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- The Limited (Ltd.) is a corporation under British law, similar to the GmbH in Germany.
- The liability of the shareholders is limited to their contributions, which is an advantage.
- Incorporation is by registration at Companies House with minimal documentation requirements.
- A Ltd. operating in Germany is subject to German taxation, but must prepare its accounts in accordance with German regulations.
- Brexit has reduced the attractiveness of the Ltd. for German entrepreneurs and leads to legal uncertainties.
- Advantages are low-cost formation and limited liability; disadvantages include complex legal requirements.
- The decision for a Ltd. should be made carefully, taking into account the individual company situation.
Definition and legal basis:
The Limited (Ltd.) is a corporation under British law, similar to the German equivalent of the GmbH. It is regulated by the Companies Act 2006 and is one of the most popular forms of company in the United Kingdom. The Ltd. is a legal entity with its own legal personality, which is separate from its shareholders. The suffix “Limited” or “Ltd.” indicates that the liability of the shareholders is limited to their contributions.
In Germany, the Ltd. gained in popularity from 2003, when the European Court of Justice confirmed the freedom of establishment for EU companies. This made it possible to establish an Ltd. in the UK and operate it as a branch in Germany. However, the introduction of the German Unternehmergesellschaft (haftungsbeschränkt) in 2008 made the Ltd. less attractive for German entrepreneurs.
Foundation and formal requirements:
An Ltd. is formed by incorporation at Companies House, the UK commercial register. The following documents are required for this:
– Memorandum of Association
– Articles of Association
– Form IN01 with details of directors, shareholders and share capital
There is no minimum capital requirement, theoretically 1 British pound is sufficient. The company can be founded online and is usually completed within a few days. At least one director and one shareholder are required, although one person can hold both positions.
In order to operate in Germany, the Ltd. must be entered in the German commercial register as a branch office. Additional formalities must be observed, such as the appointment of a representative with authorization for service of process in Germany.
Liability and management:
The liability of the shareholders is limited to their contributions. Management is the responsibility of the directors, who have similar duties to the managing directors of a German GmbH. They must act in the interests of the company and can be held personally liable for breaches of duty.
The Ltd. must submit annual accounts and an annual return to Companies House every year. These documents are publicly accessible, which leads to greater transparency, but also to a higher administrative burden.
Tax treatment and special features:
A Ltd. operating in Germany is generally subject to German taxation. It is subject to corporation tax and must pay trade tax. Profits are taxed at company level, distributions to shareholders are subject to capital gains tax.
There are special features with regard to bookkeeping and accounting. Although the Ltd. is subject to British company law, it must keep books and accounts for tax purposes in Germany in accordance with German regulations. This can lead to an increased administrative burden.
Advantages and disadvantages of the Ltd:
Advantages:
– Fast and cost-effective foundation
– No minimum capital required
– Limited liability of the shareholders
– Possibility of cross-border activity within the EU
Disadvantages:
– Complexity due to the application of British and German law
– Higher administrative costs due to double-entry bookkeeping and reporting obligations
– Possible acceptance problems with German business partners and banks
– Uncertainties due to Brexit and possible future legal changes
Current developments and future prospects:
Brexit has further reduced the attractiveness of Ltd. for German entrepreneurs. There are uncertainties regarding the future legal treatment of Ltd. companies in the EU. Some experts recommend converting existing Ltd. companies into German legal forms in order to ensure legal certainty.
Despite these challenges, the Ltd. can still be an interesting option in certain situations, particularly for companies with a strong connection to the UK market or for international business models. However, it is important to carefully consider the legal and tax implications and seek expert advice where necessary.
In summary, it can be said that the Ltd. has lost importance as a British legal form in Germany, but can still be relevant in specific cases. The decision in favor of this legal form should be made taking into account the individual company situation, the legal framework and the long-term business objectives.
