Business Legal Forms in Germany: GmbH, UG, GbR, OHG, KG and AG

When starting a business in Germany, you need to choose a Rechtsform — its legal form. It affects the founders’ liability, minimum capital, taxes, accounting, registration, company name and the attitude of banks or investors.

For a small start, sole proprietorship or a GbR is often enough. Businesses with greater risks, employees, investors or several owners more often consider a GmbH, UG or hybrid forms such as GmbH & Co. KG. There is no universally best form: the choice depends on risk, scale, tax circumstances and growth plans.

For more on starting independently without a corporation, see: how to start as a sole proprietor in Germany.

Main groups of legal forms

German business forms can conveniently be divided into three groups:

Group	Examples	Main idea
Einzelunternehmen	sole proprietorship, e.K.	one entrepreneur runs the business in their own name
Personengesellschaften	GbR, PartG, OHG, KG, GmbH & Co. KG	several participants run a joint business, often with personal liability for at least some partners
Kapitalgesellschaften	GmbH, UG, AG, KGaA, SE	the company is a separate legal entity; liability is generally limited to the company’s assets

Key laws include the BGB for civil-law relationships and GbR, the HGB for commercial partnerships and Kaufleute, the GmbHG for GmbH and UG, the AktG for AG and KGaA, and the PartGG for professional partnerships.

What to consider before choosing a form

Before registering, it is worth answering several questions:

How many founders will the business have?
Do you need limited liability?
Is there a risk of major debts, guarantees, fines or customer claims?
Do you need an investor or bank financing?
Are employees planned?
Is simple income-surplus accounting enough, or is double-entry bookkeeping needed?
Does the reputation of a GmbH/AG matter to customers and suppliers?
Is there enough money for a notary, registration, accounting and annual reporting?

The higher the risk and scale, the more important it is to separate the business from personal assets. But limited liability costs money: notary fees, the Handelsregister, accounting, publication of financial statements and stricter corporate rules.

Personengesellschaften: partnerships

A Personengesellschaft is a form in which the participants, rather than share capital, are central. It usually requires at least two participants. A Gesellschaftsvertrag is best made in writing even where the law does not require notarisation: it sets out shares, management, a partner’s exit, profit distribution and how conflicts are resolved.

Personengesellschaften include:

GbR — Gesellschaft bürgerlichen Rechts;
PartG — Partnerschaftsgesellschaft for liberal professions;
OHG — Offene Handelsgesellschaft;
KG — Kommanditgesellschaft;
hybrid forms, such as GmbH & Co. KG or UG & Co. KG.

These forms often have no minimum capital. In many cases, however, the participants are personally liable for the business’s obligations. Exceptions and limitations depend on the specific form and agreement.

Taxes for Personengesellschaften

For income-tax purposes, a Personengesellschaft is usually treated as transparent: profit is allocated among the participants, and each then reports their share in their personal tax return. This does not always mean cash has actually been paid out; tax can arise even when profit remains in the business.

Main taxes and obligations:

Umsatzsteuer — VAT, unless an exemption or the Kleinunternehmerregelung applies;
Einkommensteuer — the participants’ income tax on their share of profit;
Gewerbesteuer — trade tax for commercial activity; individuals and Personengesellschaften have an annual allowance of €24,500;
Lohnsteuer and social-security contributions — if the business employs staff;
profession-specific rules — for doctors, lawyers, architects, tax advisers and other regulated professions.

Gewerbesteuer is calculated using the Steuermessbetrag and the individual municipality’s Hebesatz. Therefore, an example for one city cannot be applied to all of Germany.

GbR

A GbR suits a simple joint project by two or more people: freelancers take on a shared assignment, several specialists run a joint practice, or partners launch a small service. There is no minimum capital and the setup is relatively straightforward.

The main risk of a GbR is the participants’ personal liability. As a general rule, partners are personally liable for the partnership’s debts. Since the 2024 MoPeG reform, an eGbR — an entered Gesellschaft bürgerlichen Rechts — can be registered in the Gesellschaftsregister. Registration is not required for every GbR, but is often necessary for real-estate transactions, interests in other companies and certain register actions.

A GbR is suitable when the business is small, partners trust one another and the risks are clear. For activities involving major contracts, loans or liability to customers, it is better to examine alternatives.

PartG

A Partnerschaftsgesellschaft is designed for members of liberal professions: lawyers, doctors, architects, engineers, tax advisers and similar professions, where their professional rules allow it. It is registered in the Partnerschaftsregister.

A PartG is useful because it better reflects a professional partnership than an ordinary GbR. In some cases, a PartG mbB — Partnerschaftsgesellschaft mit beschränkter Berufshaftung — is possible, where professional liability is limited if insurance requirements are met. These rules depend on the profession and should be checked separately.

OHG

An OHG is a general commercial partnership. It is suitable when several Kaufleute operate a commercial business under a common company name. An OHG is entered in the Handelsregister and keeps accounts under HGB rules.

An OHG’s advantage is a simple management structure and the trust of counterparties. Its disadvantage is the full personal liability of all participants. Each Gesellschafter may have authority to represent the company unless the agreement lawfully limits it.

An OHG is rarely chosen for high-risk businesses where participants want to protect personal assets.

KG

A KG has at least two roles:

Komplementär — a participant with full personal liability and management authority;
Kommanditist — a participant who is generally liable only up to their Einlage and does not manage day-to-day business.

A KG is suitable where one or more participants run the business and others want to contribute capital with limited risk. The limited partner’s liability amount is recorded in the Handelsregister.

A popular variation is GmbH & Co. KG. Here, the GmbH takes the Komplementär role, which can substantially limit individuals’ personal liability. The price is a more complex structure: in practice, both a GmbH and a KG must be maintained.

Kapitalgesellschaften: corporations

A Kapitalgesellschaft is a separate legal entity. It enters into contracts, owns assets, employs people and is liable with its own assets. Participants generally risk their contribution, but personal liability can arise through guarantees, breaches of directors’ duties, late insolvency filings or mixing personal and company funds.

Corporations include:

GmbH — Gesellschaft mit beschränkter Haftung;
UG (haftungsbeschränkt) — an entrepreneurial company, a GmbH variant with lower capital;
AG — Aktiengesellschaft;
KGaA — Kommanditgesellschaft auf Aktien;
SE — Societas Europaea.

Taxes for corporations

A corporation pays taxes at company level, while the owner separately pays tax on salary, dividends or other personal benefits.

Usually these include:

Körperschaftsteuer — corporate income tax of 15% on taxable profit;
Solidaritätszuschlag — 5.5% of corporate income tax;
Gewerbesteuer — at a rate determined by the municipality’s Hebesatz;
Umsatzsteuer — where activity is subject to VAT;
Kapitalertragsteuer — when dividends are paid to individuals;
Lohnsteuer and social-security contributions — when salaries are paid to employees and managing directors.

A corporation must keep double-entry accounts, prepare annual financial statements and publish reports in the Unternehmensregister. Since 2022, electronic identification has been used to submit reports there.

GmbH

A GmbH is Germany’s best-known limited-liability company form. Minimum Stammkapital is €25,000. When incorporated with cash contributions, at least €12,500 normally has to be paid in before registration if the share capital is set at the minimum. Contributions can be cash or, subject to the rules, assets in kind.

Incorporating a GmbH involves a notary and the Handelsregister. Usually, the following are needed:

A company name and a check that it is permissible.
A Gesellschaftsvertrag or Musterprotokoll.
Notarial certification.
Opening a bank account and paying in the capital.
Filing with the Handelsregister.
Gewerbeanmeldung if the activity is a Gewerbe.
Registration with the Finanzamt, usually through ELSTER.
If needed, registration with the IHK or Handwerkskammer, or obtaining permits.

A GmbH is suitable for small and medium-sized businesses, startups, agencies, trade, IT, manufacturing and services where limited liability, reputation and a clear ownership structure matter.

Foreigners can be GmbH founders. But the right to found a company does not replace immigration, tax or practical requirements for living in Germany or managing a business there.

UG (haftungsbeschränkt)

The UG (haftungsbeschränkt) is often called a Mini-GmbH. It is not a separate legal family from the GmbH, but a GmbH variant under section 5a GmbHG. It can be incorporated with capital from €1, but very low capital is practically risky: the company must be able to pay its bills from day one.

Features of a UG:

its name must include UG (haftungsbeschränkt) or Unternehmergesellschaft (haftungsbeschränkt);
contributions in kind are not permitted on incorporation; capital is paid in cash;
the capital must be paid in full before registration;
part of annual profit must be placed in a reserve until equity reaches the level of an ordinary GmbH;
banks and suppliers may have less confidence in it than in a GmbH with adequate capital.

A UG can suit a small start with limited liability if the founder is prepared for full accounting and published financial statements.

AG

An AG is a public limited company. Its minimum Grundkapital is €50,000. Its structure is more complex than a GmbH: it has a Vorstand, Aufsichtsrat and Hauptversammlung. An AG is suitable for large businesses, companies with many shareholders, or projects that need a professional corporate structure and potential access to capital markets.

For an ordinary small business, an AG is usually too expensive and formal.

KGaA

A KGaA combines elements of a KG and an AG. It has shareholders and at least one personally liable Gesellschafter. Like an AG, its minimum capital is €50,000. This form is uncommon and more often fits family or large companies that need to raise capital through shares while retaining control with the managing participant.

Examples of KGaA companies in Germany show that it can be useful for stable family control, but for a small business it is usually excessive.

SE

Societas Europaea (SE) is a European public-company form. It is of interest to companies operating in several EU countries and requires substantially greater capital and corporate preparation. For a new entrepreneur, an SE is almost never a starting form.

Comparing popular forms

Form	Minimum participants	Minimum capital	Liability	When it fits
GbR	2	none	participants are generally personally liable	a simple joint project, freelancing, a small service
PartG	2	none	depends on the form and profession	liberal professions
OHG	2	none	all participants are personally liable	a commercial business run by partners willing to be personally liable
KG	2 roles	no general minimum	Komplementär is fully liable; Kommanditist up to their contribution	a business with a managing partner and investors
GmbH & Co. KG	at least a KG plus GmbH	capital is needed for the GmbH	limitation through the GmbH as Komplementär	family business, investment structures, complex models
GmbH	1	€25,000	generally with company assets	small and medium-sized businesses with risks and growth plans
UG	1	from €1	generally with company assets	a small start with limited liability
AG	1	€50,000	generally with company assets	large business, shareholders, scaling
KGaA	several roles	€50,000	at least one participant is personally liable	a large business retaining control

Registration: general process

The procedure depends on the form but often includes:

Choosing a Rechtsform and checking professional restrictions.
Checking the company name and, where necessary, consulting the IHK or Handwerkskammer.
Preparing a Gesellschaftsvertrag.
Notarial certification for GmbH, UG, AG and certain register actions.
Opening an account and contributing capital if required.
Registering in the Handelsregister, Gesellschaftsregister or Partnerschaftsregister if required for the chosen form.
Filing a Gewerbeanmeldung with the Gewerbeamt for commercial activity.
Registering with the Finanzamt and obtaining a tax number through ELSTER.
Checking special permits: hospitality, transport, crafts, finance, medicine, education and other regulated fields.

Time frames and costs depend on the form, federal state, notarial acts, complexity of the articles, number of founders and the speed of the court or register. A fixed registration price should therefore not be treated as universal.

Common mistakes

Setting up a UG with €1 of capital even though the business must pay bills immediately.
Choosing a GbR without a written agreement between partners.
Treating a GmbH as complete protection from personal liability for guarantees and directors’ mistakes.
Forgetting Gewerbesteuer and the local Hebesatz.
Not checking professional permits and chamber membership.
Mixing personal and company expenses.
Assessing a form solely by taxes while ignoring accounting, liability and future investors.

How to choose a form in practice

For a small solo start, people often begin as an Einzelunternehmen or Freiberufler if the activity permits it. For two freelancers or a small joint project, a GbR may fit. If the activity is commercial and partners are willing to accept personal liability, an OHG or KG may be possible.

If risks are higher, there are employees, inventory, major contracts, investors, or a wish to separate the business from personal assets, a GmbH or UG is more often considered. A GmbH costs more at the start but appears more solid and is better capitalised. A UG requires less capital but the same accounting discipline and can appear weaker to banks.

Before registration, discuss the structure with a Steuerberater and, in complex cases, a lawyer specialising in company law. A mistake in the company form can cost more than advice before incorporation.