Gesellschaft mit beschränkter Haftung (GmbH) / UG (haftungsbeschränkt)
Limited Liability Company
The GmbH is a trading company with a corporation structure and its own legal personality. The private limited company has at least one shareholder. This shareholder can either be an individual, a partnership or another company. GmbHs are usually for smaller enterprises and easy to manage in Germany as there are only a few restrictions. The liability is limited to the equity mentioned in the companies register. The minimum equity is EUR 25,000. For foundation purposes it is sufficient to pay only half of the minimum equity in cash (EUR 12,500) and transfer the balance amount afterwards. However in that case the founder is liable for the balance amount up to 25,000. The limited liability company (GmbH) is a legal person and therefore subject to corporation tax, solidary surcharge and trade tax.
Directors and executive officers
GmbH law also regulates that at least one general manager be appointed by the shareholders’ meeting in order to be in charge of the company’s operation. The execution of control over the general manager is done by the shareholders’ meeting even if there is only one shareholder. There is an option of setting up a board but it is not required by law. The German Commercial Code grants the right to shareholders or general managers to assign power of attorney to an employee to represent the company. Representing the firm either occurs by only one general manager or by two general managers or by one general manager in unison with an authorized employee.
Formation of a limited liability company (GmbH)
For the formation the contract of association needs to be notarised for certification of the articles and the principal organisational requirements (e.g. general manager, domicile, beginning of the operational business). Furthermore it is required by law to have the company registered by the general manager in the companies’ register.
Since 01 November 2008 there is the UG in Germany. According to German law UG needs a minimum equity of EUR 1.00 (however usual there is a minimum equity of approx. EUR. 1,000.00). The UG is similar to GmbH there is also a limited liability. Founding an UG is an easy possibility to get an entity in Germany with little equity and a limited liability.