Whether art and culture promotion or monument protection: Anyone who makes a charitable purpose the main object of their company needs the right legal form. The non-profit GmbH (short: gGmbH) offers founders not only the limitation of liability of a classic GmbH, but also numerous tax savings. In this article you will find out exactly how a gGmbH is structured and how you set up such a company. You will also get answers to the questions as to when a GmbH is considered “non-profit” and how it is treated for tax purposes.
What is a gGmbH?
A non-profit GmbH is a special form of GmbH. It is one of the corporations and pursues a business purpose oriented towards the common good. A gGmbH – just like a regular GmbH – consists of three bodies:
- the partners, i.e. the shareholders of the gGmbH
- the management, which represents the gGmbH to the outside world
- if necessary, a supervisory board (required for more than 501 employees).
The aim of a gGmbH is to combine the advantages of a GmbH with the advantages of non-profit status. Although a gGmbH has the same general conditions as a GmbH, it benefits from the tax advantages of non-profit law. For example, non-profit GmbHs are exempt from certain taxes in accordance with Section 5 (1) No. 9 of the Corporation Tax Act (KStG) and Section 3 No. 6 of the Trade Tax Act (GewStG).
When is a gGmbH non-profit?
In order to benefit from the tax benefits mentioned above, a gGmbH must pursue charitable, charitable or church purposes in accordance with Section 51 of the German Fiscal Code (AO). Paragraphs § 52, § 53 and § 54 of the AO define what exactly counts as “non-profit”, “charitable” or “ecclesiastical”.
To be classified as a non-profit, the company must be involved in one of the following areas:
- Science, education, education or research
- Arts and Culture
- Religion, monument protection, homeland or customs care
- Help for politically or religiously persecuted people
- Protection of marriage and family
- Nature and animal protection
- Welfare and Public Health
- Youth and elderly care
- Consumer protection and consumer advice
- Animal and plant breeding
- Model aircraft and amateur radio
The decision as to whether a limited liability company is pursuing non-profit purposes is made by the tax office after examining all the necessary documents, in particular the articles of association.
Tax treatment of a gGmbH
If the non-profit status of a GmbH has been approved by the responsible tax office, the company will receive a notice of exemption. The result: numerous tax benefits and exemptions. So a gGmbH is entirely of:
- the trade tax
- the corporate tax
- the solidarity surcharge
In addition, a non-profit GmbH is not obliged to pay property tax or gift and inheritance tax.
No sales tax is due for non-material services provided by a gGmbH. Sales from ongoing business operations are only taxed at 7 percent.
Reading tip: In this article you can find out how exactly a classic GmbH is taxed.
What is the difference between a gGmbH and a non-profit association?
The emergence of the organization
Non-profit GmbH or non-profit association? Which legal form is best suited for your company depends on the individual framework conditions. Both legal forms differ significantly in terms of their foundation and internal structure.
A gGmbH is only deemed to have been founded once it has been entered in the commercial register. A share capital of at least 25,000 euros is required for the foundation, of which 12,500 euros must be available. The founding of a non-profit association, on the other hand, does not require any share capital. The association is founded with the entry in the register of associations.
The formation of will
Whether investments or budget planning: decisions have to be made in a company. A gGmbH is usually bound to the will of the shareholders. Although deviating regulations can also be agreed in the articles of association, in practice the formation of will is often based on the shares of the respective shareholder. To put it simply: If you have a lot of shares, you can have a lot of say.
A non-profit association is organized in a grassroots-democratic manner. Each member of the association has one vote and is equal to every other member.
Representation and Liability
The gGmbH must be represented externally by a managing director. This is nominated by the shareholders. The non-profit association is headed by a board of directors, which is elected by the members of the association.
In principle, the managing director of a non-profit GmbH is not liable to third parties. The only exceptions are in the event of delayed insolvency and so-called tortious liability. A gGmbH managing director is only liable to the shareholders in the event of violations of the contractual duty of care.
The board of directors of a non-profit association is only liable with its private assets in the event of intent and gross negligence. And only if he receives less than 720 euros per year for his work.
How do I set up a gGmbH?
Would you like to launch a gGbmH? We support you with all necessary steps.
Step 1: gGmbH – preliminary considerations and approvals
First of all, you determine – if necessary together with your fellow campaigners – the non-profit business purpose of the gGmbH and its shareholders. Then you have to consider how the required share capital should be raised. Obtaining the necessary permits concludes the preliminary considerations. Especially in the areas of care and education, some certificates and authorizations are required to set up a gGmbH.
Step 2: Before founding, there is a draft of the articles of incorporation
The company’s charitable purpose must be specified in the articles of incorporation. The company name and a beneficiary non-profit organization must also be specified in the articles of association. In the event of the gGmbH being dissolved, this company receives the profits generated.
Step 3: gGmbH examination by the tax office and opening of a company account
The articles of association are submitted to the tax office for examination. The tax office checks the non-profit status of your company and grants it retrospectively. If the tax office gives the go-ahead, the articles of association are certified by a notary. The notary will then send you the gGmbH founding documents. With these documents you go to your bank to open a company account. The share capital is paid into the company account – either in cash or as a contribution in kind.
Step 4: Registration of the gGmbH
Once the share capital has been paid in, your notary can register the gGmbH in the commercial register. Your company will only be founded once you have registered. Now you register the gGmbH with the local trade office and the tax office. You can also register online. After a few days you will receive the confirmation of the business registration and the tax number of your company.
Founding a gGmbH: The most important things in brief
- The legal form of a gGmbH is a special form of the GmbH and pursues a non-profit purpose.
- The responsible tax office is responsible for examining non-profit status.
- A non-profit GmbH is exempt from many taxes and limits the liability of the shareholders to the share capital.
- In return, economic profits may only serve the business purpose and may not be distributed to the shareholders.
- The founding of a gGmbH is similar to the founding of a GmbH and requires a memorandum of association, share capital of at least 25,000 euros and an entry in the commercial register.