[ESTABLISHING A BUSINESS ENTITY IN GERMANY]
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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 management of changes within the partner structure, particularly regarding the entry and exit of partners and the process during insolvency. A KG is established when a partnership agreement between two or more partners (including at least one limited and one unlimited partner) is concluded. It is advisable for the partnership agreement to be made in writing. The updated provisions offer increased flexibility in partnership agreements, enhancing the structure's adaptability to diverse business needs. The liability of the limited partner will only become limited once the registration of the KG and the subscribed partnership contribution has been entered in the commercial register (which is obligatory). The application to the commercial register must be made by all partners and be certified and filed by a notary. The costs for registration vary but are about EUR 400. A KG must then be registered with the local trade office. Fees for legal counsel are not included. g. GmbH & Co. KG The GmbH & Co.KG is a limited partnership (KG) in which the general partner (Komplementär) is a limited liability company ( GmbH ). The GmbH is fully liable for the GmbH & Co. KG's debts and liabilities. The liability of the limited partners ( Kommanditisten ) is limited to their respective share of the partnership capital. This hybrid form is suitable for entrepreneurs wishing to limit their liability while enjoying the flexibility of a non-incorporated business. Because of its flexibility, the legal form GmbH & Co. KG is especially appropriate for medium- sized businesses and family companies. The GmbH & Co. KG is established through conclusion of a partnership agreement between the general partner and the limited partners (advisably in writing). Typically, the
ILN Corporate Group – Establishing a Business Entity Series
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