What is a GmbH & Co. KG? Limited liability company & limited partnership explained

What does GmbH & Co. KG stand for?

GmbH & Co. KG stands for Gesellschaft mit beschränkter Haftung & Compagnie Kommanditgesellschaft, which translates to ‘limited liability company & limited partnership’.

The abbreviation Co. comes from the historical German use of the French word Compagnie, meaning “and company.” In practice, it signals that the general partner in the limited partnership is not a person, but a GmbH (limited liability company).

Definition

In German corporate law, a GmbH & Co. KG is a hybrid structure combining a GmbH (limited liability company) and a Kommanditgesellschaft (KG) 💬limited partnership.

Even though it uses both elements, it is legally classified as a KG legally treated as a Personengesellschaft 💬partnership. For international founders, this means it is not a corporation in the strict sense, but a partnership with corporate liability protection built in.

• In a traditional KG, the general partner 💬Komplementär has unlimited personal liability.
• In a GmbH & Co. KG, the Komplementär is a GmbH, so liability is limited to the company’s corporate assets.
• Thelimited partners 💬Kommanditisten only risk their investment, which is recorded in the commercial register 💬Handelsregister.

This combination offers liability protection similar to a GmbH, while keeping the flexibility and tax benefits of a partnership.

Advantages of a GmbH & Co. KG for international founders

✅ Limited liability: Your personal assets are protected, as the GmbH takes the risk as general partner.

✅ Tax efficiency: Profits are taxed like a partnership, which can be more favourable than a corporation, depending on your situation.

✅ Flexible investment: Passive investors (Kommanditisten) can contribute capital without taking on management responsibility.

✅ Credibility in Germany: The GmbH component gives international founders higher trust with German banks, suppliers, and clients.

✅ Lower disclosure requirements: Compared to a GmbH, the GmbH & Co. KG has fewer reporting obligations, which means less financial information must be published.

✅ Management options: Day-to-day operations are handled by the GmbH’s managing director, who can be a foreign resident or even an external professional.

Partnership agreement

The partnership agreement 💬Gesellschaftsvertrag sets the framework for the GmbH & Co. KG. Shareholders can tailor many aspects, such as:

• how profits are distributed
• voting rights and decision-making
• management responsibilities

This flexibility makes the GmbH & Co. KG attractive for joint ventures with international investors.

Asset protection with a GmbH & Co. KG

One practical advantage of the GmbH & Co. KG is the possibility to separate business operations from valuable assets.

For example, valuable assets such as real estate can be transferred out of the liability structure of the GmbH & Co. KG. By holding these assets in a different entity, they are protected from creditors if the partnership faces financial difficulties.

📌 Example: Many entrepreneurs in Germany use a two-entity structure. The operating GmbH & Co. KG runs the business and carries the commercial risks. A separate GmbH (holding company) owns the valuable assets, such as real estate or intellectual property, and leases them to the operating company. In case of insolvency, creditors can only access the assets of the operating GmbH & Co. KG, while the property in the holding GmbH remains protected.

This setup allows founders and investors to minimise risk exposure and secure long-term investments.

Lower disclosure requirements

Compared to a GmbH, the GmbH & Co. KG has lower disclosure requirements. As a partnership, it is generally subject to fewer accounting and reporting obligations than a corporation. This makes the GmbH & Co. KG more discreet, as less financial information must be made publicly available in the German Federal Gazette 💬Bundesanzeiger.

📌 Good to know: While this reduced level of disclosure can be an advantage, larger GmbH & Co. KGs may still be required to prepare and publish annual financial statements depending on their size class.

Management

The GmbH, as general partner, formally manages the partnership. It is required to appoint one or more managing directors 💬Geschäftsführer.

📌 For international founders: the managing director does not need to be a German citizen or a shareholder. You can appoint yourself, a partner, or even a professional external manager.

Taxes

A GmbH & Co. KG is subject to several taxes in Germany. For foreign founders, it’s important to know how liability and taxation are split:

• Income tax 💬Einkommensteuer – paid by the limited partner
• Corporation tax 💬Körperschaftsteuer – paid by the GmbH
• VAT 💬Umsatzsteuer (value-added tax)
• Trade tax 💬Gewerbesteuer
• Real estate transfer tax 💬Grunderwerbsteuer (if property is purchased, with some exceptions)
• Inheritance and gift tax 💬Erbschaftssteuer/Schenkungssteuer
• Wage tax 💬Lohnsteuer — if employees are hired

📌 Tip for non-residents: The split tax treatment can create cross-border complexities. Always seek local tax advice before registering.

Forming a GmbH & Co. KG in Germany

To establish a GmbH & Co. KG, you need at least one general partner and one limited partner. Since the general partner is a GmbH, the process takes place in three clear stages.

Stage 1: Form and register the GmbH

• Draft and notarise the articles of association 💬Gesellschaftsvertrag for the GmbH.
• Deposit the minimum share capital of €25,000 (cash or in-kind contribution) into a business bank account (learn here how to open a German business bank account).
• Register the GmbH with the commercial register 💬Handelsregister.
• Register with the tax office 💬Finanzamt to obtain a tax number and VAT ID for the GmbH.
• Register in the transparency register 💬Transparenzregister to disclose the beneficial owners of the GmbH.
• Apply for a trade licence 💬Gewerbeanmeldung if the GmbH’s activity requires one.

At this stage, the GmbH exists as a separate company. It can now become the general partner in a GmbH & Co. KG. Check here for more details on a GmbH formation.

Stage 2: Form and register the GmbH & Co. KG

• Conclude the partnership agreement for the GmbH & Co. KG.
• Define the roles of the general partner (the GmbH) and the limited partner(s).
• Register the GmbH & Co. KG with the commercial register.

Once this entry is complete, the liability limitation for both general and limited partners becomes fully effective.

⚠️ Important for international founders: If the partnership starts operating before registration, limited partners may still be personally liable with their private assets.

Stage 3: Setup after registration

• Bank accounts
  • The GmbH already has its account (opened in Stage 1 for capital contribution).
  • After registration, the GmbH & Co. KG should open its own account to keep finances separated.
• Register the GmbH & Co. KG with the tax office to receive its own tax number.
• Disclose the GmbH & Co. KG in the transparency register.
• Apply for a trade licence for the GmbH & Co. KG if required.
• Register employees with social security and payroll tax authorities (if hiring).
• Check for additional permits or licences if your business operates in a regulated industry (e.g., finance, healthcare, food).

Visa and residence regulations for non-EU founders

If the managing director is not an EU/EEA or Swiss citizen, they must hold the appropriate residence permit to legally manage a business in Germany:

• Residence permit for self-employment (§21 AufenthG): This type of permit is issued if there is an economic interest or regional need for the business in Germany. The founder must present a solid business plan, financing plan, and proof of experience.
• Residence permit for employment: A managing director can also enter under an employment-based permit, but this requires a formal employment contract with the GmbH.

⚠️ Important: Without the correct visa or residence permit, a non-EU managing director cannot be officially registered in the commercial register. This step is essential for company formation.

Other legal forms to consider

The GmbH & Co. KG is less common than other German legal forms, but can be ideal for founders who want to limit liability while attracting outside investors. More popular alternatives include:

• GmbH: the most widely used company form in Germany
• UG: a mini version of a GmbH with only €1 starting capital
• UG & Co. KG: the smaller version of a GmbH & Co. KG with a UG instead of a GmbH
• Holding structures: often used for tax optimisation
• AG: suited for larger companies or those planning to raise public capital

Need help choosing? See our detailed guide: How to choose the right legal form in Germany.