Everything you should know about the GmbH: What is a GmbH and how does it work?

Everything you should know about the GmbH: What is a GmbH and how does it work?

Everything you should know about the GmbH: What is a GmbH and how does it work?

The GmbH, or limited liability company, is one of the most popular legal forms for companies in Germany. It offers founders a lot of advantages and protection. In this article we will explain everything about the GmbH, from the definition to the incorporation to the various aspects related to this legal form.

Definition and characteristics of a GmbH

A GmbH is a legally independent association of people that pursues a specific economic goal. It is a legal entity and therefore independent of its shareholders. A GmbH has its own legal personality and can therefore conclude contracts, acquire or sell property and sue or be sued in court.

The characteristics of a GmbH are:

1.Limited Liability:One of the most important features of a GmbH is limited liability. This means that the shareholders' liability is limited to their contributions. In the event of insolvency, the partners are not liable with their personal assets, but only with their contribution to the company.

2.Establishment by partnership agreement:A GmbH is founded through a partnership agreement. This contract specifies the general data of the company and the rights and obligations of the shareholders.

3.Corporation:A GmbH is a corporation, which means that the share capital is provided in the form of contributions from the shareholders. The minimum share capital in Germany is currently 25,000 euros.

4.Bodies of a GmbH:A GmbH has various bodies that are responsible for managing and representing the company. The most important bodies are the shareholders' meeting, the managing director and the supervisory board (if there is one).

Establishment of a GmbH

Establishing a GmbH can be legally complex in Germany, but at the same time it opens up many possibilities and advantages. Here are the most important steps for setting up a GmbH:

1.Create a partnership agreement:The first step in setting up a GmbH is to create a partnership agreement. This contract specifies the names and addresses of the shareholders, the share capital, the business address and other important information.

2.Notarial certification:The partnership agreement must be notarized. The notary checks compliance with the legal requirements and declares the establishment of the GmbH.

3.Registration with the commercial register:After the partnership agreement has been notarized, the GmbH must be registered with the relevant commercial register. All relevant information about the GmbH and the shareholders is entered.

4.Payment of share capital:The share capital of the GmbH must be paid into the company account within a certain period of time. After the payment, the share capital can be used freely.

5.Business registration and further steps:After entry in the commercial register, further steps must be carried out such as registering a business, applying for tax numbers and possibly registering with other authorities or institutions.

Rights and obligations of the shareholders

The shareholders of a GmbH are primarily responsible for paying in the share capital. In return, you will receive shares in the GmbH. The amount of shares determines the voting rights and profit share of the shareholders.

The rights and obligations of the shareholders are primarily set out in the partnership agreement. Topics such as decision-making, profit distribution, management and leaving the company should be clearly clarified.

The shareholders' meeting is the highest decision-making body in which all shareholders can vote on important matters of the GmbH. The shareholders have the right to participate in this meeting and to have a say. As a rule, voting rights are based on the proportion of shares in the company.

Management and liability

The management of a GmbH usually lies with the managing director(s). The managing directors are appointed by the shareholders and are responsible for the operational management and representation of the GmbH. They act externally on behalf of the GmbH and make important business decisions.

In principle, the managing directors are not personally liable for the liabilities of the GmbH. However, under certain circumstances they may be held personally liable if they breach their duties through gross negligence or willful intent.

It is important to note that the liability of partners is limited to their contributions. The personal assets of the shareholders are generally not affected by possible debts of the GmbH.

Taxation of a GmbH

A GmbH is subject to taxation both at the corporate level and at the individual level for the shareholders. The income of the GmbH is taxed with corporate income tax. The profit can be distributed to the shareholders after deducting taxes.

The distribution of profits to the shareholders is subject to income tax. The amount of income tax depends on the individual tax rates of the shareholders. However, a GmbH can also retain profits and leave them in the company in order to invest them later or to increase the share capital.

Frequently asked questions

How many shareholders does a GmbH need?

A GmbH can already be founded with one shareholder. There is therefore no minimum number of shareholders. However, at least one natural or legal person must hold the partnership status.

What is the difference between a GmbH and an AG?

The main difference between a GmbH and an AG lies in the organizational structure. In a GmbH, the shareholders are also the owners and have the sole right of co-determination. In the case of an AG, on the other hand, the shareholders are the owners and elect the supervisory board, which in turn appoints the board of directors.

How high are the founding costs for a GmbH?

The founding costs for a GmbH can vary depending on the extent of the advice and involvement of a notary. The costs usually include notary costs for notarizing the partnership agreement, commercial register costs for registering the GmbH and any consulting or legal fees.

Can a GmbH be converted into another legal form?

Yes, a GmbH can be converted into another legal form, for example into an AG or a partnership. However, the conversion requires a special procedure and compliance with certain conditions set out in the Conversion Act.

Conclusion

The GmbH is a popular legal form for companies in Germany that offers many advantages and protection. Their features such as limited liability, incorporation by partnership agreement and various bodies make them an attractive option for founders. The GmbH offers the shareholders the opportunity to benefit from the company's profits without having to be personally liable for the GmbH's liabilities. However, establishing a GmbH requires legal effort and compliance with certain requirements. Nevertheless, the GmbH is an excellent legal form for companies that strive for growth and success.