Definition and legal basis:

The partnership company (PartG) is a partnership specifically designed for cooperation between members of the liberal professions. It was introduced by the Partnership Act (Partnerschaftsgesellschaftsgesetz – PartGG) of July 25, 1994 and came into force on July 1, 1995. The PartG combines elements of the partnership under civil law (GbR) with those of the general partnership (OHG), but is tailored to the special needs of freelancers. The liberal professions that can form a PartG include doctors, lawyers, tax consultants, architects, engineers, journalists, auditors, psychotherapists and interpreters.

The PartG is not a legal entity, but a partnership. However, it can acquire rights, enter into liabilities, sue and be sued under its name. In contrast to commercial companies, the PartG does not carry on a commercial business and is exempt from trade tax as long as it only carries out freelance activities. This makes it an attractive option for freelancers who want to work more closely together without losing the tax advantages of their freelance work.

Foundation and formal requirements:

A written partnership agreement is required for the formation of a PartG. This must contain at least the following information:
– Name and registered office of the partnership
– Surnames and first names as well as the profession practised in the partnership and the place of residence of each partner
– Object of the partnership

The PartG must be entered in the partnership register at the competent local court. The application is made in notarized form and must be made jointly by all partners. Certain requirements must be observed when choosing a name: The name must contain the name of at least one partner, the addition “and partner” or “partnership” and the professional titles of all professions represented in the partnership. For example, the name could read: “Dr. Müller und Partner, Rechtsanwälte und Steuerberater Partnerschaft”.

No minimum capital is required to form a PartG, which distinguishes it from corporations such as a GmbH or AG. This facilitates the formation, but also means that the partners are liable with their private assets, albeit with certain restrictions.

Liability and management:

A significant advantage of the PartG is the possibility of limited liability. In principle, the partners are jointly and severally liable for the partnership’s obligations. However, liability for professional errors can be limited to the partners who were involved in the processing of a specific assignment. This means that partners who were not involved in an assignment are not liable with their personal assets for any resulting errors. This arrangement provides some protection against the risks of unlimited personal liability that would exist in a GbR.

The management and representation of the PartG is generally the joint responsibility of all partners, unless otherwise stipulated in the partnership agreement. This allows for a flexible organization of internal structures and processes. Partners can be assigned certain tasks or areas, and individual partners can also be excluded from management. However, the partners’ power of representation cannot be restricted in the external relationship.

Tax treatment and accounting:

The PartG is treated as a partnership for tax purposes. This means that the partnership itself is not subject to income tax. Instead, the profits are attributed to the individual partners and taxed by them as part of their personal income tax return. Depending on the individual situation of the partners, this can lead to tax advantages.

The PartG is exempt from trade tax as long as it only carries out freelance activities. This is a significant advantage over commercial partnerships or corporations. However, care must be taken to ensure that no commercial activities are carried out, as this could lead to trade tax liability for the entire activity of the PartG.

With regard to bookkeeping, the same rules apply for the PartG as for other freelancers. As a rule, a simple income statement is sufficient, unless the PartG exceeds certain turnover or profit limits. In this case, an accounting obligation may arise.

Advantages and disadvantages of the PartG:

The PartG offers freelancers an attractive opportunity to work together. The advantages include:
– Simple formation without minimum capital
– Trade tax exemption
– Possibility of limited liability for professional errors
– Flexible organization of internal structures and processes
– Retention of freelance status
– Possibility of interdisciplinary collaboration between different professional groups

Disadvantages may lie in the following points:
– Personal liability of partners (albeit limited)
– Possible conflicts between partners
– Restriction to liberal professions, which limits opportunities to expand into other business areas
– Need for careful contract drafting and regulation of cooperation
– Potential difficulties in admitting new partners or the departure of partners

In summary, it can be said that the PartG is a specialized legal form that is an attractive option for many freelancers for joint professional practice. It offers a good balance between the advantages of a partnership and protection against unlimited liability. However, it requires careful planning and structuring to ensure that the specific needs and objectives of the partners are optimally taken into account.