Characteristics and Advantages of the GmbH

There are many advantages to establishing a Gesellschaft mit beschränkter Haftung (GmbH):

  • The legal form of a GmbH serves many purposes, and the risk of liability is calculable and manageable because it is restricted to the company’s assets.
  • However, the partners (shareholders) remain liable with their own assets until the company is entered in the commercial register.
  • A GmbH can be founded by natural persons as well as legal entities (both individual shareholders and multiple partners are allowed).
  • A managing director serves as the company’s representative, and even individuals from outside the company can be appointed to management.
  • The average tax burden is 30%.
    • The median rate in Germany is approximately 14% business tax — depending on location, business taxes can be higher or lower.
    • 15% corporate tax
    • 0.8% solidarity surcharge (5.5% on corporate tax)

 

What things do you need to keep in mind?

  • The minimum share capital is EUR 25,000.
  • The formalities required for establishing a company are time-consuming.
  • Bookkeeping is mandatory.
  • Companies are subject to public disclosure obligations, with the extent of information depending on the size of the company. Relatively small companies are required to publish at least their balance sheets after preparing their annual financial statements.
  • Auditing is mandatory for companies exceeding at least two of the criteria below over two successive years:
    • Balance sheet total over EUR 6 million
    • Sales revenue of more than EUR 12 million over the past 12 months before the closing date of the financial statements
    • Average annual headcount of 50 employees