[ESTABLISHING A BUSINESS ENTITY IN GERMANY]
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ff. Liability of Partners The KGaA can have an unlimited number of capital investors (limited shareholders), whose liability is limited once they have paid their subscribed capital contribution. The minimum share capital of a KGaA is (in total) EUR 50,000. The limited shareholders have more or less the same legal rights as shareholders in an AG. At least one partner of the KGaA, the general partner, has to be liable for debts and liabilities of the KGaA without limitation. gg. Registration The KGaA must be entered into the commercial register and registered with the local trade office. 2. Partnerships The main feature of a partnership is the personal commitment of the partners to their working efforts to the partnership. Any partnership requires at least two partners. There are four major forms of partnerships in Germany. - Civil Law Partnership ( GbR ) - General Commercial Partnership ( oHG ) - Limited Partnership (KG) - GmbH & Co. KG Their main difference lies in the liability of their partners and required registration obligations. A partnership company ( Partnerschaftsgesellschaft or PartG ) is a form of partnership specifically designed for the joint exercising of professional freelance activities, such as architects. a. Main Characteristics In contrast to corporations, partnerships are not independent legal entities but associations of people. In partnerships, the individual partners responsible for the liabilities of the
company (including private assets) act for the company. Limitations of liability for individual partners are only possible to a limited extent. No minimum share capital is required, and the accounting obligations and publication requirements are less extensive than those for corporations. b. Establishment of a Partnership Establishing a partnership is easy and can be completed in just a few steps. At least two partners are required to establish a company. A minimum share capital does not have to be raised. The management of the company can only be carried out by partners. Depending on the type of partnership, entry in the commercial register ( Handelsregister ) is required. The application is signed by all partners and must be filed by a German notary in certified and electronic form with the commercial register. If a business activity is carried out by the partnership, the trade office (Gewerbe-/Ordnungsamt) must accordingly be notified. c. Taxation of a Partnership and its Foreign Partners A partnership is transparent for income tax purposes. This means that the partnership is not subject to income tax. Whether the foreign partners are subject to taxation in Germany depends on the circumstances and the structure of the partnership. If the sole business purpose of the partnership is the holding of shares in corporations ( GmbH or AG ), it is usually possible to structure the partnership in a way that the foreign partners are not subject to taxation in Germany. If the partnership is, however, engaged in operative activities, the profit realized by the partnership is taxable at the level of the partners in accordance with their participation quota, even if the profit is not distributed to them. If the
ILN Corporate Group – Establishing a Business Entity Series
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