)
The most advisable structure for establishing a subsidiary in Germany is a limited-liability corporation, particularly in the form of a Gesellschaft mit beschränkter Haftung (GmbH).
A German GmbH is the equivalent to an American limited liability company (LLC) or a private company limited by shares (Ltd.) in the UK.