Legal forms – What types of company are there? If you want to found your first company, then the choice of the legal form is one of the first steps in the process of founding a company. Whether it is a special real estate company or a start-up, here I have summarized all types of companies in Germany for you. In this list of companies you will find explanations, advantages, disadvantages, costs, the process with checklists and requirements, for each type of company. In addition, especially for real estate owners, as an extra: real estate GmbH (asset-managing GmbH) and family foundation with tax advantages. All legal forms in one list! Your first company? Learn how it works here: Founding a company.
Real estate company: Start a business
You want to buy your first property and rent it out? You have inherited a property and now you want to be active in property management, property administration and other related areas or even more, you want to become a property investor yourself? Then the big question is, which company is right for you? What is the first step?
Basically, you have many different possibilities and options how you can set up your business for the future. Roughly explained, everything starts with the sole proprietorship and goes over individual and cooperation models such as OHG and UG to the GmbH.
To give you a first overview, I have written this guide to the different types of companies for you. Here you will get to know the different possibilities you have as a founder in Germany. Definitions, tips for founding, advantages, disadvantages, as well as taxes. Everything you need to have a good basis for decision-making.
Factors: Property type, rental, structure
There is the right type of company for every type of property (condominium, apartment building or property in need of renovation), for the type of rental and structure, depending on your personal requirements. If you later have several properties in your portfolio, you will also choose different company types for the individual properties.
If you are facing the question for the first time: Which company should I found? Here is an overview of all company forms
From the beginnings, as an individual businessman & businesswoman, to simple forms of cooperation with other business partners, to the real estate GmbH and finally AG.
- Sole trader / sole proprietor
- Civil law partnership (GbR)
- Registered businessman (e.K.)
- General partnership (OHG)
- Limited partnership (KG)
- Entrepreneurial company (UG)
- Limited liability company (GmbH)
- GmbH & Co KG, GmbH & Co OHG
- Stock corporation (AG)
Also in focus:
- Real estate GmbH / Asset management GmbH
- Family Foundation
Tip. According to the company list I still have:
- Tips for your first real estate purchase
- Tips on the start-up process
The larger the company, the more tasks and resources have to be delegated.
Let’s start the sole proprietor and sole trader:
Sole trader / sole proprietor
The sole proprietorship is a German legal form which – as the name suggests – is founded and managed by a single person. This includes freelancers, small traders and registered traders. Would you like to become self-employed and learn more about the topic of “forms of business law and the real estate industry”? Learn everything you need to know about sole proprietorships here.
Registered businessman (e.K.)
Eingetragener Kaufmann (e. Kfm.) / Eingetragene Kauffrau (e. Kfr.) / Registered merchants (e. K.) – The registered merchants embody a German legal form variant, which is based on the corporate legal form of the sole proprietorship (EU). This is therefore a company that is founded and managed by a single person and is also obliged to be entered in the commercial register – hence the name.
Civil law partnership (GbR)
A civil law partnership is a German legal form established by two or more persons for a certain period of time in order to conduct a certain business together or to achieve a common goal. It is therefore always for a specific purpose and usually exists only as long as the joint venture has not yet been completed. As the name suggests, it is governed by civil law and is therefore often referred to as a BGB partnership. Would you like to join forces with other people and learn more about the topic of “forms of business law and the real estate industry” in advance? Learn everything you need to know about setting up a GbR here.
General partnership (OHG)
The general partnership is a German legal form founded by two or more persons and managed by at least one partner. As the name suggests, it is primarily geared towards commercial business and is thus subject to the German Commercial Code (HGB) in the legal sense. Would you like to join forces with other people and learn more about the topic of “business legal forms and the real estate industry” in advance? Let’s start, step by step, the OHG.
Limited partnership (KG)
The limited partnership is a German legal form founded by two or more persons and managed by at least one partner. The main feature of this legal form of company is the division of liability risk: at least one partner has unlimited liability and at least one partner has exclusive business liability with his contribution.
Entrepreneurial company (UG)
Unternehmergesellschaft / UG (haftungsbeschränkt) – The Unternehmergesellschaft (haftungsbeschränkt) is a German legal form based on the legal form of the Gesellschaft mit beschränkter Haftung (GmbH). It is considered to be the little sister of the GmbH and is therefore often referred to as the “mini-GmbH”. In principle, there are only minor differences between the UG (haftungsbeschränkt) and the GmbH from a legal perspective.
Limited liability company (GmbH)
GmbH, GmbH & Co KG, GmbH & Co OHG – The limited liability company is a German legal form that is founded by at least one person and managed by at least one shareholder. As the name already indicates, this legal form of company is characterised by a limitation of liability for its shareholder(s). Everything you need to know about taxes and real estate trading.
Real estate GmbH / Asset management GmbH – Special
Immobilien GmbH / Vermögensverwaltende GmbH / Immobiliengesellschaft – In this article you will learn the basics about real estate companies. Who would think of founding a limited liability company when buying a house or a condominium? Admittedly, this makes no sense for owner-occupation, but it does for renting.
Here still special case GmbH & Co KG, GmbH & Co OHG, no person GmbH, one person GmbH, two person GmbH and the organs of a GmbH.
GmbH & Co KG
GmbH & Co KG – The GmbH & Co KG is a German legal form which combines the corporate legal form of the limited partnership (KG) with a limited liability company (GmbH). Thus, the greatest advantages of both legal forms – the separation between general partner & capital provider typical for the KG plus the limitation of liability of the GmbH – intertwine and enable an innovative, new form of structuring for start-ups.
GmbH & Co OHG
GmbH & Co OHG – The GmbH & Co OHG is a German legal form which combines the corporate legal form of the general partnership (OHG) with a limited liability company (GmbH). Thus, the greatest advantages of both legal forms – the uncomplicated formation typical for the OHG as well as equality of all shareholders plus the limitation of liability of the GmbH – intertwine and enable an innovative, new form of organization for start-ups.
No-Person GmbH – The model for a GmbH without shareholders! By appointing new shareholders or leaving existing shareholders, the limited company model you choose can easily change. Whether it’s a one-person company, a two-person limited company or even a company that operates without shareholders at all…. In each case, there are specifics that you should be aware of as they deviate from the norm of the traditional limited liability company.
One-person limited liability company
One-person GmbH – The GmbH model for solo founders! By appointing new shareholders or leaving existing shareholders, the GmbH model you have chosen can easily change.
Two-person limited liability company
Two-person GmbH – The GmbH model for founding duos! By appointing new shareholders or leaving existing shareholders, the GmbH model you have chosen can easily change.
Corporate bodies of a limited liability company
A limited liability company consists of several bodies. The managing directors deal with the day-to-day business and other matters of the company and represent their company externally in accordance with the GmbHG. The supervisory board is required by law above a certain number of employees and acts as a controlling body of the company by appointing and advising the management, but also by monitoring and, in case of doubt, dismissing it. Alternatively, its establishment can also be determined within the framework of the articles of association. The shareholders’ meeting acts as the decision-making body of the GmbH.
Stock corporation (AG)
Aktiengesellschaft (AG) – The stock corporation is a German legal form founded by at least one person and organized by different bodies. Instead of a managing director, the company is managed by a board of directors consisting of at least one person. As the name already indicates, this corporate legal form primarily stands for share trading.
In addition, the special case of real estate stock corporations (REIT-AG).
Real estate stock corporation (REIT-AG)
Real estate stock corporation / REIT-AG – You don’t find the idea of a stock corporation bad at all and are now wondering how you can combine your capital company with the real estate industry? A real estate company is a company that serves the financing, development, realization, leasing, or marketing of real estate – starting with a single property up to a real estate portfolio in the three or multi-digit range. The management of real estate property or third-party real estate on behalf of third parties can also be handled by a real estate company.
Types of Stocks – A corporation, as the name suggests, deals with stock trading. I’m sure you’ve heard that stocks can go up and down. You may also know someone who has invested their wealth in stocks. But what exactly is a share? In a nutshell, a share is a document that determines your entitlement to the share capital of a public limited company and guarantees you a fixed share of the profits. In this context, there is often talk of “securitising a claim”.
AG in detail: Management Board and Supervisory Board
The management board of a joint stock company deals with the day-to-day business and other matters of the company and represents the joint stock company externally.
The Supervisory Board is a legally prescribed self-monitoring body that appoints and monitors the individual members of the Management Board and, in case of doubt, also removes them. Furthermore, it is responsible for the written reporting of the annual financial statements as well as for business reports.
Annual General Meeting
The Annual General Meeting acts as the decision-making body of the stock corporation.
Limitation of liability for AG bodies
Limitation of liability for AG executive bodies – In the event of a loss, the stock corporation as a legal entity under private law is, to a certain extent, subject to a limitation of liability, because the liability – apart from a few rare exceptions – exclusively burdens the business assets of the company. In the external relationship, therefore, only the share capital is liable for any losses. In the internal relationship, however, the liability claim may vary depending on the governing body of the AG.
Societas Europaea (SE)
Societas Europaea (SE) – The Societas Europaea is a legal form that was introduced with regard to harmonization efforts at the European level. In German usage, the terms “Europäische Gesellschaft” or “Europäische Aktiengesellschaft” and Europa AG are therefore also commonly used. Characteristic features of a Societas Europaea are, above all, the simplification of cross-border business activities in EU member states and EEA countries through largely uniform legal bases and the personnel policy framework with regard to the co-determination rights of employees of the company.
Foundation / Family Foundation
Saving taxes with real estate – In this special article I will take a deep look into the subject of foundations, family foundations, real estate purchases, taxes and tax optimization. The establishment of a foundation, more specifically a family foundation has many advantages for you. From tax-free capital gains after speculation tax to low, 15 percent taxation of rental income. In this article you will learn how this works, how you can set up a foundation and how your grandchildren will still benefit from it.
Founding a company: Process, costs, requirements, legal forms – 7 steps checklist
You want to found your first company? Requirements for you as a founder, share capital, shareholder agreements, costs for the foundation, legal forms and checklists. This sounds complicated for beginners, but it is actually quite simple. The process of founding a company is usually relatively the same. I have summarized the foundation here once in simple steps, for you. Learn how to start your own business. After the great guide to all legal forms or types of companies, today a detailed look at the establishment of a (real estate) company for beginners.
Company formation in 7 steps: checklist
In the article you will find the foundation of a company explained in 7 simple steps. So you have a quick overview.
Checklist to start a company in 7 steps:
- Type of company: What should I start?
- Share capital: amount and forms of enterprise
- Company shares: Who brings / gets what?
- Shareholder agreement: Preparing the foundation and the business
- Notary: Arrange an appointment for the foundation
- Business account: Basis financial transactions
- Commercial register, trade, tax office and IHK
When setting up a company, you move from theory to practice, so to speak. First of all, of course, it’s about the type or structure of your company. Step one is very basic: you have to choose the right company for your (personal) construct. What factors influence the choice? The factors influencing the choice of company include: Share capital, number of founders or shareholders, liability criteria but also taxes. Learn more about founding a company in 7 steps here:
Tax for companies: Taxes in Germany
Buying your first real estate: Getting Started
The first property is your real “seed money”. A good location is the biggest advantage when it comes to returns.
So if you want to start your business, you need good real estate that will give you a solid return, which in turn will allow you to make new investments. To do this, you need to learn about the selection and purchase process: how do you find good properties and how do you buy them?
Location, valuation and appreciation
There is a world of difference between a condominium in Dortmund and luxury real estate in Hamburg. An apartment building in Braunschweig is easier to get hold of than a villa in Berlin-Grunewald. At the same time, the apartment building (as a type of property itself) is much harder to get than the condominium itself. So it’s not just apportionment, but also property type, i.e. house type and apartment type. Add to that time, do you need to buy something “right away” or do you have time to research and compare?
Your 3 key factors in buying:
- Property type / property
All this and more, must be included in the property valuation and this requires, depending on the type of property, location, demand and supply on site and also the purchase desire. Do you want to buy the property for your portfolio or do you want to live in the property yourself and sell or rent it later, after two, three or four years? Here again comes the value appreciation end game, especially of properties in very desirable locations, such as Berlin, Hamburg or Düsseldorf.
After the macro perspective, the micro perspective
After the macro perspective comes the micro perspective. What features does the property offer? And what construction costs were incurred? How does all of this affect the property, the land, and the future return on rent? From the carport for the modern family home, to the spa area for the luxury villa, all factors play into the property valuation.
After finding the right real estate, it is about the real estate valuation. The evaluation of house and apartment is very difficult, especially for beginners and beginners. Facts are, for example:
- Construction costs of the object
- Land value
- Increase in value
- Demand and supply (on site)
Evaluate and buy: More tips
Learn more about buying real estate here: