Company Formation
Starting a Business in Germany – Which Legal Structure is Right for You?
At trust7, we regularly receive inquiries from entrepreneurs and business founders who want to start a company in Germany. Many are unsure which legal structure best suits their needs. That’s why we have put together an overview of the most important business forms, explaining their advantages and disadvantages.
A Valuable Tip from Years of Experience
One common mistake many founders make is immediately establishing a GmbH (limited liability company) before even testing their business idea. This often leads to significant bureaucratic effort and high costs, including fees for notaries, commercial register entry, and ongoing obligations such as accounting and annual financial statements.
Our recommendation: Just get started! If you want to start alone, you can operate as a sole proprietor. If you are launching a business with partners, a civil law partnership (GbR) is a simple and cost-effective way to get started. Both options allow for a quick market entry with minimal financial risk. Once the business is running successfully, you can always transition to a GmbH or another legal form—but this time with a solid foundation and secured revenue.
If you need guidance on choosing the right business structure or the registration process, we’re happy to assist you.
Overview of the possible legal forms for company formation!
1. Sole Proprietorship (Einzelunternehmen)
- Best for: Self-employed individuals and small businesses
- Liability: Unlimited personal liability
- Minimum Capital: No minimum capital required
- Registration: Business registration required (except for freelancers)
- Taxes: Income tax, possibly trade tax
2. Civil Law Partnership (Gesellschaft bürgerlichen Rechts, GbR)
- Best for: Small businesses with at least two partners
- Liability: Unlimited personal liability of all partners
- Minimum Capital: No minimum capital required
- Registration: Business registration required
- Taxes: Partners pay income tax, possibly trade tax
3. General Commercial Partnership (Offene Handelsgesellschaft, OHG)
- Best for: Trading businesses with at least two partners
- Liability: Unlimited personal liability of all partners
- Minimum Capital: No minimum capital required
- Registration: Registration in the Commercial Register required
- Taxes: Partners pay income tax, trade tax applies
4. Limited Partnership (Kommanditgesellschaft, KG)
- Best for: Businesses with investors who want limited liability
- Liability: At least one general partner (Komplementär) has unlimited liability, while limited partners (Kommanditisten) are only liable up to their investment
- Minimum Capital: No minimum capital required
- Registration: Registration in the Commercial Register required
- Taxes: Partners pay income tax, trade tax applies
5. Limited Liability Company (Gesellschaft mit beschränkter Haftung, GmbH)
- Best for: Medium-sized businesses
- Liability: Limited to the company’s assets
- Minimum Capital: €25,000
- Registration: Notarized articles of association and registration in the Commercial Register required
- Taxes: Corporate tax, trade tax, possibly VAT
6. Entrepreneurial Company (Unternehmergesellschaft, UG – "Mini-GmbH")
- Best for: Startups and small businesses with low capital
- Liability: Limited to the company’s assets
- Minimum Capital: From €1, but profits must be retained until €25,000 is reached (for conversion into a GmbH)
- Registration: Registration in the Commercial Register required
- Taxes: Corporate tax, trade tax, possibly VAT
7. Public Limited Company (Aktiengesellschaft, AG)
- Best for: Larger businesses seeking investment capital
- Liability: Limited to the company’s assets
- Minimum Capital: €50,000
- Registration: Notarized articles of association and registration in the Commercial Register required
- Taxes: Corporate tax, trade tax, possibly VAT
8. European Company (Societas Europaea, SE)
- Best for: Businesses operating across EU borders
- Liability: Limited to the company’s assets
- Minimum Capital: €120,000
- Registration: Registration in the Commercial Register required
- Taxes: Depends on the company’s registered seat
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