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A GmbH is a limited liability company and, as a corporation, one of the most common legal forms. The abbreviation is part of the company name and thus clearly shows customers and investors that it is a company with limited liability. If financial problems arise, the shareholders are not liable with their private assets, but only the assets of the GmbH are liable. To found a GmbH, a share capital of at least 25,000 euros is required, at least half of which must be paid into the share capital at the time of formation. A GmbH has its own legal personality and is therefore a legal entity. It can therefore act as a contractual partner, sue others or be sued itself. The GmbH is considered a merchant and is subject to the provisions of the German Commercial Code (HGB).

To found a GmbH, one must raise the share capital of at least 25,000 euros, at least half of it at the time of formation. The notary and registration fees of just under 1,000 euros must be paid from this share capital. Costs for registration in the transparency register and for business registration are also due, which vary depending on the municipality.

Establishing a GmbH is attractive for entrepreneurs who do not want to put their private assets at risk. As a safeguard, a share capital of 25,000 euros is paid into a business account when founding a GmbH, but the funds may be used in the normal course of business. The GmbH makes sense for founders who have high private assets and want to protect them well. If you want to attract investors, the GmbH often is the most suitable legal form.

Establishing a limited liability company requires several steps. After finding a name, the articles of association must be drawn up. Shareholders can be one or more persons. The articles of association are notarised by the notary public, after which the capital contribution must be paid into a business account. The GmbH is then registered with the commercial register by the notary. Next comes the registration of the business and the tax registration of the GmbH.

At least one person is required to establish a GmbH, but often two or more persons are involved. In the case of a one-person GmbH, the sole shareholder can also be the managing director at the same time. A GmbH can have any number of shareholders. The more there are, the easier it is to raise the share capital. In the case of a one-person GmbH, however, the sole shareholder must raise the 25,000 euros all by themself.

The biggest difference between a UG (haftungsbeschränkt) and a GmbH is the amount of share capital required for formation. In the case of a GmbH, 25,000 euros of share capital is required, half of which must be paid in at the time of formation. In the case of the UG (haftungsbeschränkt), on the other hand, 1 euro is sufficient as share capital, unless the actual capital requirement necessitates a higher sum. In the case of the UG (haftungsbeschränkt), one must form reserves from profits, which may not be distributed to the shareholders. In addition, the UG (haftungsbeschränkt) can also consider increasing its capital and changing its name to a GmbH. Otherwise, the UG (haftungsbeschränkt) has the same rights and obligations as a GmbH with regard to the requirements for shareholders, accounting and liability. The UG (haftungsbeschränkt) also has to pay corporation and trade taxes just like the GmbH.

The biggest difference lies in the share capital and liability. While a share capital of at least 25,000 euros must be raised for the formation of a GmbH, no minimum share capital is required for the formation of a GbR. Nor is an entry in the commercial register necessary for the formation of a GbR. However, in contrast to the GmbH, the partners of the GbR are fully liable with their private assets; in the case of shareholders of a GmbH, private assets are generally protected. For tax purposes, the GmbH is treated differently as a corporation and the GbR as a partnership. A GmbH can be founded by one person alone, whereas a GbR requires at least two partners.

GmbH and AG are both corporations. However, they can also be interconnected. For example, the GmbH can be a shareholder by acquiring shares in the AG. An important difference between the two forms of company when founding is the amount of share capital. When founding an AG, 50,000 euros must be contributed, whereas when founding a GmbH, half that amount, i.e. 25,000 euros, is sufficient as a capital contribution. However, there are other differences, for example in the management of the company and the relationship of the corporate bodies; the GmbH has a management and a shareholders' meeting, while the AG has an executive board, a supervisory board and a general meeting with different rights and obligations.

Which legal form is best suited for founders depends on various criteria. How many shareholders are there, how high is the start-up capital and what about liability? The desire for less financial and accounting effort or tax advantages can also be decisive in determining which legal form is the best choice for a company.

The GmbH is founded in a few steps, which nevertheless take a few weeks. First of all, the name has to be found. Then the articles of association must be notarised. Next, a business account is opened and the share capital is paid in. Once this has been done, the GmbH is registered with the commercial register by the notary. After the business registration and tax registration with the tax office, the GmbH may properly launch its business activity.

Any natural person can found a GmbH if the necessary share capital of 25,000 euros can be raised. A GmbH can be founded by a single person or a founding team consisting of several shareholders. Other legal entities can also be involved in founding a GmbH.

A holding company is a corporate entity that can appear in various legal forms (e.g. as a GmbH or an UG (haftungsbeschränkt)). The holding company is not a special legal form. Rather, it is a normal GmbH and, as a result, a corporate structure that has the objective of holding shares in other companies. In order to establish a holding GmbH, at least 25,000 euros of share capital is required. Legally, the Holding GmbH is treated like a normal GmbH, but the Holding structure offers tax advantages.

A GmbH makes sense whenever entrepreneurs want to limit their liability. While sole traders are liable with their private assets, the liability of a GmbH is limited to the company's assets. In addition, the legal form of the GmbH generally has a good reputation with banks and other business partners. For this reason, it is often chosen as a legal form because it appears more trustworthy to the outside world. It is also suitable for attracting investors.

At least one shareholder is required to establish a GmbH. This person can also be the managing director. Often, however, the team of a GmbH is made up of several people who share the tasks and pay in the share capital together. Once the staffing details have been determined, at least half of the 25,000 euros share capital must be paid into the business account when the company is founded. This must only be increased to the full amount later. In addition, the GmbH needs a valid business address. Once the share capital has been paid in, the entry is made in the commercial register and the transparency register. A tax number must also be applied for at the tax office for the start of the business activity.

Compared to the GmbH, a sole proprietorship offers the advantage that no share capital of 25,000 euros needs to be raised. Other advantages include the quick formation procedure and the simple accounting that is possible as a sole trader. The sole proprietorship is the ideal legal form for solo self-employed persons without a high liability risk. However, if the necessary share capital is available and private assets are to be better protected, a sole trader can also opt for a GmbH.