Summary
A gGmbH combines the structure of a GmbH with a legally defined non-profit purpose. The articles of association must clearly establish the charitable mission, and profit distributions to shareholders are prohibited. Surplus funds must be used for the defined objectives, with a beneficiary clause ensuring asset transfer on dissolution. The gGmbH is subject to stricter transparency obligations and tax scrutiny than a standard GmbH. Legal and operational rules largely follow GmbH principles, with additional oversight to preserve non-profit status.
gGmbH: Definition and meaning
The gGmbH is an acronym for a non-profit company with limited liability 💬gemeinnützige Gesellschaft mit beschränkter Haftung. Non-profit means that the company’s purpose is to benefit the common good. Typical businesses are hospitals, kindergartens and museums.
The legal form gGmbH is non-profit variation of a regular, for-profit GmbH and is—along with its smaller version gUG—by GmbH law.
Purpose of the gGmbH
The legal form of the gGmbH aims to combine the benefits of a non-profits, i.e. tax benefits, with limited liability. The increased economic demands on charitable organisations have made gGmbHs more attractive and relevant for healthcare, cultural, and educational institutions.
For example, a gGmbH makes long-term planning and implementation easier by employing a professional full-time managing director while continuing to benefit from tax breaks.
Forming a gGmbH
The most essential requirement and difference between the GmbH and gGmbH legal forms is the charitable corporate purpose. A gGmbH must serve a charitable function, as established in the articles of incorporation 💬Gesellschaftsvertrag, which must be approved by the tax office 💬Finanzamt.
When does my GmbH qualify as a non-profit?
- A gGmbH is considered non-profit if it serves a non-commercial, charitable, or religious function.
- The company objective must fulfil this charitable function.
- The purpose of a gGmbH must be altruistic, direct, and specific. Profits must not be distributed among the shareholders but used to further the company’s objective. Additionally, all salaries must be related to work performance.
- The articles of incorporation need to establish a Begünstigter (beneficiary). If the gGmbH is disbanded or loses its non-profit status, the company assets go to this beneficiary. However, the initial investment is paid out to the shareholders. The beneficiary must also be recognised as a non-profit. Beneficiaries can also fall under the category gGmbH, Stiftungen (foundations), gemeinnützige Vereinegemeinnützige Vereine (charitable organisations) or gUGs, for example.
Requirements for forming a gGmbH
- The legal form of gGmbH dictates that a charitable purpose must be established in the articles of incorporation.
- A charitable beneficiary must be established in the articles of incorporation.
- Share capital must be deposited.
Read here how to set up a gGmbH.
Conclusion
Forming a gGmbH offers reputation, limited liability, and a formal structure for mission-driven activities. You must adhere strictly to non-profit regulations, asset-use rules, and the beneficiary clause. Obtain timely approval from the tax authorities to certify your purpose. Maintain detailed records and transparency to retain your status. A gGmbH provides an effective legal vehicle for sustainable impact when compliant.
