What is a GmbH? The German Limited Liability Company explained

“Gesellschaft mit beschränkter Haftung” (in short: GmbH) means Limited Liability Company. It is the most popular company form in Germany and protects – as long as the legal rules are being obeyed – its shareholders from any personal liability. For an overview of German company forms see here.

However, in contrast to most other EU member states, there is still a hefty minimum capital requirement of 25,000 Euro, half of which (i.e. 12,500 Euros) must be available in cash at the time of formation of the GmbH. The reasoning behind it being that only solvent entrepreneurs shall be able to found a GmbH. The general public shall be protected from shady people founding 1 Euro companies. Who cannot come up with at least 12,500 Euro can establish a “GmbH light”, called “Unternehmergesellschaft mbH”, commonly referred to as “mini GmbH”. However, this mini GmbH is not taken quite seriously  in the business world, so it cannot be recommend to go that route. This guideline explains the necessary steps for establishing a GmbH in Germany: Guideline for the Formation of a German Limited Liability Company (GmbH) 

Bernhard Schmeilzl, Rechtsanwalt (Germany) & Master of Laws (UK)

How to incorporate a German Limited Liability Company (GmbH)

The most suitable form of organization for a mid-sized enterprise in Germany is the “Gesellschaft mit beschränkter Haftung” (in short: GmbH), a limited liability company which requires a minimum share capital of 25,000 Euros (however, only half of this amount must be paid in to start business). The reason for this quite high minimum capital requirement: The German legislator wants to prevent dubious and unsound entrepreneurs from using the GmbH, so the general public does not lose trust in this legal form. Thus, having to come up with at least 12,500 Euros in cash is meant as a “sobriety test”.

For very small start ups, there is an alternative company form, the so called “Unternehmergesellschaft mbH”, commonly referred to as “mini GmbH”. However, the mini GmbH is not taken quite seriously  in the business world, so we cannot recommend going that route.

For English speaking clients we have prepared a guideline which explains the necessary steps for establishing a GmbH in Germany: Guideline for the Formation of a German Limited Liability Company (GmbH). For an overview of German company forms see here.

Bernhard Schmeilzl, Rechtsanwalt (Germany) & Master of Laws (UK)