gGmbH formation: Kickstart your non-profit organisation with firma.de

The gUG (gemeinnützige Unternehmergesellschaft) is a non-profit organisation, just like the gGmbH. The gUG is the smaller version of the gGmbH, just like the UG is the smaller version of the GmbH.

The main difference between the two legal forms is the shareholders’ required share capital. gUG founders only need a minimum of € 1.00 per shareholder, while to set up a non-profit GmbH, founders have to come up with € 25,000.

Due to this difference in share capital, the gUG shareholders must build up annual reserves until the company's share capital has reached € 25,000. The differences parallel those that exist between the regular versions of the UG and GmbH.

The gGmbH is only liable for damages with the company's capital and not with the shareholders’ private assets.

The articles of association set out the obligations and rights of the shareholders. For example, the statues contain the right to dismiss managing directors and certain rights to information and inspection.

Independent decision making

Within the other form of a not-for-profit association called a Verein, usually every member has one vote in deciding business decisions. Within a gUG or gGmbH, the shareholders make the business decisions.

Although it is possible to vote on the business procedure of a gUG or gGmbH, such voting is not legally binding.

When conducting your business within a gUG or gGmbH, you are not dependent on member decisions, as is the case when working in an association.

Limited liability

The gGmbH is only liable for damages with the company's capital and does not extend to the shareholders’ private assets.

Tax benefits

Non-profit companies like gUG or gGmbH are exempt from corporation tax and trade tax. They are also authorised to issue donation receipts and under certain conditions benefit from reduced VAT.

Professional management

A gGmbh can use its profits or donations to employ full-time management to become a more professional operation. In comparison, regular associations (Vereine) are run by members on a voluntary basis.

Compliance with the following German laws for non-profit organisations (Gemeinnützigkeitsrecht, §52 Abgabenordnung) ensures a gGmbH receives and maintains its non-profit legal status:

• The company has to pursue at least one charitable, benevolent or religious corporate purpose.
• The company's purpose must be exclusively altruistic and transparent.
• Business activities must be designed to fulfil the company's charitable purpose.
• The articles of association of the company must state that its assets cannot be distributed if the company is dissolved or the charitable purpose is no longer pursued (the shareholders' share capital is exempt from this rule). Distribution of its assets is only possible if the shareholders themselves are non-profit legal entities.

While shareholders of a regular GmbH can distribute the company profits annually, this option is not available to owners of a gGmbH. Building up capital reserves is also restricted.

gGmbHs are exempt from corporation and trade tax companies can issue donation receipts which are tax deductable for donors.

If a gGmbH generates profits or other economic benefits, it is designated as a special purpose enterprise (Zweckbetrieb) and must pay VAT. However, due to its non-profit status, the VAT is at the low rate of 7%.

The annual accounts of a GmbH and a gGmbH are very different. Depending on the company size, different rules apply to the balance of accounts, publication and disclosure.

Whether a gGmbH has to disclose its annual accounts and publish it in the German Federal Gazette (Bundesanzeiger), depends on company size, sales and total assets.

This option is especially beneficial if your association has a large amount of capital.

The gGmbH combines the benefits of a public charity (gemeinnütziger Verein) with those of a limited liability company.