GmbH & Co. KG - Limited partnership

Limited partnership (KG) with a private limited company (GmbH) as general partner

The limited partnership with a private limited company as general partner is a German law and tax construct. It is a combination of the advantages of a partnership and the exclusion of liability of a private limited company. There are different reasons why the stakeholders want to limit the liability of the partnership. The main focus of the construct is the limitation of liability of partners. It is also possible to have numerous stakeholders and none of them want to take the risk of unlimited liability due to the substantial amount of capital in the company.

There are two different kinds of limited partnerships. On the one hand there are trading partnerships, which mean commercial partnership by definition. In general the trading partnerships are subject to trade tax on Germany. On the other hand there are asset managing partnerships. For formation of the limited partnership with a private limited company as general manager there is at least one limited partner. However it is possible that the limited partner is equal to the shareholder of the private limited company.

As the limited partnership with a private limited company is not a legal person, the company is not subject to tax. There is one exclusion with trade tax, which is levied on level of the limited partnership. Beside trade tax there is a transparent taxation of the limited partnership in Germany which means that the partnership is not subject to corporate or income tax. Taxes are levied on level of the partners (private limited company and limited partners).

In summary the limited partnership is subject to trade tax, the private limited company is subject to corporation tax and solidary surcharge and the limited partners as individuals are subject to income tax and solidary surcharge.