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Partnerships in Germany: General Partnerships & Limited Partnerships

German corporate law allows for different forms of partnership arrangements as corporate structures. Partnerships in Germany allow entrepreneurs to come together and grow their companies significantly. Partnerships have lower establishing requirements than other forms of companies including the GmbH and the AG. However, it should be noted that there are major differences between the different types of partnerships and these key differences involve their stated purpose and their liability requirements.

On this page, we will outline the key differences between the different types of partnerships in Germany such as the limited partnership (Kommanditgesellschaft – KG), the general partnership (OHG – offene Handelsgesellschaft), the Civil Law partnership (GbR – Gesellschaft bürgerlichen Rechts) and the blended form of partnership (The GmbH & Co. KG and the UG & Co. KG.) and provide insight into which form may be most suitable for your business.

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Our Services for Partnerships in Germany

At Schlun & Elseven Rechtsanwälte, we provide a full range of services for partnerships in Germany. Our lawyers will advise your enterprise on the form of partnership it should form and then provide the legal assistance to establish it successfully. Our lawyers frequently support businesses to establish themselves in Germany, and we are your reliable partner in all matters relating to German corporate law.

However, once the partnership in Germany is established, our full-service approach allows our team to provide expert legal counsel in all areas of German law. Our law firm provides all the legal knowledge you need from one source with certified experts in employment law, experienced contract lawyers and dedicated teams in business immigration law, intellectual property law, and commercial law; our law firm provides all the legal knowledge you need from one source. For entrepreneurs from outside of Germany, our team will provide the strategic industry-specific insights needed to remain ahead of your competitors.

On this page, we will outline the establishment requirements and the advantages and disadvantages of the various forms of partnerships in Germany. However, for specialised legal assistance, please contact our lawyers directly using the contact form below.

The Kommanditgesellschaft (KG) – Limited Liability Partnership

The KG (“die Kommanditgesellschaft”) is a form of partnership with an element of limited liability. In this form of business, the partnership has a minimum of two partners, with there being limited partners with limited liability (Kommanditist) and general partners with unlimited liability (Komplementär). Under this form of partnership, the partners can be natural or legal persons, and this is what gives rise to another form of business where a GmbH or a UG can take the role of the Komplementär (general/unlimited liability partner) in the form of the GmbH & Co. KG or UG & Co. KG. In a KG, the Komplementär have a more active role in the management of the company. These partners generally make the daily decisions about the partnership’s direction, whereas the Kommanditist acts primarily as an investor in the company.

To form a KG, the partnership agreement must outline the list of shareholders and distribute the limited liability partner’s roles and the unlimited liability partner. They must also present the name of the partnership, the purpose of the enterprise, and its planned duration, among other aspects. KG company formation can be a complex business, as there are many bureaucratic requirements to be addressed. Allow our team of German corporate lawyers to guide you through the necessities.

Establishing a Limited Liability Partnership (KG)

The requirements involved in setting up a KG partnership are much less onerous than those involved in setting up a limited company. The starting point is the Partnership Agreement. The Partnership Agreement is a  written agreement that outlines the partners’ role and establishes which partners are the general partners (with unlimited liability) and the limited partners (with limited liability). The agreement should also outline the partnership’s aims, the distribution of the partnership’s profits, and how the KG will contend with the changing of shareholders/partners within the partnership. Registration: Following the partnership agreement, the partnership needs to be registered. A notary should then oversee the partnership agreement before the KG is registered with the trade office, the tax office and the registrar. Capital Requirements: Like other partnership arrangements, there is no set amount required of capital needed to start a KG. It is recommended to have enough finances to adequately support the partnership in the early stages of business to establish the business fully.

The Advantages and Issues to be Aware of with the Limited Partnership Germany

  • Ease of Establishment: In common with other forms of partnerships, the KG is relatively straightforward to establish. In establishing a KG, the partners should draft a partnership agreement that lays out the purpose of the partnership, the business aims, the designation of the general partner and the limited partner. The requirements within a partnership agreement are less onerous than those on a limited company’s articles of association.
  • Limited Liability Element: Since the KG allows some partners to have limited liability serves as encouragement for greater investment in the partnership.
  • Greater Level of Control: Under a partnership arrangement, the partners have more control over the firm’s aims than they would in a limited company set. The share of the company’s profits is also likely to be increased depending on the KG’s nature.
  • Shareholder Turnover: With the right plan in place in the company’s partnership agreement, there should be little disruption in shareholders/limited partners’ changes.
  • Flexibility: With the general partners as those in charge of the company’s management, there is greater flexibility in how a KG is run compared to a limited company. The general partner makes the operating decisions as to how business is conducted. Of course, they also run the risk since they have unlimited liability.

Issues to be Aware of with the Limited Partnership in Germany

  • Bookkeeping and Records: The bookkeeping requirements for KGs are not as high as those for GmbHs and AGs, but like all companies, they need to ensure that they keep their records. At the end of the year, it is a requirement that they submit their profit-and-loss account and balance sheet to the Trade Register.
  • Taxes: A KG is not liable for corporation tax in its own right; however, if the partner of the company is a limited company (Gmbh & Co. KG/UG & Co. KG), the tax liability for the partnership will be part of the corporation tax paid by the partner company. Otherwise, the tax liability will be calculated as part of their income tax requirements for natural persons.
  • Unlimited Liability of the General Partner: It is worth keeping in mind that the General Partner faces a risk when operating under this model. Should the partnership face legal or financial issues, their personal assets (not just those invested in the company) can be at risk.
  • Purpose: A KG partnership is a partnership with a commercial purpose instead of a more general-purpose (such as those registered under the GbR/Civil Law Partnership). This means it is subject to the HGB (German Commercial Code) requirements and subject to commercial registration.

The GmbH & Co. KG/UG & Co. KG

This business model is proving to be a popular form of business in Germany. It combines the limited liability aspects of the limited company with the features of the partnership model. Under this model, the limited partner and the general partner present in the KG model is still applicable with one difference; a limited company takes the role of the general partner. This results in the partner with unlimited liability being the directors of a limited company. Their personal assets are not at risk, as is usually the case in a partnership arrangement. In this piece, the company model will generally be referred to as a GmbH & Co. KG, but the same rules apply to the UG & Co. KG business model. Here are some advantages and issues to be aware of when considering this model of business:

Establishing a GmbH & Co. KG

Establishing a Gmbh & Co. KG can be more straightforward than creating a GmbH or other forms of limited companies. It follows the rules of KG and other forms of partnership company formation in Germany. The starting point is the partnership agreement. Partnership Agreement: The partnership agreement outlines the roles of the different partners within the organisation and the purpose of the enterprise. In the case of GmbH & Co. KGs, the directors of the GmbH take the role of the general partner. The partnership agreement requires less onerous establishment necessities than is the case for limited liability companies generally.

Regarding share capital it should be noted that unlike liability companies, there is no requirement to have a set amount of share capital in place to establish this business model. The only requirement for sharing capital is that the requirements for a GmbH have been made available to set the parent company up in the first place. Registration: The business needs to be notarized and registered with the relevant bodies such as the Finanzamt (tax office), the local trade office, and the businesses’ registrar. KG companies are commercial in nature and thus subject to requirements under the HGB (German Commercial Code).

Advantages of a GmbH & Co. KG

There are many advantages associated with this mode of business, as can be seen here.

  • Ease of Establishment: The company formation requirements to set up this business model are less complex than those involved in setting up a limited company.
  • Changes of Shareholder: Should a change in shareholder arise, it is generally easier to accommodate such a change under this business model than the paperwork requirements for a standard limited liability company.
  • Tax Benefits: A GmbH & Co. KG model has trade tax allowances. There are other tax benefits under this model and how profits and losses are distributed. As partners of the enterprise, the GmbH has its tax calculated on their profits, and this is charged to the company’s corporation tax. Such enterprises’ tax returns are scrutinised to a far lower degree than for a limited liability company.
  • Control: The control of this partnership in terms of its business decisions is made by the managing director, which is, in this case, the GmbH. However, the GmbH needs representation, and in this case, it is the managing director of the GmbH. In its decision making, such an enterprise follows the rules of partnership. Thus, there is far more freedom granted to the managing partner than under a limited liability company arrangement.

Issues to be Aware of with the GmbH & Co. KG Model

When establishing a GmbH & Co. KG, take note of the following issues:

  • Administration Issues: Ensuring that this form of the company operates in tandem with the original GmbH can be complicated and costly. Organising two forms of companies operating with different tax, bureaucratic and other requirements can cause issues if the parent company is not big enough for the extra administration issues. This issue is dependent on the nature of the company involved and is based on an individual case basis. It is worth receiving assistance and advice on the legal and other issues involved when deciding on this business model.
  • Accountability: The accountability requirements for a GmbH & Co. KG are not as strong as those placed on a standard limited company. However, it is worth noting that this partnership is obliged to prepare double-sided accounts, keep its financial records for up to ten years, and publish its accounts to show transparency in its business dealings.
  • Investment: Banks and other groups may be less willing to invest in such a company’s operations due to the awareness that the partner with unlimited liability is a limited liability company.

Our team of dedicated German corporate lawyers will ensure that your GmbH & Co. KG model is established correctly. From there, we will support your company on an ongoing basis.

GbR – Civil Law Partnership

Another form of partnership under German Law is the GbR – Gesellschaft bürgerlichen Rechts or Civil Law Partnership. The legal regulation of partnerships can be found under Title 16 of the German Civil Code (§§705 – 740 BGB). This form of partnership is more flexible than the OHG (General Commercial Partnership) as it can also be concerned with charitable, artistic and other non-commercial aims. It is also not regulated by the German Commercial Code (HGB) but rather the BGB. This form of partnership is suitable for start-up companies, freelancers who wish to work together and wish to work together on a project where the aim is not strictly financial profit.

Establishing a GbR/Civil Law Partnership

When establishing such a partnership, one should consider important factors. One such factor is the capital requirements. Capital Requirements: There are no formal requirements as regards having a set amount to start the partnership. However, it is worth considering that there are loan schemes and grants available in some cases when it comes to starting a new company. Even if there are no formal requirements, ensure that the partnership has enough finances to keep it going through the first few months.

From there, the most important establishing document is the partnership agreement. Partnership Agreement: Partnership Agreements can be made orally but become quite difficult to enforce without written evidence. A written partnership agreement specifies the aims of the partnership, the individual partners’ responsibilities, and the partnership rules regarding voting procedures, distribution of shares, and management of profits/losses made. Receiving legal advice on how to draft such an agreement to make it clear and binding is recommended. Regarding registration, in contrast to the OHG, the GbR does not need to be registered with the company registrar. However, it does need to be registered with the Finanzamt (tax office).

Advantages of the GbR/Civil Law Partnership

  • Flexibility: The GbR partnership is more flexible than the OHG in terms that it is regulated for by the German Civil Code – BGB – and not the stricter German Commercial Code – HGB. The GbR also does not need to be registered with the commercial registrar but can do so voluntarily. The GbR purpose does not need to be focused primarily on making a profit and can instead be concerned with other aims.
  • Division of Costs: This is a general advantage of partnerships for entrepreneurs and freelancers and applies to OHGs. By establishing a partnership, the costs of establishing and running the business are divided between the partners. This reduces the financial burden on anyone entrepreneur.
  • Expertise/Division of Labour: By establishing a partnership, the partners can also focus more on the aspects of the business they specialise in. Under an e.K., the entrepreneur is solely responsible for the company’s workings, but there is less of a requirement to oversee every aspect of the firm in a partnership.
  • Capital Requirements: Establishing a GbR is quite straightforward as, in contrast to other forms of companies in Germany, there is no set requirement for the amount of capital needed.
  • Ease of Establishment: As can be seen above, the requirements regarding setting up a GbR are quite straightforward. In comparison to limited liability companies, the requirements are much reduced.

Issues to be Aware of Concerning the Civil Law Partnership

  • Unlimited Liability: GbR partnerships are unlimited liability companies and can, therefore, form a risk to the partners. It is worth noting that should one partner (Partner A) find themselves in legal/financial difficulties, then Partner B can also be found to have to answer for those difficulties. The partners are not separated when it comes to unlimited liability. If there is a legal or financial difficulty within the firm, the private assets – and not just what has been invested in the company – of the partners can be sought after.
  • OHG: Should the GbR partnership become more commercial in nature, it may be obliged to become an OHG partnership. There is no set requirement when this comes into effect, but generally, it is held when the partnership has a turnover of €250,000 per annum and five or more employees working for the partnership.
  • Name choice: A partnership is restricted in its choice of the business name as the company should include the name of at least one of the partners. The business name can also include information about the purpose of the company.
  • Tax: The shareholders pay tax on behalf of the company under their own income tax declarations. If a partner is a limited company, the tax paid is in their corporation tax. The partnership itself pays local business tax and may have to pay VAT depending on whether it is a mercantile business.

OHG – General Commercial Partnership

The general commercial partnership is another form of unlimited liability company. This type of partnership is strictly for commercial activity and is thus more limited than the Civil Law Partnership. The OHG (offene Handelsgesellschaft) involves two or more partners coming together for commercial activity. The partnership is then registered with the commercial registrar. Again, should the partnership face financial difficulties, the partners themselves can be targeted regarding the liability.

Advantages and Issues to be Aware of with the General Commercial Partnership

Advantages: Similarly to the e.K./sole trader, the advantages here arise in issues such as the ease of establishing this form of company, the level of independence under which the partnership operates and that the profits are those of the partners much outside interference. It is worth noting that the OHG is a more reputable form of enterprise when it comes to commercial activities than the Civil Law Partnership. This means it is easier to obtain financial support from banks and outside parties.

  • Independence: The partners are the owners of this enterprise and do not have to satisfy a board of management’s requirements.
  • Ease of Establishment: In terms of bureaucracy, an OHG can be established with a Partnership Agreement instead of issuing Articles of Association and other paperwork forms. The cost of establishing an OHG is also greatly reduced in comparison to other forms of companies. There is also no requirement for an amount in share capital.
  • Reputation: OHGs have a stronger reputation than both e.K. and GbR forms of unlimited liability enterprises when dealing with obtaining additional finance.
  • Legal Entity: Although not fully a separate legal entity from its partners, the OHG does have certain legal attributes. For example, cases can be taken by and against the partnership itself instead of its individual partners.
  • Public Disclosure: There is no requirement for the OHG to publish their accounts publicly.

Issues to be Aware of with the General Commercial Partnership

The issues to be aware of are those generally associated with unlimited liability companies. The partnership may have certain aspects of a legal identity, but it does not grant the partners any protection regarding liability. The liability issue can affect the individual partners even after the partnership as an entity has been dissolved. It can also impact the partners to the degree that exceeds what is stated in the Partnership Agreement. For example, if the Partnership Agreement states that Partner A is responsible for 60% of the enterprise and that Partner B is responsible for the other 40%, Partner B can still be held accountable to Partner A declaring bankruptcy due to inability to pay off liabilities.

  • Unlimited Liability: The assets of the partners can be targeted in the event of financial trouble.
  • Taxes: The taxes involved are those of the income tax of the partners. Their enterprise is not recognised as one to which corporate tax rates apply.
  • Records and Financial Statements: The OHG must keep records and up-to-date financial statements in profit-and-loss accounts. These must be made available to the registrar at the end of the financial year.
  • Dissolution of Partnership: It is quite easy to dissolve an OHG as it merely requires agreement between the partners to dissolve the enterprise. However, as stated above, the partners need to be aware that the company’s mere dissolution does not prevent them from paying debts owed.
  • Turnover Requirements: This form of partnership is one formed for strictly commercial issues instead of the more flexible GbR (Civil Law Partnership). If a GbR partnership reaches a certain turnover limit or demonstrates itself to be commercial in its nature, it is obliged to register as an OHG. This requirement is generally held when the turnover is over €250,000 and/or when it employs five or more people.

An OHG is a respectable manner in which two or more entrepreneurs in the same work line can cooperate to pool their resources and talents. There is a degree more control and ease of establishment than a limited company, but the issue of unlimited liability indicates the risk involved with such an enterprise. It is worth considering whether a UG or a GmbH model would better suit the company. However, these kinds of considerations need to be looked at on a case-by-case basis. When it comes to deciding on company formation in Germany and other such issues, it is vital to receive expert legal advice in determining what is best for your business. Contact Schlun & Elseven Rechtsanwälte today.

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Practice Group: German Corporate Law

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German Corporate Law

Dr. Matthias Wurm


Jens Schmidt


Martin Halfmann


Dr. Simon Krämer
Dr. Simon Krämer, LL.M.

Lawyer | Freelance

Florian Reisser

Lawyer | Freelance