What is a GmbH & Co. KG (limited liability company & limited partnership)?

updated on 11. March 2019 8 minutes reading time
Share

GmbH, the KG and the GmbH & Co KG: Many abbreviations hiding different legal forms. That can get confusing. And, even if you know what a GmbH or a KG is, what’s a GmbH & Co KG? Here you’ll find an overview of this legal form including the meaning of general partner and limited partner, as well as a definition of the terms.

What does the abbreviation GmbH & Co KG mean?

Before you deal with the company form “GmbH & Co KG”, you should consider the words behind the abbreviation. In German, that’s Gesellschaft mit beschränkter Haftung & Compagnie Kommanditgesellschaft, or in English, ‘limited liability company & limited partnership’.

What is a limited liability company? – A definition

In German corporate law, the GmbH & Co. KG is a hybrid of the legal forms GmbH and KG. The GmbH & Co. KG is by definition a limited partnership (KG) and thus a partnership. Normally, the general partner (Komplementär) in a KG is the partner who is personally liable with his own private assets. For the GmbH & Co. KG, the general partner is not a natural person but rather a limited liability company. This limited liability company has unlimited liability with its company assets. If there’s no natural person as a second general partner in this legal form and there’s also no partner who is fully liable.

Interested in setting a business in Germany but not the paperwork?
Form your GmbH & Co. KG with firma.de’s practical formation packages!

The shareholders of the GmbH & Co KG

In connection with the legal forms KG and GmbH & Co KG, the terms “general partner” and “limited partner (Kommanditist)”, which describe the different forms of the partner, are frequently used. firma.de has drawn up a short definition for you:

What is a general partner of the legal form GmbH & Co KG? – A definition

A general partner is the partner of a limited partnership (KG) who has unlimited personal liability. In a GmbH & Co. KG, the general partner is a GmbH. This has the advantage of not being a natural person who is personally liable, as is the case with the general partnership, but a legal entity like the GmbH. The GmbH is liable with its complete business assets.

What is a general partner of the legal form GmbH & Co KG? – A definition

The limited partner is a partner in a limited partnership (KG), however, his or her liability is usually limited to the amount of liability entered in the commercial register.

What should be considered when forming a GmbH & Co. KG?

The formation of a GmbH & Co. KG requires at least one personally liable partner and one associate. First, the shareholders establish a GmbH (limited liability company). If it’s entered in the Commercial Register (Handelsregister), the GmbH & Co. KG can then be founded.

The articles of association (Gesellschaftsvertrag) or the charter define the basis of the GmbH & Co. KG. If this is also entered in the Handelsregister, the full limitation of liability for the general partners comes into force.

Be careful: The company already holds legal capacity before it’s entered in the Handelsregister, only the limited partners are liable up to this point in time also with their private assets.

The minimum capital that must be contributed to a GmbH & Co. KG is €25,000. Material assets can also be contributed.

What makes the GmbH & Co. KG an attractive legal form for founders?

One advantage of the GmbH & Co KG, among others, is the fact that the GmbH assumes the role of the general partner in the KG. As already mentioned above, the GmbH is liable as a corporation with the full company assets, but not with the private assets of the partners. Liability risks for the persons involved in the company can thus be greatly limited.

A further advantage of GmbH & Co. KG: The GmbH is also responsible for the management of the partnership.

What is meant by the purpose (Zweck) of a GmbH & Co. KG?

The purpose of a GmbH & Co. KG can either be the operation of a commercial enterprise or the management of its own assets.

The partnership agreement of a GmbH & Co. KG

The shareholders define the legal basis of GmbH & Co KG in the articles of association. It’s also possible to amend requirements laid down by the German Commercial Code, such as voting rules for shareholders or the distribution of profits.

Managing a GmbH & Co. KG

The management of the GmbH & Co. KG holds the GmbH. However, since a limited liability company is not a natural person, the company itself may not be a managing director. Therefore, the managing director of the GmbH is also indirectly managing director of the GmbH & Co. KG. By the way, the management of a GmbH does not necessarily have to be staffed by one of its shareholders; it can also be an external person.

The GmbH & Co. KG and taxes

A GmbH & Co. KG must pay the following taxes:

  • Income taxes (Einkommenssteuern) – limited partner (Kommanditist)
  • Corporate income taxes (Körperschaftssteuern) – general partner or limited liability company (Komplementär or GmbH)
  • Value added tax (Umsatzsteuern) – if necessary, also the limited partner (Kommanditist) as managing director (Geschäftsführer)
  • Trade taxes (Gewerbesteuern)
  • Real estate transfer tax (Grunderwerbssteuern) – if a property is purchased for the entire property or for the limited partner if he or she buys a property for the special area requiring a special balance sheet (Sonderbilanz); with a few exceptions
  • Inheritance tax/gift tax (Erbschaftssteuern/Schenkungssteuern)
  • Wage tax (Lohnsteuer) – for employees
Book one of our GmbH & Co. KG packages now!
Minimise formalities while maximising business possibilities.

The information published on our site is all written and checked by experts with the greatest care. Nevertheless, we cannot guarantee the accuracy of this information, as laws and regulations are subject to constant change. Therefore, always consult an expert in a specific case – we would be happy to connect you with the right professional.

firma.de assumes no liability for damages caused by errors in the texts.

 

 

 

 

Continue browsing