Contents
- What is a gGmbH?
- Purpose of the gGmbH
- Forming a gGmbH
- When does my GmbH qualify as non-profit?
- Prerequisites for forming a gGmbH
- Want to know more?
Got questions about setting up a not-for-profit business in Germany?
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gGmbH: Definition and meaning
The gGmbH is a non-profit company with limited liability under German law. In German this is gemeinnützige Gesellschaft mit beschränkter Haftung – gGmbH for short.
Here ‘non-profit’ (gemeinnützig) means that the purpose of the company is to benefit the common good. ‘GmbH’ is the abbreviation for Gesellschaft mit beschränkter Haftung (limited liability company in English). This means that in Germany, the legal form of a gGmbH is bound by GmbH law. The increasing number of hospitals, kindergartens and museums now being conducted as gGmbHs serve as a good example.
Do you have a charitable mission and don’t need much share capital to form a company? Then establish a non-profit entrepreneurial company (gemeinnützige Unternehmergesellschaft, or gUG) with limited liability (haftungsbeschränkt) instead. This requires as little as a €1 investment.
The gGmbH is the non-profit variety of the GmbH (the German limited liability company). You can find out more about the GmbH legal form in our guide.
Purpose of the gGmbH
The legal form of the gGmbH aims to combine the benefits of a non-profit with those of a GmbH. The increase in economic demands on charitable organisations has made gGmbHs more attractive and relevant for healthcare, cultural, and educational institutions. For example, a gGmbH makes long-term planning and implementation easier through the employment of a professional full-time executive director, while also continuing to benefit from tax breaks.
Forming a gGmbH
The most important requirement and difference between the GmbH and gGmbH legal forms is the charitable aspect. A gGmbH must serve a charitable function. This is established in the articles of incorporation (Satzung). These articles must be approved by the Finanzamt (tax office). Learn more about the pros and cons of the corporate form GmbH.
Want to make the leap to social entrepreneurship?
- 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.
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. You can find an overview of these functions in the general fiscal law (Abgabenordnung) under Sections 52 and 53 (§ 52 AO/§ 53 AO). For further information about what constitutes a charitable non-profit, check out our article.
- The company objective must clearly fulfil this charitable function.
- The objectives of a gGmbH must be altruistic, direct, and for a specific purpose. Profits must not be distributed among the shareholders but must instead be put towards the company objective. Additionally, all salaries must be kept in relation to work performance. You can learn about the rights and duties of gGmbH shareholders in our article.
- The articles of incorporation need to establish a beneficiary (Begünstigter). 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, as well as foundations (Stiftungen), charitable organisations (gemeinnützige Vereinegemeinnützige Vereine) or gUGs, for example.
Source: Deutscher Spendenrat (German charity council)
Prerequisites for forming a gGmbH
- The legal form of gGmbH dictates that a charitable purpose must be established in the articles of incorporation.
- The company must directly work towards fulfilling this charitable function.
- A charitable beneficiary must be established in the articles of incorporation.
- The share capital must be deposited. We’ve outlined the things to look out for when depositing your gGmbH capital in a helpful article.
Still have questions?
- 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 know more?
Our gGmbH essential reading:
- What is the German non-profit LLC?<<<
- The pros and cons of the gGmbH
- How to set up a gGmbH
Master list:
The Master list of all Company Formation articles can be found here.