Introduction

The GmbH & Co. KG is a legal form widely used in Germany that combines elements of the limited liability company (GmbH) and the limited partnership (KG). This hybrid legal form offers a number of advantages, particularly in terms of limited liability and flexibility. In this article we will examine in detail the structure, formation, advantages and disadvantages as well as other relevant aspects of the GmbH & Co KG.

What is a GmbH & Co KG?

The abbreviation GmbH & Co KG stands for “Gesellschaft mit beschränkter Haftung & Compagnie Kommanditgesellschaft”. This is a special form of limited partnership in which the personally liable partner (general partner) is a limited liability company. The GmbH & Co. KG thus combines the advantages of a corporation (GmbH) with those of a partnership (KG).

Structure of the GmbH & Co. KG

The GmbH & Co. KG consists of at least two partners:

1. The GmbH as general partner: The GmbH is the personally liable partner. It assumes the management of the company and has unlimited liability for the company’s obligations.
2. The limited partners: The limited partners are the investors. Their liability is limited to their contribution.

Foundation of a GmbH & Co. KG

The formation of a GmbH & Co. KG is a multi-step process:

1. Formation of the GmbH: First, a GmbH must be formed, which will act as the general partner in the KG. This requires the preparation of a memorandum and articles of association, the payment of the share capital (at least 25,000 euros) and the registration in the commercial register.
2. Formation of the KG: After the formation of the GmbH, the KG is formed. This requires a partnership agreement that regulates the rights and obligations of the shareholders. There is no minimum capital requirement for the KG.
3. Entry in the Commercial Register: The GmbH & Co. KG must be entered in the Commercial Register. This makes the company legally capable.

Advantages and disadvantages of the GmbH & Co. KG

Advantages

1. Limited liability: The limited partners’ liability is limited to their contribution, while the GmbH is liable as general partner. This protects the private assets of the limited partners.
2. Flexibility: The GmbH & Co. KG offers a high degree of flexibility with regard to the design of the articles of association and the management of the company.
3. Tax advantages: The profits of the GmbH & Co. KG are not subject to corporate income tax. Instead, they are attributed directly to the shareholders and taxed with income tax (transparency principle).
4. Creditworthiness: Due to the participation of a GmbH as general partner, the GmbH & Co. KG can often be considered more creditworthy, which facilitates access to financing opportunities.

Disadvantages

1. Complexity of the formation: The formation of a GmbH & Co. KG is more complex than the formation of a simple partnership because two legal forms are involved.
2. Costs: The formation and management of a GmbH & Co. KG involves higher costs, including notary fees, commercial register entries and possibly higher accounting costs.
3. Double-entry bookkeeping obligation: The GmbH & Co. KG is obliged to double-entry bookkeeping, which means a higher administrative effort.

Relevant laws and regulations

The GmbH & Co. KG is subject to various laws and regulations, including:

1. German Commercial Code (HGB): The provisions on limited partnerships in the HGB are also applicable to the GmbH & Co. KG.
2. GmbH Act (GmbHG): The provisions on the GmbH in the GmbHG apply to the GmbH as general partner of the GmbH & Co. KG.
3. Fiscal Code (AO) and Income Tax Act (EStG): These laws contain tax regulations relevant to the GmbH & Co. KG.

Conclusion

The GmbH & Co. KG is an attractive legal form for entrepreneurs and companies who wish to combine the advantages of limited liability with the flexibility of a partnership. It is particularly suitable for medium-sized companies and family businesses. Despite the complexity of the formation and the higher costs, the GmbH & Co. KG can be a suitable choice for many business models due to its structure and tax advantages.