GmbH – limited liability company

Introduction

The limited liability company, or GmbH for short, is one of the most common legal forms for companies in Germany and many other countries. It combines the advantages of a corporation with a flexible internal structure and is suitable for both small and large companies.

Foundation

The formation of a GmbH requires a notarized partnership agreement and entry in the commercial register. The minimum share capital is 25,000 euros, of which at least half must be paid in at the time of formation.

Liability

A key feature of the GmbH is its limited liability. This means that the company is liable with its corporate assets, but not the shareholders with their private assets. This protects the personal assets of the shareholders in the event of liabilities or insolvency of the company.

Management

The GmbH is represented by one or more managing directors appointed by the shareholders. The managing director is responsible for the day-to-day business and represents the company externally.

Tax aspects

The GmbH is liable to tax as a legal entity and is subject to corporate income tax. Profits distributed to shareholders are additionally subject to capital gains tax.

Advantages

• Limited liability protects the private assets of the shareholders.
• Flexibility in internal structure and corporate governance.
• Professional image and credibility towards customers and business partners.

Disadvantages

• Foundation can be complex and expensive.
• Obligation to publish annual financial statements.
• Double taxation of profits (corporate income tax and capital gains tax).

Conclusion

The limited liability company is a popular legal form for companies seeking the advantages of a corporation with limited liability. It is suitable for a wide range of business models and offers flexibility in business management.