What is a GmbH?
The GmbH (limited liability company) is one of the most popular German company forms. It is a so-called capital company, as the focus of its formation is on the capital participation and capital raising of the shareholders.
The advantage of this legal form is that the liability of the shareholders is limited to the capital of the GmbH. Once they have made their contribution, the shareholders are not liable with their private assets for losses incurred by the company or for any liability claims asserted against the company.
How does the formation of a GmbH proceed?
To form a GmbH, the partners must agree on a memorandum and articles of association (articles of association) and certify it before a notary (the notarial deed of formation, including the memorandum and articles of association, is read out and then signed by the participants). The partners can also be represented by a proxy.
The articles of association determine, among other things, the purpose of the company and the amount of share capital (at least €25,000.00).
A managing director, who does not have to be resident in Germany, must be appointed in the deed of formation. Furthermore, the company needs a registered office and a business address in Germany.
The registration of the GmbH with the commercial register is carried out by the managing director via the notary. The managing director makes certain personal declarations and attaches a list of shareholders to the application. Once at least half of the share capital (€12,500.00) has been paid into a bank account in the name of the GmbH (in formation), the notary arranges for the entry in the commercial register.
A GmbH can initially be founded as an entrepreneurial company with only €1.00 share capital. The company is then obliged to use the name suffix “UG (haftungsbeschränkt)” and to set aside a portion (1/4) of the annual surplus each year to continuously increase the share capital. If the share capital reaches € 25,000.00, it can discard the name suffix “UG (haftungsbeschränkt)” and in future trade as a “GmbH”.
If the company has no more than three shareholders, it can be founded in a simplified and less expensive procedure. Instead of an individual memorandum and articles of association, a standardised memorandum and articles of association with the necessary content is used, which at the same time represents the appointment of the managing director and the list of shareholders. The legislator has provided a model protocol for this purpose in the GmbH Act. If the shareholder(s) use this protocol, the notary fees are also considerably lower.
Have we aroused your interest in founding a GmbH or UG? We specialise in such formations, especially by foreign natural persons or legal entities. Please feel free to contact us!