[ESTABLISHING A BUSINESS ENTITY IN GERMANY]
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d. Civil Law Partnership (GbR) A civil law partnership (Gesellschaft bürgerlichen Rechts, GbR) is defined as an association of individuals or enterprises united in the achievement of a joint contractual purpose , suitable for start-ups and collaborative ventures. With new legal reforms effective 1 January 2024, a GbR now has the option to register in the newly established Gesellschaftsregister, gaining legal capacity (in this case the GbR is referred to as eingetragene Gesellschaft bürgerlichen Rechts, eGbR). This registration enables the GbR to hold assets, sue, and be sued in its own name. The registration does not alter the unlimited personal liability of the partners; it merely grants the GbR full legal capacity and register transparency. While registration is optional, it provides significant advantages for GbRs engaging in substantial commercial activities or requiring formal legal standing. Formation remains straightforward, requiring only a partnership agreement, recommended to be in writing. If the GbR engages in trade and surpasses certain thresholds, it may need to register as a general commercial partnership (Offene Handelsgesellschaft, oHG). e. General Commercial Partnership (oHG) The general commercial partnership (Offene Handelsgesellschaft, oHG) continues to be the classic partnership form for small and medium-sized enterprises (SMEs). Its structure corresponds to the civil law partnership (GbR). Every GbR that runs a commercial enterprise (a business enterprise of a type or size requiring business operations to be set up in a commercial manner) automatically qualifies as an oHG. Accounting regulations for an oHG are stricter than those for a GbR.
New legislation, effective from 1 January 2024, introduces more flexible provisions for managing partner entries and exits, and handling insolvency, which enhances governance and succession planning. This reform allows partners greater autonomy in defining their operational and financial arrangements within the partnership agreement. In order to establish an oHG, two or more partners must conclude a partnership agreement. It is advisable for the partnership agreement to be made in writing. All partners are jointly and severally liable for the oHG's debts and liabilities. The oHG must be entered in the commercial register and registered with the local trade office. The application to the commercial register must be made by all partners and be certified and filed by a notary. The expenses for registration vary, but are about EUR 400. Fees for legal counsel are not included. f. Limited Partnership (KG) The limited partnership (Kommanditgesellschaft, KG) is a legal form related to the oHG, but with the option of limiting the liability of some of the partners. This legal form is suitable for medium-sized enterprises (SMEs) seeking additional start- up capital but wishing to limit individual responsibility. At least one partner, the general partner (Komplementär), is personally liable without limitation. The liability of the limited partners (Kommanditisten) is limited to their respective share of the partnership capital. A KG offers greater flexibility compared to other forms of partnerships as the capital base can be increased by including additional limited partners. New legislation, effective from 1 January 2024, clarifies and streamlines the registration and
ILN Corporate Group – Establishing a Business Entity Series
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