German Business Forms: GmbH, UG, OHG, KG, AG Guide
German founders should choose a legal form by liability, governance, financing, tax treatment, and exit plan—not by the lowest formation cost. A sole trader, GbR, OHG, or general partner can expose private assets; a UG, GmbH, or AG generally confines contractual liability to company assets after registration, subject to important exceptions. This is a decision framework, not legal or tax advice.
Map liability before comparing capital
An OHG has no statutory minimum capital, but its partners are personally and jointly liable for company obligations under section 126 HGB. In a KG, at least one general partner has unlimited liability, while a limited partner's external liability is tied to the registered liability amount and contribution rules; see section 171 HGB. A GmbH & Co. KG can place a GmbH in the general-partner role, but that adds another entity and set of accounts.
A UG and GmbH are corporations. The GmbH requires at least 25,000 euros registered share capital; the UG may start below that amount but must fully fund its stated cash capital and retain part of its surplus. The liability boundary generally arises on commercial-register entry, not when founders agree a name. Personal guarantees, pre-registration contracts, director misconduct, tax and social-security duties, and late insolvency filings remain personal-risk paths.
Governance and financing narrow the choice
An OHG fits a small commercial partnership only when every partner accepts joint personal liability and active management. A KG separates managing general partners from limited investors, but the agreement must handle information rights, distributions, succession, and departures. A GmbH or UG supports defined shares and managing directors and is familiar to German investors. An AG adds formal organs and at least 50,000 euros capital, which is rarely proportionate for an early small business.
A UK Ltd is not a shortcut German corporation. For a company managed from Germany, post-Brexit recognition, German tax residence, branch registration, and UK filings need specialist analysis. Use it only when the UK connection is substantive. The federal official legal-form table is a starting comparison, not a substitute for an agreement tailored to founders and investors.
Tax follows activity, people, and distributions
Partnerships and corporations differ in who is taxed, how business tax is credited or applied, how salaries and distributions are treated, and how losses can be used. A single headline tax percentage is misleading because municipal trade-tax multipliers, shareholder residence, retained earnings, payroll, and related-party transactions matter. Ask an adviser to model the same three-year profit and cash-flow assumptions for the short-listed forms.
Before signing, document ownership, voting, reserved decisions, managing authority, vesting or leaver rules, funding obligations, profit distributions, death or incapacity, deadlock resolution, sale, and insolvency response. The UG reserve statute is one example of a rule generic summaries often distort. A robust agreement and enough operating cash matter more than saving a small amount on formation.
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