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- The limited partnership (KG) combines personal liability and capital participation for specific business models.
- General partners have unlimited liability, while limited partners are only liable up to the amount of their contribution.
- The formation of a KG requires a partnership agreement that defines the rights of the partners.
- The advantages of the KG are flexibility, limited liability and tax advantages.
- One disadvantage is the unlimited liability of the general partners, which represents a considerable risk.
- The KG is regulated in the German Commercial Code (HGB) and must keep accounts.
- Legal advice is advisable in order to clarify complexity and liability issues.
Introduction
One of the many legal forms available to entrepreneurs is the limited partnership (KG). This legal form offers a mix of personal liability and equity participation that can be attractive for certain business models. In this article we will examine the structure, characteristics, advantages and disadvantages of a limited partnership, as well as the relevant legal aspects.
What is a limited partnership (KG)?
A limited partnership is a company in which at least one partner has unlimited liability (general partner) and at least one other partner has limited liability only with his contribution (limited partner).
Structure of a KG
Complementary
The general partner(s) are the active partners in a KG. They manage the day-to-day business, make decisions and bear unlimited liability with their personal assets for the company’s liabilities.
Limited partner
Limited partners are investors who limit their liability to the amount of their capital contribution. They are usually not actively involved in day-to-day operations and have less say in decisions.
Formation of a limited partnership
The formation of a KG requires a partnership agreement signed by all partners. This contract specifies the rights and obligations of the shareholders, the amount of capital contributions, the distribution of profits and losses, and other important aspects. The KG must be entered in the commercial register.
Advantages and disadvantages of a KG
Advantages
Flexibility
The KG offers flexibility in terms of capital structure and shareholder participation.
Limited liability for limited partners
Limited partners are only liable up to the amount of their contribution, which reduces the risk for investors.
Tax benefits
The KG itself is not subject to tax. Profits and losses are allocated to the partners and taxed in their personal tax returns.
Disadvantages
Unlimited liability for general partners
Unlimited liability of general partners can pose a significant risk, especially in the case of large liabilities.
Complexity
The structure of a KG can be more complex than that of a simple partnership or a sole proprietorship.
Legal aspects
Commercial Code (HGB)
The KG is regulated by the German Commercial Code (HGB). Sections 161 to 177a HGB contain specific provisions for limited partnerships.
Tax laws
A KG is taxed in accordance with the income tax laws. Profits and losses are allocated to the shareholders and taxed accordingly.
Liability regulations
As already mentioned, general partners have unlimited liability, while limited partners’ liability is limited to their capital contribution. This is regulated in Section 171 of the German Commercial Code.
Bookkeeping and accounting
A KG is required to keep accounts and must prepare a balance sheet in accordance with the provisions of the HGB.
Practical considerations when establishing a limited partnership
Election of shareholders
It is important to select the right partners, especially the general partner(s) who will manage the business.
Raising capital
The structure of the KG makes it possible to raise capital from limited partners without giving them full control over the company.
Legal advice
Due to the complexity of the legal form and liability issues, it is advisable to seek legal advice before establishing a KG.
Conclusion
The limited partnership is a versatile legal form suitable for various business models. It offers flexibility in terms of capital structure and participation and allows limited liability for capital providers. At the same time, it requires careful planning and consideration of the legal aspects, especially with regard to liability and taxes. For entrepreneurs who want to play an active role in their business while raising capital from investors, the limited partnership can be an attractive option.
