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I. Definitions and essential features I. A. Definitions: A trade exists in the case of an independent externally identifiable, legal activity which is oriented towards sustainability and the realisation of profits and is not a liberal profession (e.g. physician, lawyer, tax advisor, etc.) and there is no exploitation of natural resources (agriculture etc.). In Germany there is freedom of trade. Whoever wishes to exercise a trade has the fundamental right to do so. The civil-law partnership (GbR) is a partnership of persons based on a partnership agreement without legal capacity to support an object jointly pursued by the partners. §§ 705-740 BGB (German Civil Code) deals with the general legal provisions governing the GbR. In Germany a GbR may also operate a trade oriented towards making a profit. An enterprise which operates a trade may be organised in two different ways and its legal status may be governed by different laws. Like every enterprise which pursues a trade, the GbR must comply with the provisions of the Industrial Code (GewO) as amended on 1 January 1987. Enterprises from a certain size and enterprises entered in the commercial register on a voluntary basis also come under the organisational provisions of the Commercial Code (HGB). HGB refers to them as traders regardless of whether they pursue a trade in the narrower, traditional sense. Traders are obliged to have themselves entered in the commercial register. Enterprises which pursue a business operation, which in terms of type and scope does not need commercial facilities, do not have to be entered in the commercial register. They are, however, obliged to register a trade with the competent trade supervision office. As opposed to merchants, these smaller scale enterprises are referred to as small traders (KGT) or simply traders. These enterprises, which operate a business which in terms of type and scope is not set up in a commercial manner, may have themselves entered (on a voluntary basis) in the commercial register and are then considered as merchants with all ensuing rights and obligations. A GbR becomes an oHG after its registration. If several persons are the owners of an enterprise carrying on a small trade, this enterprise structure is referred to as a civil-law partnership (GbR). The following explanations refer exclusively to an enterprise carrying on a trade which is organised in the form of a GbR. Since the legal provisions for the GbR are less coercive there is a wide scope for individual adjustments. Because of this high flexibility and because no special conditions as to form or auditing have to be complied with for its setting up, its scope is to be seen as very broad. The main disadvantage is the unrestricted liability of all partners. I. B. Essential features Legal form The GbR is the fundamental form of all partnerships. It is a partnership of the simplest type. It consists of at least two small traders carrying on a business together. Capital The partnership assets are part of the assets of the partners (as joint owners). Constitution, bodies The GbR has no legal capacity. It does not have any rights and obligations itself. Instead, the individual partners have the rights and obligations in a personal capacity. The partners manage the partnership jointly. Legal status of the partners, liability The partners themselves are not merchants. The partnership assets are liable for the partnership debts just as all partners are liable personally and without restriction with their private assets as joint and several debtors. A restriction of liability is possible but applies only vis a vis informed third parties. The members of the GbR, like all self-employed persons in Germany, are not normally subject to social security contributions (pension insurance, health insurance and unemployment insurance). Voluntary continued insurance in the statutory health insurance is possible for former employees. Furthermore, there is the possibility to apply for compulsory or voluntary insurance under the statutory pension insurance. In some sectors an entrepreneur is subject to insurance in the statutory accident insurance (employer's liability insurance associations) if he does not employ any employees. II. The setting up of a GbR II. A. Most important requirements Partners A GbR is set up by way of a partnership agreement of at least two partners. The partners may be natural persons and legal entities, including foreign ones. Furthermore, trading partnerships can be partners. A change in partners requires the consent of all partners unless otherwise provided for by the agreement. Capital A minimum capital is not necessary. Object The joint object may be any object permissible under the statutory provisions (e.g. including a craft or other services). As opposed to the oHG (general partnership) and KG (limited partnership), the GbR does not operate a commercial enterprise. The GbR carries on a trade in terms of type and scope which must not be run commercially if its operations are only on a small scale. This is the case if the partners act alone or with a few employees or not on a full-time basis, the sales revenues and borrowings are low, the transactions altogether have not reached a particular dimension. For the assessment whether an enterprise must be run commercially or not, the main determining factors are in each case annual sales revenues, type and scope of business transactions, borrowing, size of the business premises, number of employed, type of accounting etc. If a certain size, which may differ according to sector, is exceeded (e.g. because of the business volume increasing over the years), the GbR becomes automatically an oHG regardless of whether it is entered in the commercial register or not. It is then also governed by the organisational provisions of the HGB and must be entered in the commercial register. Name of the enterprise The GbR has no business name. The designation of the enterprise must include all family names with the full first names of all its partners. Additions, which could suggest that the company name is entered in the commercial register, are not admissible. In some sectors (pharmacies, pubs etc.) it is, however, possible to traditionally include business designations (establishment designations). II. B. Provisions governing form and disclosures Partnership agreement No form is prescribed for the conclusion of the partnership agreement.. It is not even necessary to enter into a written agreement. For reasons of legal certainty it is, however, recommended to have an agreement. Since there are no formal provisions, the GbR is set up externally with its public appearance at the latest (participation in the market). The following should be covered by the partnership agreement: object, type and scope of capital contributions by partners, management and representation powers, profit and loss distribution, termination of the enterprise and resignation of partners. Resolutions of partners must be adopted unanimously unless otherwise provided for in the partnership agreement. Capital resources The partnership assets constitute a jointly owned property as independent separate assets compared to the assets of the individual partners. The contribution of a partner may be made in cash, as a contribution in kind or through the provision of services. Appointment of bodies Apart from the partners there are no particular management bodies. Compliance with disclosure provisions The GbR cannot be entered in the commercial register. III. Functioning of the GbR III. A. The management of the GbR Executive bodies Internal management The management is exercised jointly (principle of self-management without third party). An empowerment to joint management applies. Every transaction basically requires the consent of all partners. Furthermore, it is possible that partners entrust the conduct of certain transactions in individual cases to one or more partners. It is also possible to enter into other agreements. External representation The external representation vis a vis third parties is carried out by the partners. The scope of the power of representation corresponds to the agreements entered into. It may be restricted at will. Possible restrictions of the power of representation must be identifiable for third parties. Unless otherwise provided for, there is joint power of representation in line with joint management. Hence, legal transactions are only binding if they are entered into by all partners acting jointly. If the partnership agreement provides for individual management, this may also mean power to represent the partnership alone. Obligation to state the names Like all traders the GbR is obliged to state the family names of all partners with at least one full first name at the entrance of its permanent establishment. These names must also be stated in every business letter. III. B. Controlling and financial statements Controlling by the partners Non-managing partners, too, have a right to personal information about the matters of the enterprise. For this purpose they may inspect business records and papers. Accounting and financial statements As a non-commercial enterprise the GbR is not obliged to keep commercial books. It may document its business transactions (more particularly for the tax office) also in form of a cash book or a cash method of accounting. IV. Taxes The GbR is a partnership. Partnerships themselves are neither subject to income tax nor corporation tax. Profit is rather determined uniformly and separately and directly attributed to the partners. On the level of the partners the profit shares are subject to income tax or to corporation tax depending on their legal form. More extensive information is contained in our brochure on accounting and taxes for business founders. |
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Ansprechpartner
Christine Seitz
Recht und Steuern
© IHK Frankfurt am Main 2012
