Summary
The GmbH (Gesellschaft mit beschränkter Haftung) is a German limited liability company form that protects shareholders by limiting liability to the company’s assets. It requires a minimum share capital of €25,000, of which at least €12,500 must be paid in before registration. The formation process includes a notarisation, registration in the Commercial Register as well as trade and tax registration. GmbHs are subject to corporate taxation, trade tax, and possibly capital gains withholding when distributing profits. The GmbH is among the most common and respected company forms in Germany.
Samar Fathulla | founder consultant
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What does the abbreviation GmbH stand for?
The abbreviation GmbH stands for Gesellschaft mit beschränkter Haftung, which means limited liability company (LLC).
What is a GmbH?
The main feature of the GmbH is its limited liability – shareholders cannot be held liable for damages with their private assets. The owner of a GmbH is called shareholder or partner. Here you can find out about all steps necessary for a GmbH formation.
Read more about the the GmbH’s non-profit counterpart gGmbH here.
What does limited liability mean?
In the case of the GmbH, liability is limited to a shareholder’s share capital contribution. For a GmbH, limited liability means that the company is liable for damages solely with its assets and not with the private assets of individual shareholders. The financial risk for the shareholder is much easier to calculate since they are liable only with the amount of share capital that is recorded in the GmbH’s articles of association.
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How much does a GmbH cost?
There is no set cost for forming a GmbH, as notary fees, etc., can vary. The lion’s share of the costs comes from its share capital. Additional costs are commercial register fees, trade registration fees. Here you can find all costs explained in more detail.
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How much share capital is required to form a GmbH?
To incorporate a GmbH, you need at least €25,000 in share capital, which can be contributed by one or more shareholders. The individual capital contributions of each shareholder can vary. For example, Founder A can contribute €20,000 while Founder B contributes €5,000 to the share capital.
Where does the share capital have to be paid?
Shareholders must deposit their share capital into the GmbH’s bank account. The receipt for the deposit must be submitted to the notary after the notary appointment. Only then can the company be entered into the commercial register.
Do I have to pay all the share capital upfront?
No. Someone who does not have the full share capital of €25,000 can nevertheless form a GmbH if they have at least half of the capital, i.e. €12,500. However, the missing share capital should be deposited as soon as possible.
Incorporating a company with share capital below €25,000 is risky because the partners are liable for damages with their personal assets up to the amount of the outstanding capital contribution (i.e. if only €12,500 share capital was deposited, the shareholders are personally financially liable up to €12,500).
What is a mini-GmbH?
Colloquially called the “mini-GmbH”, the UG (haftungsbeschränkt) can be formed with a share capital of just €1,- per shareholder. Every UG has the legal obligation to put 25% of its profits into a special reserve account until its share capital reaches €25,000. Find our more about UG notary costs, UG formation costs and all necessary steps of a UG formation incl. checklist.
Like the GmbH, the UG also has a non-profit version: the gUG. If you want to form a UG for a charitable purpose, consider this option.
Samar Fathulla | founder consultant
I’m here to help founders build strong, successful businesses. Let’s talk about your formation and find the best way forward together.
- 🌍 International founders
- 💬 500+ consults
- 🤝 Tailored advice
Conclusion
Choosing a GmbH offers strong legal protection, credibility, and limited liability for business owners. The higher capital requirement suits founders with long-term growth plans and stable revenue potential. Ensure accurate bookkeeping and tax compliance to avoid penalties. Update all corporate records promptly after structural changes. With professional guidance and proper setup, a GmbH provides a secure foundation for sustainable success in Germany.
