Glossary · Legal forms

Legal form (Rechtsform)

Also: Rechtsform, Gesellschaftsform, Unternehmensform, business structure, type of company

In short

The legal form is the legal framework of a business and determines liability, capital, formation effort, say in decisions and taxes. Common legal forms in Germany include the sole proprietorship, GbR, OHG, KG, GmbH, UG and AG.

Legal form (Rechtsform) explained

The first question when choosing is usually liability: sole proprietors and partners in a GbR and OHG are personally liable without limit, while in a GmbH and UG only the company's assets are liable from registration. The second question is capital: sole proprietorships and partnerships need none, the UG manages with little, and the GmbH needs €25,000. Then there are the notary, register, bookkeeping and taxes. The legal form can be changed later, for example from a sole proprietorship to a GmbH, or by a change of legal form under the Transformation Act (Sec. 190 UmwG). If you are unsure, an initial consultation via Anwalt online for €169 including VAT will clarify your questions in advance.

Legal basisBGB, HGB, GmbHG, AktG, PartGG; Sec. 190 UmwG

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Related terms

GbR (civil law partnership)A GbR comes into existence as soon as at least two persons contractually undertake to pursue a common purpose, without a notary, register or minimum capital. All partners are personally liable for its debts, without limit and jointly and severally.GmbH (limited liability company)The GmbH is a corporation and legal entity formed by one or more persons with at least €25,000 share capital. As soon as it is entered in the commercial register, in principle only the company's assets are liable for its debts.OHG (general partnership)The OHG is a commercial partnership whose purpose is to operate a commercial business under a joint company name, and all of whose partners are personally liable without limit. It needs no minimum capital and is entered in division A of the commercial register.Partnership (Personengesellschaft)In a partnership, at least two partners join together, and the partnership depends on their personal involvement; examples are the GbR, OHG, KG and PartG. There is no minimum capital, but at least one partner is liable without limit.Sole proprietorship (Einzelunternehmen)A sole proprietorship is run by a single natural person, without minimum capital, without a partnership agreement and without a notary. The owner is liable for all debts with their entire private assets.UG (haftungsbeschränkt)The UG (haftungsbeschränkt) is not a separate legal form, but a GmbH with less than €25,000 share capital, mathematically from €1, which must be paid in full in cash before the application. In return, it must put a quarter of its annual net profit into a reserve every year.

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