Founding a GmbH & Co. KG

The GmbH und Co. KG (limited liability company and limited partnership) is a limited partnership (Kommanditgesellschaft) It consists of a GmbH which is a limited partner and other general partners.

How is a GmbH & Co. KG founded?

A GmbH & Co. KG consists of at least the personally liable general partner GmbH and a non-personally liable partner. These have to run a trade together. A commercial trade, according to legal regulations, is a commercial enterprise which, depending on the type, requires a commercial business operation. The businesses belong to the trading business regulated according to the German Trade Code (HGB). A social contract is necessary between the partners. A GmbH must be founded and a managing director must be appointed. The founders of the GmbH then in turn found the GmbH & Co. KG for the GmbH as a partner and complementary. This is then entered in the commercial register.

What are the advantages of founding a GmbH & Co. KG

An advantage with a GmbH & Co. KG is that the limited partner is not liable with his personal assets. If the contribution has been made and has not yet been repaid, there are no liability risks for the limited partner’s private assets. Only the general partner GmbH is the personally liable partner. Since the liability of a GmbH is limited, private individuals can found a company and avoid their own personal liability for the business debts of the GmbH & Co. KG. Since the liability of the GmbH is also limited, the risks for debts in the business are low. There are also the advantages of a partnership. In the case of partnerships whose partners are to be regarded as so-called co-entrepreneurs in tax law, there is the advantage that the income or losses of the co-entrepreneurs of the GmbH & Co. KG are tax-deductible from the partners’ other income.

What taxes does a GmbH & Co. KG pay?

The GmbH & Co. KG is a partnership. It is tax transparent. This means that it does not have to pay corporation tax like a GmbH, but the shareholders of the GmbH & Co. KG have to pay income tax themselves. The annual result of GmbH & Co. KG is then divided between the individual shares. Each partner then has to pay income tax on the profit of his share. In addition, the partner must pay a 5.5% Solidaritätszuschlag (solidarity surcharge) tax on the fixed income tax. For the general partner GmbH, this means that, depending on the distribution of profits in the partnership agreement, corporation tax must be paid for the distributed profits.