Contents
- What does GmbH & Co KG stand for?
- Definition
- Shareholders
- Forming a GmbH & Co. KG
- Advantages
- Partnership agreement
- Management
- Taxes
- Want to know about other legal forms?
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What does the abbreviation GmbH & Co KG stand for?
GmbH & Co KG stands for Gesellschaft mit beschränkter Haftung & Compagnie Kommanditgesellschaft, or in English, ‘limited liability company & limited partnership’.
What is a GmbH & Co KG?
In German corporate law, as the name suggests, the GmbH & Co. KG is a hybrid of the legal forms the GmbH (limited liability company) and the Kommanditgesellschaft (KG) limited partnership. But, despite this hybrid form, the GmbH & Co. KG is still a KG (limited partnership) and, therefore, is categorised as a Personengesellschaft (partnership).
The KG legal form has a legal entity/person as the general partner called a Komplementär who has unlimited liability in the business structure. But, for the GmbH & Co. KG, the general partner is not a natural person but rather a limited liability company. This GmbH is liable only with its corporate assets. If the second general partner in the GmbH & Co. KG is also a limited liability company (and not a natural person), both partners now have limited liability.
Gesellschafter: The partners of the GmbH & Co KG
In connection with the legal forms KG and GmbH & Co KG, the terms Komplementär (general partner) and Komplementär (limited partner), which describe the different forms of the partner, are frequently used. Let’s define what they mean below:
Komplementär: The general partner of the GmbH & Co KG
A Komplementär (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.
Kommanditist: The limited partner of the legal form GmbH & Co KG
The Kommanditist (limited partner) is a partner in a KG, whose liability is limited to the amount officially entered in the Handelsregister (commercial register).
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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. If it’s entered in the Handelsregister (commercial register), the GmbH & Co. KG can then be founded.
The Gesellschaftsvertrag (articles of association) 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 ‘in-kind’ (known as a Sachgründung).
What makes it an attractive legal form for founders?
One advantage of the GmbH & Co KG, among others, is 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 minimal.
A further advantage of GmbH & Co. KG: The GmbH is also responsible for the management of the partnership.
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Zweck: What is meant by the purpose of a GmbH & Co. KG?
The Zweck (purpose) of a GmbH & Co. KG can either be the operation of a commercial enterprise or the management of its own assets.
Gesellschaftsvertrag: The partnership agreement
The shareholders define the legal basis of GmbH & Co KG in the Gesellschaftsvertrag (articles of association/partnership agreement). It’s also possible to amend requirements laid down by the Handelsgesetzbuch (commercial code), such as voting rules for shareholders or the distribution of profits.
Management
The management of the GmbH & Co. KG holds the GmbH. However, since a GmbH 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.
Taxation
A GmbH & Co. KG must pay the following taxes:
- Einkommenssteuer (income taxes): Levied on the Kommanditist
- Körperschaftssteuer (corporation tax): Levied on the the Komplementär (i.e., the GmbH)
- Umsatzsteuer (VAT)
- Gewerbesteuer (trade tax)
- Grunderwerbssteuern (real estate transfer tax) – if a property is purchased (with a few exceptions)
- Erbschaftssteuer/Schenkungssteuer (inheritance tax/gift tax)
- Lohnsteuer (wage tax): for employees
Still, got questions about setting up a business in Germany?
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- 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 about companies in Germany?
The GmbH & Co KG is a less common legal form in Germany. More popular legal forms are:
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