GmbH & Co OHG – formation, financing, liability & Co

The general partnership – OHG for short – is one of the so-called full companies and, as a partnership, is subject to the German Commercial Code (HGB). The formation process for this legal form of company is quite uncomplicated, as it can be formed informally and requires a minimum of only two founding members. It can be formed by both natural persons and legal entities. A maximum number of permissible shareholders is not specified by law.

If the personally liable main shareholder of an OHG appears as a limited liability company (GmbH) or if no natural persons but exclusively legal entities are liable in the company as a whole, a so-called Gesellschaft mit beschränkter Haftung & Compagnie Offene Handelsgesellschaft – in short: GmbH & Co OHG – is formed. But be careful: While the GmbH represents a legal entity by virtue of its legal form, a GmbH & Co OHG does not have its own legal personality and is always considered a partnership!

Other typical partnerships:

• Limited partnership (KG)
• General partnership (OHG)
• Limited Liability Company and Company Limited Partnership(GmbH & Co KG)

Foundation & Company Name

The formation of a GmbH & Co OHG requires at least two persons, with at least one of the two appearing in the form of a GmbH. A common scenario sees both founding members as limited liability companies that join together to form a GmbH & Co OHG for a joint project. In any case, all legal entities of the company act as general partners.

If you are starting from scratch, you first need to set up a limited liability company. To do this, you need the following in a nutshell: a natural or legal person as the founder of the company; a tax identification number (tax ID); the registration confirmation from the trade office; the shareholders’ agreement aka articles of association together with notarial certification; 25,000 euros in share capital; and finally the entry in the commercial register.

You can find out how the process of setting up a GmbH works in detail here:

• Establishment of a limited liability company (GmbH)

You have successfuly founded your GmbH? Then the next step is to set up a limited liability company (Gesellschaft mit beschränkter Haftung & Compagnie Offene Handelsgesellschaft). Since the GmbH & Co OHG is a separate company, you again need a tax ID and must register the company with the trade office. Since one of the partners is a GmbH, the GmbHG also requires a minimum capital of 25,000 euros, in contrast to the conventional OHG. The establishment of articles of association is also mandatory and of course your company needs a suitable company name including the company suffix “GmbH & Co OHG”.

Management & power of representation

Insofar as no other regulation has been established in the shareholders’ agreement, each shareholder of a GmbH & Co OHG has the power of representation in the external relationship. It is possible to agree on a joint representation within the articles of association – and to enter this in the commercial register – or to withdraw the power of representation from individual shareholders. However, this restriction only applies in the internal relationship and is ineffective vis-à-vis third parties, since they cannot view the representation authority of the individual partners.

The same applies to the power to manage: In principle, all shareholders may – and should – act in a managing capacity. Deviations from the legal regulations in the German Commercial Code (HGB) are possible, but only become effective in the external relationship if a corresponding note has been entered in the commercial register and the information is thus accessible to the public. In the absence of a corresponding entry in the commercial register, a transaction is effective even if the shareholder has been excluded from management in the internal relationship.

Excerpt from the law – § 114 HGB:

(1) All shareholders are entitled and obliged to manage the business of the Company.
(2) If the management is assigned to one or more shareholders in the partnership agreement, the other shareholders shall be excluded from the management.

Business letters – offers, order forms, invoices & Co.

In business transactions, the GmbH & Co OHG is bound to a certain presentation. Thus on all business letters – as with the conventional OHG also – information must be given to the legal form addition, the company seat, the responsible register court as well as the commercial register number. Since it concerns with the partners legal entities, a GmbH & CO OHG must indicate additionally the companies of the partners together with legal form addition and further their commercial register number, the responsible register court and the registered office of the companies. The full names of all managing directors and members of the management board – as well as the first name and surname of the chairman of the supervisory board, if applicable – must also be listed on all business letters.

Business correspondence includes all written communications from a company that are specifically adressed to one or more recipients, such as order forms, solicited offers, invoices and payment reminders or dunning letters. General promotional literature and direct mail, on the other hand, are not business letters in form and accordingly do not have to contain any of the above information.

Profit distribution, loss sharing & liability

With regard to the distribution of profits and the sharing of losses, either the statutory principles come into play or corresponding provisions have been anchored in the Articles of Association. Profits are generally distributed “per capita” at 4 percent of the capital share plus additional profit. Loss sharing is also carried out “according to heads”.

A limited liability company & Compagnie General partnership is liable as a company with its business assets. In addition, the individual partners – as with the general partnership – are directly, unlimitedly and jointly and severally liable, i.e.: creditors can not only directly attack the partners independently of the causer, but in case of doubt also raise liability claims beyond the company assets, namely on the private assets of the individual partners.

If, on the other hand, shareholders of a GmbH & Co OHG appear in the form of a limited liability company (GmbH), they are liable as legal entities only to the extent of the GmbH’s capital contribution. The limitation of liability as a legal entity is one of the advantageous features of this legal form of enterprise.

Tax liability of GmbH & Co OHG shareholders – GewSt, USt & ESt / KSt

Like all other legal forms of companies, the Gesellschaft mit beschränkter Haftung & Compagnie Offene Handelsgesellschaft is generally liable to pay taxes. For commercial enterprises with an annual income of more than 24,500 euros, the trade tax obligation applies and, in principle, for all companies, the turnover tax obligation applies, insofar as the GmbH & Co OHG does not only carry out tax-exempt sales.

In addition, partnerships are generally subject to the transparency principle, which states that due to the income tax liability of the individual partners, the payment of income tax for the partnership as a whole is superfluous. Distributed profits are also taxed in the partners’ income tax return as income from business operations. However, this is based on the assumption of natural persons. Income from profits for legal entities, on the other hand, is subject to corporate income tax.

• Trade tax (GewSt)
• Value added tax (VAT)
• Income tax (ESt)
• Corporate income tax (KSt)

Taxes for businesses, all in one list:

• Taxes in Germany

GmbH & Co OHG – For whom is it worthwhile?

A significant advantage of a GmbH & Co OHG is undoubtedly the limitation of liability to the business assets of the GmbH as a personally liable partner. This means that company founders can quickly and easily get off the ground in a team on an equal footing and do not directly risk the existence of their company if an investment turns out to be disadvantageous. In contrast to the GmbH & Co KG, the equal cooperation of the partners is particularly important here and strong hierarchies corresponding to the limited partnership are avoided.

So who is the GmbH & Co OHG suitable for? This legal form is worthwhile for start-ups who would like to set up their business as a partnership without having to forego the special liability restrictions of a GmbH. A GmbH & Co OHG is also conceivable as an asset-managing company and for family businesses.

Alternatives to the GmbH & Co OHG: Legal forms in Germany

Legal forms – What types of company are there? If you want to start your first company, then choosing the ideal legal form is one of the first steps in the process of setting up a company. Whether it’s a special real estate company or a start-up, I’ve summarized all the types of companies in Germany for you here.

• Legal forms: List

Company types in detail:

• Sole proprietorship
• Registered businessman / registered businesswoman (e. K.)
• Civil law partnership (GbR)
• General partnership (OHG)
• Limited partnership (KG)
• Entrepreneurial company (UG)
• GmbH: Limited liability company
• Real estate GmbH / Asset management GmbH
• Stock corporation (AG)
• Real estate stock corporation (REIT-AG)
• Societas Europaea (SE)
• Foundation / Family Foundation

Supervisory Board – The controlling body

The supervisory board is the supervisory body of a stock corporation and consists of at least three members. The Supervisory Board is appointed by the Annual General Meeting for a term of four years and is obliged to report to the Annual General Meeting.

More on the other bodies of a public limited company:

• Board of directors
• AGM

Duties of the Supervisory Board – Appointment, Supervision, Dismissal & Co

As the name suggests, the supervisory board is primarily responsible for supervising the management board, in addition to appointing and dismissing the management board. Furthermore, it is responsible for reporting in writing on the annual financial statements after they have been prepared by the management board and audited by the auditors, and it prepares annual reports. Formally, the Supervisory Board issues the invitation to the Extraordinary General Meeting and can submit proposals to the General Meeting on the appropriation of the profits generated.

Tasks of the Supervisory Board at a glance:

• Reporting to the Annual General Meeting
• Appointment of the Management Board
• Supervision of the Management Board
• Dismissal of the Management Board
• Written reporting
• Preparation of annual reports
• Invitation to the Extraordinary General Meeting
• Proposal for the appropriation of profits

The members of the supervisory board are registered in person with the registration court and at least the chairman of the supervisory board must also be listed by name on the AG’s business letters. Upon taking up their office, supervisory board members may not simultaneously act as members of the management board of their company, and they are also prohibited by the prohibition of cross-linking from being appointed as a member of the management board of another company. Remuneration is paid to all members of the Supervisory Board in accordance with the Articles of Association or the amount is decided at the Annual General Meeting.

AG: foundation, legal form, special case real estate

1. Stock corporation (AG)
2. Real estate stock corporation (REIT-AG)
3. Real estate company

Stock corporation (AG): Formation, liability, legal form & Co.

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 legal form of a company primarily stands for stock trading. You would like to start a company alone or together with other people and learn more about company law forms in advance? Then you’ve come to the right place!

• Stock corporation (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.

• Real estate stock corporation (REIT-AG)

Real Estate GmbH & Asset Management GmbH

Alternative – In this article you will learn the basics about real estate companies. Briefly explained, a real estate company is a company that has the purpose of leasing, developing, financing, realizing and/or marketing. It doesn’t matter if it is one or more properties. The management of residential and commercial real estate – in its own interest or as a service offered to third parties – is also a popular focus for real estate companies and asset management GmbHs. Find out more about the main advantages and disadvantages of buying real estate and the expected costs.

• Real estate company