The choice of legal form

General framework conditions

Commercial and company law prescribe the enterprise forms (legal forms) which are legally available to enterprises. It is not possible to invent a new legal form and introduce it on the market. The statutory base structures may, however, be partially amended and adjusted to individual needs.

On the following pages the characteristic features of different statutory organisational forms are shown by way of an overview.

In a concrete case you should review, together with a consultant, the legal form which is most appropriate for your enterprise.

A peculiarity of German company law is the distinction between a "small trade" and a "commercial enterprise". This distinction is only relevant for partnerships and not for legal entities.

Commercial enterprises must be entered in the commercial register. Their transactions are basically governed by the German Commercial Code (HGB).

Non-commercial enterprises may have themselves entered in the commercial register on a voluntary basis and are then treated like merchants. If they do not avail themselves of this option, their legal transactions are basically governed by the German Civil Code (BGB) and not HGB.

The question whether an enterprise is a commercial undertaking depends on whether its business operations require commercial facilities in terms of type and scope (§ 1 HGB). The main relevant criteria are sales revenues, the number of employed, the operating assets, the credit volume and the number of locations and/or establishments. Sales revenues of more than EUR 250,000 indicate, as a rule, that the small trade scope is exceeded.

A small trade may be operated by an individual as a small trader or a civil law partnership in the form of a BGB partnership (GbR). Commercial partnerships include the sole trader (e.K. = e.Kfm. or e.K. = e.Kfr.), the general partnership (oHG), the limited partnership (KG) and the partnership with limited liability (GmbH & Co. KG, GmbH & Co. oHG).

Zweigniederlassung (Registered Office) more

The simplest way for a foreign business to engage in commercial trading in Germany is to establish a business branch.
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Gesellschaft mit beschränkter Haftung – GmbH (Private Limited Company)
incl. UG (haftungsbeschränkt) (Entrepreneurial Company with limited liability) more

The GmbH is a trading partnership with a corporation structure and its own legal personality.
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Public Limited Company (Aktiengesellschaft-AG) more

The Public Limited Company (AG) is a typical legal form for large companies which intend to finance themselves by calling on the capital market.
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Kleingewerbetreibende Einzelpersonen (Small Traders) more

The quickest and simplest way to become an entrepreneur is to register a small trade.
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Gesellschaft bürgerlichen Rechts - GbR (Civil-Law Partnership = BGB Partnership) more

The Civil-Law Partnership (Gesellschaft bürgerlichen Rechts – GbR) or BGB Partnership (BGB-Gesellschaft) is governed by similar principles as those applying to small traders.
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Einzelkaufmann – Einzelkauffrau (e.K.) (Solo Trader) more

If a company reaches a commercial size of operation it is necessary not only to register the trade but also to apply for entry in the commercial register.
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