Shareholder of a German LLC: A practical guide for founders

What is a shareholder?

A shareholder 💬Gesellschafter is an equity owner of a company, participates in its governance, financial results and long-term development. They provide share capital, accept entrepreneurial risk and exercise influence over major strategic decisions. Their rights and obligations are defined by corporate law and the company’s founding documents.

In Germany, the most common type is the shareholder of a GmbH or UG. They hold company shares 💬Geschäftsanteile, which determine their voting power, their share of profit distributions and their influence in the shareholders’ meeting 💬Gesellschafterversammlung.

While the term can describe equity owners in any legal structure, it usually refers to small businesses and privately held companies in Germany. Here, the shareholder is not a distant investor but a core participant in shaping the company’s organisation, strategy and governance. Their role blends ownership with responsibility, requiring both financial commitment and active engagement in key corporate decisions.

Shareholder vs. stockholder vs. stakeholder

Although often used interchangeably, the terms describe fundamentally different relationships to a company.

A shareholder is an equity owner whose rights stem from holding a share in the company. They have clearly defined rights to vote and participate in profit distributions. Their shares cannot be traded freely. The public can look up equity owners of corporations on the commercial register and the transparency register.

A stockholder 💬Aktionär is technically also a shareholder but in the context of a publicly traded company or stock corporation 💬Aktiengesellschaft. Stockholders own freely tradable shares and interact with the company largely through formal general meetings. Their ability to influence operational decisions is limited in comparison. While stockholders collectively shape long-term governance, individual influence is usually minimal due to dispersed ownership and strict capital-market rules. Learn more about the differences between stock and limited liability companies.

A stakeholder 💬Interessensvertreter, by contrast, does not own equity. The term refers to any party affected by the company’s activities: Employees, suppliers, customers, banks and local communities. They depend on the company’s performance, stability or behaviour. Stakeholders may influence a company socially, economically or operationally, but they do not possess ownership rights unless these are separately granted.

How founders become shareholders

📌 You must be at least 18 years old be a founding member of a German company. There can be exceptions but they usually require a ruling by a judge.

Founders become shareholders by contributing capital during company formation. Their share reflects this initial investment and their voting power.

Example: A team of two set up a new GmbH. A contributes 80 % of the required share capital of €25,000, B the other 20 %. This split translates to 20.000 votes for A (1 for each euro) and 5.000 for B. A is a majority shareholder with a controlling share; B is a minority shareholder.

Over time, ownership may shift through transfers, new shareholders joining or existing ones leaving the corporation.

📌 All transfers of shares require a resolution, notarisation and filing with the commercial register.

Types of shareholders and influence levels

Equity owners differ not only in ownership percentages but also in the influence they hold. A majority shareholder has decisive control, especially when they have more than 50 percent of voting rights. This allows them to appoint managing directors 💬Geschäftsführer, approve structural changes and determine the overall direction of the company.

It is common that shareholders also serve as managing directors. This double role makes them managing shareholders 💬geschäftsführende Gesellschafter.

Minority shareholders, while lacking control, hold important legal protections. They have the right to fair treatment, access to essential information and safeguards against harmful decisions by the majority. If one or more minority shareholders have more than 25% of votes, they are considered a blocking minority that can sway the most important decisions of the shareholders’ meeting.

The shareholders’ meeting

The shareholders’ meeting is the primary decision-making body of a limited liability company. Meetings are required for decisions such as appointing and dismissing managing directors, amending the articles of associations or dissolving the company. All of these would be considered major decisions which require a three-fourths majority rather than a simple majority to pass. This is when a blocking minority can wield its power. More general resolutions just require the majority of votes, excluding abstentions.

Proper procedure is essential. Invitations must list all agenda items so that shareholders can prepare and resolutions remain legally valid. Meetings should be documented in writing, ideally with structured minutes that record discussions and resolutions.

⚠️ Founders often underestimate the importance of sticking to procedure. Conflicts can easily arise because decisions were taken informally or without proper notice.

Responsibilities and duties

Shareholders carry responsibilities designed to maintain legal and financial integrity toward the company and the rest of the founding team. These rights and duties are laid down in German law. It’s also common to define tailor-made rules of the internal relationship in the articles of association.

Capital contribution

Their most fundamental obligation is to pay in their capital contribution 💬Stammeinlage fully. If contributions remain unpaid, the company can demand payment at any time. This obligation does not expire and often becomes relevant during financing rounds,  disputes or insolvency situations.

Duty of loyalty

Duty of loyalty means shareholders must not intentionally harm the company, obstruct its business purpose or abuse their rights to gain personal advantages at the company’s expense.

Typical situations where loyalty obligations matter include:

• blocking resolutions without legitimate reasons
• pursuing competing business interests
• using insider information for personal benefit

Depending on the structure, confidentiality and non-compete obligations may also arise from the articles or shareholder agreements.

Corporate governance

Shareholders are expected to engage responsibly in company governance, primarily through their meeting. This is where decisions on annual accounting, profit distributions, managing director appointments and major structural measures are taken.

While they are not legally required to attend every meeting, ignoring governance processes or treating it informally can lead to invalid resolutions and legal uncertainty. Illegally withdrawing funds exposes shareholders to personal liability and may threaten the company’s stability.

Shareholder rights at a glance

Alternative structures

Alongside the standard multi-shareholder model, German company law allows several alternative structures. While less common, these constellations are relevant in practice and raise specific legal and organisational considerations for founders.

Solo shareholder

A GmbH or UG with only one shareholder 💬Alleingesellschafter is common but still demands some extra considerations. In this structure, the founder often acts simultaneously as shareholder, meeting and managing director. Alternatively, they may appoint an external managing director. The solo founder must fully and single-handedly contribute the entirety of the required share capital.

Because shareholder and managing director roles frequently overlap, special attention should be paid to contracts between the company and the managing shareholder. In practice, an exemption from the prohibition of self-contracting under § 181 of the German Civil Code is usually required. Without such an exemption, internal agreements may be invalid.

Silent partners

A silent partner 💬stiller Gesellschafter participates financially in without appearing externally as a shareholder. Silent partners

• are not listed in the commercial register
• do not appear on the shareholders’ list
• do not own company shares or equity

Instead, the silent partner typically receives a share of the company’s profits. Participation in losses does not apply by default and must be expressly agreed. As a result, silent partnerships function primarily as a financing arrangement rather than a traditional shareholder relationship.

LLC without shareholders

In rare cases, a GmbH or UG may temporarily have no shareholders. This occurs when all company shares are transferred to the corporation itself, for example through inheritance, donation, the acquisition of its own shares or the exclusion of the last remaining shareholder.

Such a situation is legally permissible but usually transitional. The term is often misused when all equity owners are legal entities rather than natural persons.

Shareholder liability

GmbHs and UGs offer strong protection through limited liability. Shareholders are typically responsible only up to the amount of their capital contribution. However, this protection is not absolute. Liability arises if contributions are not fully paid or if shareholders receive unlawful repayments disguised as profit distributions. There are liability insurances that can help you cover possible damages.

Personal guarantees or loans are another frequent source of liability. Banks or landlords often require them from founders, making shareholders directly responsible for certain debts. Liability can also arise when shareholders mix personal and company funds or engage in fraudulent behaviour.

When shareholders also act as managing directors, separate legal duties apply. A managing director can be personally liable for delayed insolvency filings, tax mismanagement or social security violations. These liabilities stem from the director role rather than shareholder status but are common in founder-led companies.

Returns and profit distribution

In a GmbH or UG, shareholders do not generate returns through share trading. Financial participation takes place through profit distributions, which require a formal shareholder resolution and sufficient distributable profits after taxes.

📌 In a UG, 25 percent of profits must be retained until the company reaches a €25,000 capital threshold. Read more here.

Shareholders can also receive returns through selling their share, often during investor rounds or founder exits. All transfers must be notarised and may require approval in accordance with the articles of association.

Liquidation proceeds represent a final possible return, though typically only in companies with substantial remaining assets.

Tax considerations

Taxation for shareholders in a GmbH or UG centres primarily on profit distributions. Because the company pays corporate tax before profits reach the shareholder, the remaining tax burden at the personal level directly affects the net amount received. Choosing the most suitable taxation method is therefore essential for maximising after-tax results.

Profit distributions are usually taxed under the partial-income procedure 💬Teileinkünfteverfahren. In this model, 60 percent of the profit distribution is subject to personal income tax, while 40 percent remains tax-exempt. Solidarity surcharge and, if applicable, church tax are added on top. Depending on the shareholder’s overall income, this can create a significant difference in net returns.

In certain situations, profits may instead fall under the standard capital gains tax procedure 💬 Kapitalertragsteuer. This flat-rate system can be beneficial for shareholders with smaller holdings and no business connection to the company, but is generally less favourable for managing shareholders.

📌 Choosing the right taxation model for you will have a significant impact—especially on long-term financial planning. A good tax consultant is key!