Definition and legal classification

Corporations are legally defined associations of persons with their own legal personality. They form an independent unit of rights and obligations whose existence is independent of changes in membership. The legal system distinguishes between corporations under private and public law. They are characterized by their ability to act through bodies and to shape legal relationships. Corporations differ from other legal forms in their membership-based constitution and supra-individual objectives. Under constitutional law, corporations are enshrined in Article 19 (3) in conjunction with Article 9 (1) of the Basic Law. They are a central form of organization in the economy, administration and society.

Corporations under private law

Corporations under private law include various legal forms such as stock corporations, limited liability companies, cooperatives and registered associations. They participate in general economic life and enjoy constitutional protection. The registered association is the basic form of private law corporations. They are characterized by their self-organization and economic capacity to act. Corporations such as AGs and GmbHs have specific organizational structures with management and a shareholders’ meeting. In Germany, the establishment and operation of corporations is guaranteed by constitutional law. Corporations under private law are subject to corporation tax law and have their own legal personality.

Corporations under public law

Corporations under public law perform sovereign tasks and are established by law or statute. They include regional authorities such as the federal government, federal states and municipalities, as well as staff bodies such as chambers and social insurance institutions. They have statutory autonomy and can levy contributions. Their employees are civil servants or public sector employees. They are characterized by their form of organization under public law and the performance of tasks delegated by the state. They enjoy special rights such as territorial sovereignty and legislative powers.

Legal effects and special features

Corporations can acquire rights and enter into obligations in their own name. They can sue and be sued. The bodies act legally on behalf of the corporation. In the case of corporations under private law, this is done by the management or board of directors, in the case of corporations under public law by legally defined representative bodies. Liability is generally limited to the corporation’s assets. Digital technologies are increasingly expanding the scope of action of corporations.

Tax treatment

Corporations are subject to corporation tax, regardless of their legal form. The tax treatment varies depending on the type of corporation and its purpose. Non-profit corporations enjoy tax concessions. Taxation takes place at the level of the corporation, not the members. Blockchain technologies and digital forms of organization pose new challenges for tax treatment.

Future prospects

Digital technologies and new forms of organization are changing traditional corporate concepts. Blockchain, decentralized organizational structures and AI are expanding the scope for action. Legal systems must continuously adapt to new developments. The flexibility of corporations will increase.