German corporate law knows a variety of business forms that founders can choose from. Generally, these business forms are divided into partnerships and companies. The most popular company form in Germany is the private company with limited liability (Gesellschaft mit beschränkter Haftung – GmbH). There is also a variety of partnerships, especially including the limited partnership (kommanditgesellschaft – kG). No other business forms than the ones provided by law can be created.
A GmbH is relatively easy to set up and offers limited liability for the shareholders. Additionally, the administration, later restructuring and the disposition of shares are comparatively straightforward. The GmbH has full legal capacity, meaning it can hold rights and obligations and can sue and be sued in court. For tax matters, the GmbH is a taxable entity as opposed to partnerships, which are tax-transparent and where the individual partners are tax subjects. Another important difference to partnerships is that a GmbH allows for a third-party managing director of the company. A GmbH can be founded by one or more persons, regardless of whether they are domestic or foreign, natural persons or legal entities. The company formation requires a notarized conclusion of the articles of association. Governmental permissions are not necessary unless the intended activity of the GmbH itself requires regulatory approval. The articles of association need to be signed by all shareholders and include at least the following: company name and principal office, objects of the company, nominal capital and number of shares each shareholder assumes.
A newly founded GmbH needs to be registered with the German commercial register. This is a constituent element of the formation. The registration can only be made if at least half of the required nominal capital of EUR 25,000 is provided. Mandatory registration information include: (i) the articles of association; (ii) a list of shareholders (including name, date of birth, address, and the amount of shares assumed); (iii) documentation of the appointment of managing directors; (iv) information on the power of representation. The registration with the commercial register usually takes place within one to three weeks after the application.