Corporations are particularly attractive for female founders - but why?
The question of which legal form to choose is difficult for many founders to answer. Which legal form suits your company and your needs? In most cases, founding a corporation is the right answer to this question for future entrepreneurs. But what makes corporations so attractive? Our team answers the most important questions about corporations.
What is a corporation?
The term corporation covers various legal forms. Other generic terms for a variety of legal forms are, for example, sole proprietorships or partnerships.
Each corporation is a separate legal entity. Probably the best-known advantage of corporations: Their limited liability.
Corporations: advantages and disadvantages at a glance
To best understand how you can benefit from your knowledge of limited companies, we answer the following questions:
- What rights and obligations does a corporation have?
- hat is the limited liability of corporations?
- What are the advantages of a limited company?
- Conclusion
What rights and obligations does a corporation have?
The most well-known forms of corporation are the limited liability company (GmbH) and the entrepreneurial company with limited liability (UG haftungsbeschränkt).
In principle, at least two natural or legal persons must join together to form a corporation. One exception to this is the 1-person UG/GmbH.
Corporations must fulfil the following rights and obligations:
- Entry in the commercial register
- Keep double-entry bookkeeping
- Publish annual financial statements in the Federal Gazette
- Appointment of a managing director by the shareholders
Would you like to set up a GmbH or UG? Our team will be happy to support you with your start-up project!
What is the ‘limited liability’ of corporations?
There is one decisive advantage of corporations: Limited liability. But what is it all about? The biggest fear of young entrepreneurs is that they will be liable for risks they take for their company with their private assets. This can be avoided in most cases by setting up a limited company. In corporations, the company is only liable with its corporate assets. This means that the shareholders' private assets remain protected.
Would you like to finally realise your own start-up project? Book your suitable legal advice package now!
What are the advantages of a limited company?
A corporation protects the private assets of the shareholders through their limited liability. In the event of liability, the company is only liable up to the amount of its assets.
In addition, corporations enjoy a high reputation, which can be an advantage when attracting customers.
With a corporation, it is possible to transfer company shares, which gives you entrepreneurial flexibility.
Would you like to find out more about setting up a company? You can find our checklist series for founders here!
Conclusion
Corporations can protect the private assets of shareholders. Nevertheless, you should bear in mind that setting up a corporation can involve a lot of effort and start-up costs. Especially if you want to set up a GmbH, you must remember that you have to pay a minimum amount of share capital into the business account. However, the share capital can be used to cover start-up costs, which is why this legal form can be quite attractive.
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