Surprisingly often people who wish to start a business in Germany ask during our first meeting about the meaning of the abbreviation GmbH – what does it mean, what does it stand for?
GmbH is short for “Gesellschaft mit beschränkter Haftung“ and means literally „company with limited liability”. Thus, GmbH is the German equivalent of the Anglo-Saxon LLC and Ltd.
The German GmbH
As in other countries of the world, the GmbH in Germany is a corporation whose liability is limited by its existing capital. Individuals, that do want to start a business in Germany but want to eliminate the possibility of being held accountable with their private assets, mostly decide to form a GmbH. The dominating notable characteristics of a GmbH are:
A minimum company share capital of 25.000 Euro is required. The money needs to be deposited on a corporate bank account before the German LLC is registered. The notary won’t send out any of your signed documents to the district court, before proof of deposit was submitted!
At least one shareholder/partner is needed. There can be several shareholders/partners, theoretically an infinite amount. Practically, it makes sense to keep the number low, ideally under 10.
Natural persons and corporate entities can be shareholders/partners of a GmbH. This allows the creation of unique constellations when cooperation with business partners from Germany and abroad. Yes, also foreign legal entities can become the shareholders of a GmbH in Germany!
The CEO of a GmbH doesn’t have to be a partner/shareholder of the company itself. He can be, though. Sometimes, it just makes more sense to take an external specialist to run your company, rather than give one shareholder the special status of a shareholder-managing director.
Setting up a GmbH in Germany
Of course, the listed points are just the most important characteristics of a GmbH. When setting up a GmbH in Germany, one must consider many factors, such as the foresightful articulation of the partnership agreement, the punctual translation and preparation of documents into the German language, and the communication with notaries, banks and state institutions. Our company offers customized packages for the opening of a GmbH in Germany, so just let us know how we can help you.