How to start a GbR: Your guide to setting up a civil law partnership in Germany

The Gesellschaft bürgerlichen Rechts (GbR) is a civil law partnership that has, of course, at least two partners. It takes work to set one up, albeit not as much as an incorporated legal form (GmbH, UG etc.). Find out what need you need to do to start a GbR in this big overview.


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Got questions about setting up a GbR in Germany? 

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  • 10+ years experience

Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.


The GbR at a glance

A GbR is a legal form – a legislative framework in which a business must operate. In Germany, every business needs to have one.


German businesses come in the form of Kapitalgesellschaften (corporations), Personengesellschaften (partnerships) and Einzelunternehmen (sole proprietorships).

The GbR is a Personengesellschaften (partnership) that can have two or more partners.

The GbR legal form 

  • A GbR can be set up quickly, easily and on the cheap.
  • Its founders need neither start-up capital nor a minimum contribution.
  • The GbR is only possible with two or more people (a solopreneur cannot set one up).
  • The name of the GbR has to include at least the surnames of its partners.
  • The GbR partners must agree on a corporate purpose and should conclude a GbR partnership agreement (putting it in writing is not mandatory but advisable).
  • Best practice is to draw up a GbR partnership agreement in writing and signed by all partners.
  • All GbR partners are jointly and severally liable with their private assets. Thus, business liability insurance is a must.
  • Like any business, there are specific rules about taxation and accounting.
  • Generally, a simple income surplus statement (EÜR) fulfils all accounting obligations for a GbR.
  • If the business is “gewerbliche GbR” (a business partnership in a trade that is not a Freiberufler trade), it needs to register with the Gewerbeamt (trade office).
  • Entry in the Handelsregister (commercial register) is not required. Nor does a GbR register exist.
  • Freiberufler such as freelance artists, graphic designers or journalists (i.e., not Gewerbetreibender, or traders) have to register their GbR establishment with the tax office and can skip the Gewerbeamt.

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Your checklist for starting a GbR

Who are the partners of the GbR?

The GbR is a legal form which belongs to the subgroup of Personengesellschaften (partnerships). The legal basis of the GbR is regulated in §§ 705 – 740 of the German Civil Code (BGB).

The GbR is a suitable legal form for two or more entrepreneurs who want to run their business together as a partnership.

In addition to natural persons (humans), a juristische Person (legal entity aka an incorporated company) can be a GbR partner. But, on the condition that at least one other natural person is a partner in the GbR. In other words, a company (e.g., GmbH, UG) can join a GbR, if one of the other GbR partners is a human being.


What are the rules for the GbR?

Now you’ve decided who’s going to be involved, the next step is to agree on the following points:

  1. Registered office of the GbR
  2. Purpose and objective of the GbR
  3. Management and power of representation of the GbR partners
  4. Liability risks
  5. Use of profits
  6. Private withdrawals by the partners
  7. Distribution of profits and losses
  8. Information duties and control rights
  9. Non-competition clauses for shareholders
  10. Sale or assignment of shares
  11. Provisions for the termination or death of a partner
  12. Possible provisions for termination of the GbR


The partnership agreement of the GbR

You can enter into the partnership agreement of a GbR informally. The written form for the formation of a GbR is only required by law if, for example, a partner contributes a plot of land or real estate to the GbR.

Nevertheless, it is always advisable to have a partnership agreement for the GbR in writing. The power of representation and liability regulations alone should always be regulated in a contract. This is because the founders enter into numerous obligations with each other externally and internally.

The partnership agreement of a GbR also has the function of defining the mutual obligations in advance and setting rules for the withdrawal or what happens if a GbR partner dies.


How to wind up a GbR

Nobody likes to think about the end of their GbR at the beginning, but it’s best to hope for the best and plan for the worst, which means creating an action plan for when it

If you and your business partners want to set up a GbR only for a finite period or for a project. Then thinking about how you’ll dissolve the GbR is naturally interwoven into the establishment process.

You should already define the conditions for this in the partnership agreement and specify the “reason for dissolution”.

However, this does not end the GbR immediately. It’s only until all business transactions have been completed that the business can be closed. This means all contracts have to be terminated, invoices paid or issued, and taxes paid. The GbR then remains in existence as an “Auseinandersetzungsgesellschaft”  (“dissolution company”) until everything has been resolved.

According to § 730 para. 2 BGB, a GbR is deemed to continue to exist until everything has been finally settled:

„Für die Beendigung der schwebenden Geschäfte, für die dazu erforderliche Eingehung neuer Geschäfte sowie für die Erhaltung und Verwaltung des Gesellschaftsvermögens gilt die Gesellschaft als fortbestehend, soweit der Zweck der Auseinandersetzung es erfordert. Die einem Gesellschafter nach dem Gesellschaftsvertrag zustehende Befugnis zur Geschäftsführung erlischt jedoch, wenn nicht aus dem Vertrag sich ein anderes ergibt, mit der Auflösung der Gesellschaft; die Geschäftsführung steht von der Auflösung an allen Gesellschaftern gemeinschaftlich zu.”

This translates to into English legalese:

For the termination of pending transactions, for the entering into new transactions necessary for this purpose and the maintenance and administration of the partnership assets, the partnership is deemed to continue to exist insofar as the purpose of the settlement so requires. However, the authority to manage the company vested in a partner under the articles of association shall, unless otherwise provided in the articles, cease upon the dissolution of the company; the management of the company shall be vested in all partners jointly from the time of dissolution.


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Andreas Munck

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Got questions about setting up a business in Germany?

  • Startup expert
  • 10+ years experience

Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.


Rights and duties of the GbR partners

Section 709 (1) of the German Civil Code (BGB) says that, in principle, the GbR is managed jointly by all partners as GbR managing partners. What this means in practice is that all partners must sign a contract together for every legal transaction.

With this in mind, always do your due diligence when getting into business with someone. In particular, make sure all the partners agree on the fundamentals of your business.

Having all partners participate in every little transaction isn’t an optimal way to run a business. Luckily, you can change the legal provision of § 709 BGB in the GbR’s partnership agreement. More flexible rules could include:

  • Each GbR partner could have the right to act independently when buying minor things such as office supplies.
  • Setting a monetary value of legal transactions up to which each partner can act alone.

However, when it comes to major things such as loans or investments, you can stipulate that all partners must still sign jointly.


If there are more than three partners, it also makes sense to create rules for passing resolutions. For example, you can set a rule that a simple majority can pass a resolution if the legal transaction:

  • Can’t significantly impact the GbR, or
  • doesn’t exceed a set monetary value.

However, for big decisions – such as changing the business purpose or the partnership agreement – resolutions should be passed unanimously.

Regardless of the rules, whenever your GbR passes a resolution, update the partnership agreement and get all the partners to sign it.

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Start-up capital and liability of the GbR

Unlike a corporation, a GbR does not require a minimum capital contribution from the partners. The GbR, therefore, has no statutory start-up or share capital requirements, which is what makes it so attractive for freelancers, small businesses and bootstrappers.

There is a catch: the GbR partners are jointly and severally liable (with their private assets) for their business. Only incorporated legal forms such as the UG or GmbH limit the liability of a business.

How liability is distributed internally between partners can be regulated by the partners in the articles of association. However, it is not permissible to regulate the limitation of liability in the general terms and conditions (AGB). It’s best to seek legal advice if this is what you want to do.

Since you as a partner are always liable for possible financial losses that may arise through your GbR, make sure to take out business liability insurance.


What you should know about the oHG

You can set up a GbR for any lawful trade to make a profit. But there are special conditions that could change the legal structure of your GbR later down the track.

If your GbR starts generating more than €500,000 in turnover per year, your business becomes a Handelsgesellschaft (commercial company) that is “kaufmännischen Weise betrieben wird” (“operated in a merchant-like manner”).

If this happens, your GbR becomes an offenen Handelsgesellschaft – oHG. In other words, both the Commercial Code (HGB) and the German Civil Code (BGB) kick in and your GbR (civil law partnership) turns into oHG (general partnership) which has to be entered into the Handelsregister (commercial register). And overnight your business will now have many of the legal obligations that a UG or GmbH has.

If your GbR has a commercial trade, you should talk to your tax adviser as soon as your annual turnover starts approaching the €250,000 p.a. mark.


What name can a GbR have?

Today companies often have imaginative and weird names. But, if you have a GbR, the bur freedom to call it something you dreamt up is somewhat curtailed.

Despite there being no law regulating the naming of the GbR, the authorities and IHK require that the business’s official name contains the names of the partners.

Let’s explore the naming rules of a GbR below.

Example 1: Marianne Musterfrau & Manfred Mustermann GbR

If there are several partners, you can use only the surnames, but only if they aren’t “common names”. For example, Müller, Meier, Schmidt GbR probably wouldn’t be accepted.

Whatever you decide to official call your GbR has to appear on all business documentation. What is important here is that outsiders can always clearly identify the GbR.

Example 2: Foto Wischmeier & Schmidtsen GbR

If you want a name that includes what the GbR does, you can insert the business activity alongside the partner surnames.

Before finalising the name, you check with the local competent IHK or the tax office whether the GbR name is viable.


Where do I have to register my GbR?

Handelsregister: No commercial register entry possible for any type of GbR

Unlike other common legal forms such as the GmbH or UG, it’s not possible to enter the GbR into the Handelsregister (commercial register).

One less thing on your to-do list!


Gewerbeamt: Register with the Trade Licensing Office

All “gewerbliche” GbRs (partnerships that have a commercial trade) have to register at the Gewerbeamt (Trade Licensing Office).

Before doing so, each GbR partner must apply for a Gewerbeschein (trade licence).

Finanzamt: Registering with the tax office

In the case of a non-commercial GbR, such as those set up by artists, graphic designers or journalists (Freiberufler or liberal professionals), the GbR only has to be registered with their local tax office.

Commercial GbRs automatically receive a physical letter from the tax office after registering with the Gewerbeamt (Trade Office). This letter prompt’s you to fill in a tax questionnaire on the government online portal called ELSTER.

This questionnaire registers your business with the Finanzamt and gives you the chance to apply for:

  • a VAT identification number (Umsatzsteuer-Identifikationsnummer), or
  • the small business regulation (Kleinunternehmerregelung) in the initial period (if you expect to make under €22,000 in profit or €50,000 in turnover, you can apply for a VAT exemption).

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Chamber memberships of the GbR

All gewerbliche GbRs are “compulsory members” of the local IHK (Chamber of Industry and Commerce) or HWK (Chamber of Crafts).

For freiberufliche GbRs (e.g., artists, graphic designers or journalists), the chamber obligation does not apply.

GbRs operating in a “Kammerberufen” (“chamber professions”) (e.g., tax consultants, lawyers or architects) have to become members of their respective professional chambers (Berufskammer).


GbR management

Under § 709 of the Civil Code (BGB), the management of a GbR is always the joint responsibility of all GbR partners. However, they can define in the partnership agreement which actions each partner can do independently and what must done jointly and, for example, entering into contracts.

According to § 710 BGB, management can also be delegated by the partners. For example, the partners can agree to appoint a GbR partner or employee as a general manager.

If you appoint an employee as the general manager this involves granting powers of attorney. Always grant a power of attorney in writing and describe the scope in great detail.

The general manager can run the day-to-day business of the GbR, but can’t change it in any fundamental way. Major decisions are the domain of the GbR partners.


GbR partner remuneration

The partners of a GbR should determine in the partnership agreement what remuneration each partner gets. This is because the partners don’t get a salary but only a share of the profits.

Each partner gets the same share unless the profit shares are pre-determined (§ 722 BGB).

If the partnership agreement is silent on partner profit shares, then each business year, you have to notify the tax office of the profit distribution ratio for each GbR partner.

As GbRs financials fluctuate each month, it’s wise to design profit distributions flexibly and dependent on actual liquidity.


Private withdrawals by GbR partners

Unlike wages, private withdrawals are not business expenses. It therefore doesn’t reduce the profit of the GbR.

In accounting, these private withdrawals are recorded in a so-called private account. A private account is a sub-account of equity. It is on the liabilities side. Private withdrawals also include the private use or consumption of products produced by the GbR or the use of business equipment.

The private withdrawal in the form of a cash payment or transfer is exempt from VAT.

The use or consumption of products or the private use of business equipment is subject to VAT.

The classic example here is the company car, where the records private use for tax purposes, especially when it comes to VAT, are error prone.

For example, for the private use of a product manufactured by the GbR, which has a retail price of €119, €100 is booked as private withdrawal and € 19 is booked as VAT received.

If you forget this VAT for private withdrawals of products or use of company cars, you risk fines by the tax office.


GbR accounting

Like every business, the GbR has accounting obligations under the German Commercial Code (HGB) and the German Fiscal Code (AO).

The accounting must be done in line with the “Principles for the proper keeping and storage of books, records and documents in electronic form as well as for data access (GoBD)”.

GbRs with a turnover of less €600,000 and a profit of under €60,000 just need to do bookkeeping with a simple surplus income statement (EÜR).

GbR taxation

GbR partner taxation

Unlike a corporation, a partnership such as the GbR is not subject to corporation tax. But, the GbR partners are liable for tax on the profits they take from the business assets by private withdrawal.

The partners must then declare these withdrawn profits of the GbR annually with their income tax return and, in addition to wage tax, also pay the solidarity surcharge and, if they are church members, church tax.

Gewerbesteuer (trade tax)

Unlike a corporation, a partnership such as the GbR doesn’t have to pay Körperschaftsteuer (corporation tax). But, it is subject to trade tax. Only ‘freiberuflich’ type GbRs (that is, the partners are Freiberufler) are exempt from this.

The tax debtor is the GbR and not the partners. However, their income tax, which they pay on their private withdrawals, is credited for the calculation of the trade tax income. There is also an allowance of €24,500 for partnerships. From a profit of €24,500, trade tax must be calculated and paid quarterly. Since it is a municipal tax, the trade tax assessment rate varies from municipality to municipality.

For the calculation of trade tax, so-called additions are added to the GbR profit, especially for financing expenses and interest paid.

In addition, reductions are permitted, such as 1.2% on the assessed value of a property owned by a GbR.

The profit and the additions as well as the reductions result in the trade income. After deducting the tax-free amount, the trade income is reduced. This is then multiplied by the so-called tax assessment figure, which is currently 3.5% of the trade income.

This gives you the taxable amount. This is then multiplied by an assessment rate set by the municipalities. This results in the trade tax.

Umsatzsteuer (VAT) and Vorsteuerabzug (input tax deductions)

In the beginning, a GbR can apply the so-called small business regulation if it has a low turnover and little profit. Then you do not have to charge VAT on your sold products and services in your invoices at the rate of 19% VAT.

However, this changes immediately if you achieve more than €50,000 in turnover or more than €22,000 in profit per year. Then you must apply for a VAT identification number. And on your invoices, you must then charge 19% VAT on the net sales amounts and pay it to the tax office.

The advantage of VAT is that you are allowed to deduct the so-called input tax on all goods you need for business operations.

What has to be transferred to the tax office is calculated like so:

VAT – input tax amounts = VAT.

Up to an annual turnover tax volume of €7,500, you can transfer the VAT to the tax office on a quarterly basis. If the GbR’s VAT liability exceeds this amount, you must submit a VAT return every month and transfer the VAT to the tax office by the 10th of the following month.

As an entrepreneur, you must submit the VAT return online via the ELSTER portal like all other tax returns.

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Andreas Munck

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Still, got questions about setting up a business in Germany?

  • Startup expert
  • 10+ years experience

Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.


Want to learn more about the GbR?

Our GbR series has got you covered: 

  1. What is the GbR? 
  2. The pros and cons of the GbR
  3. The unwanted GbR


The Master list of all Company Formation articles can be found here. 

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