Home/company formation/Formation of a GmbH in Germany: Limited liability and other advantages for entrepreneurs

Running a business without risking private savings? The limited liability company (GmbH for short) makes it possible. This type of company limits the liability of the shareholders to the business assets and thus reduces the economic risk. In this article, you can find out about the other advantages of founding a limited liability company. Also good to know: How exactly does the formation of a GmbH work and how long does the formation process take?

What is a limited liability company?

The limited liability company is a German type of company. It is one of the corporations. The legal basis is the “Gesetz betreffend die Gesellschaften mit beschränkter Haftung” (GmbHG).

A GmbH is considered a legal entity. It is made up of its shareholders and is represented externally by a managing director.

What are the requirements for founding a GmbH?

A GmbH can be initiated by any natural person with unlimited legal capacity. At least one natural person is required to establish a GmbH. In addition, any number of shareholders and legally capable companies can be involved in the formation. Legal entities – for example, associations and foundations – can also establish a limited liability company.

A share capital of at least 25,000 euros is required for the formation of a GmbH. This can be provided by cash or non-cash contributions. You do not have to deposit the share capital in full when founding the company. It is sufficient to pay in at least 12,500 euros.

As part of the formation process, a notarized partnership agreement must be concluded. In addition to the company name, object and registered office of the GmbH, this also regulates the amount of the share capital and the distribution of the share capital contribution among the various shareholders.

What are the advantages of a GmbH?

As a shareholder or managing director of a GmbH, you can profitably use the advantages of this legal form. But what are they in detail?

Advantage 1: Limited liability on share capital

The limited liability is often the decisive factor for founding a GmbH. A limited liability company does not provide for any personal liability of the shareholders towards creditors. The GmbH is an independent legal entity and is liable for itself – up to the amount of the deposited share capital. However, there are exceptions. If, for example, you as the managing director of a GmbH fail to collect the due capital contributions from the shareholders on time or if you are intentionally complicit in the GmbH’s insolvency, you are additionally liable with your personal assets.

Advantage 2: Flexibility

The formation of a GmbH is permitted for any legally permissible purpose. This means that whether you are an artist, want to start a craft business or open a restaurant, you can do so as a limited liability company.

In addition, a limited liability company offers you the possibility of appointing an external managing director. This makes sense, for example, if a person with specific knowledge is to manage your company, which you only have to a limited extent.

Advantage 3: Own legal capacity

As mentioned above, a GmbH is an independent legal entity. As such, a GmbH can independently conclude legal transactions. For example, acquire real estate or buy shares in another company. This protects the privacy of the shareholders, as their names do not appear on the outside.

Advantage 4: Uncomplicated sale of the company

The sale of a limited liability company is carried out by selling the shareholders’ shares to the buyer. It is not necessary to transfer all the assets of the company individually to the buyer or buyers. This not only saves valuable time, but also spares your nerves.

How do you establish a GmbH?

At the beginning of the formation of a limited liability company, you decide – if necessary, together with your colleagues – on the name of the company, its registered office and the object of the business. The number of shareholders and the managing director are determined. In addition, the form and amount of the share capital must be determined. These points are recorded in the partnership agreement. The contract is signed by all partners and then notarized.

As soon as the partnership agreement has been notarized, the share capital of at least 12,500 euros must be paid into the business account of the GmbH.

The articles of association are notarized and the share capital is deposited: Now the GmbH must be entered in the commercial register by a notary public. The following documents are required for this purpose:

  • the articles of association
  • the legitimation of the managing director
  • a list of all shareholders
  • if contributions in kind have been made: a report on the formation in kind, which quantifies the value of the contributions in kind.

Shortly after the registration in the commercial register, you will receive the “questionnaire for tax registration” from the tax office. You fill it out and send it back to the tax office together with the required documents (for example, the excerpt from the commercial register and the articles of association). You can easily complete this step online. You can find out how the whole thing works in this article.

Now you register your GmbH with the Trade Licensing Office. Registering the company with the Federal Employment Agency, the Chamber of Industry and Commerce and the Employer’s Liability Insurance Association completes the formation process.

How long does it take to found a GmbH?

Depending on your preparation and the pace of work of the authorities involved, you must normally expect at least 3 to 4 weeks for the formal formation. In addition, there is the extensive planning phase and the preparation of the necessary documents. Why a GmbH formation can be delayed despite conscientious planning and how you can avoid delays, we tell you here.

With Recht 24/7, you receive all the documents for the formation in 24 hours. We can also arrange the notary appointment immediately if you wish.

The most important facts in brief

  • Any natural person with legal capacity can establish a limited liability company.
  • The formation of a limited liability company requires a memorandum and articles of association, which must be notarized by a notary public.
  • The share capital of at least 12,500 euros must be provided by cash contributions prior to the formation of the GmbH.
  • The advantages of the GmbH as a legal form: High flexibility and comparatively low taxes. With a few exceptions, shareholders are not liable with their private assets.
  • The GmbH must be entered as a company in the commercial register and registered as a trade.
  • Professional support at a fair fixed price is offered to you by our service “Founding a GmbH
start GmbH Formation

229,00 EURO – Bearbeitung in 24h