A partnership can be set up faster than some people think. For example, if colleagues join together in a car pool, a civil law company (GbR) or also known as a BGB society is created. There is also the open trading company (OHG), the limited partnership (KG) and the civil partnership law. When it comes to founding a company, then it comes down to the question of which legal form should / can be used.
If a company is to be founded in a team, the above-mentioned partnerships are available and no minimum capital is required for each partnership, but the partners are also liable with their personal assets. If you do not want to be personally liable, then only a corporation comes into question at the moment.
The advantages and disadvantages of partnership
Compared to the corporation, the partnership has the following advantages and disadvantages:
- There is no minimum capital required to set up a partnership
- On the other hand, the personal liability of the shareholders, i.e. liability with private assets, is disadvantageous
- The salaries for the shareholders cannot be claimed as expenses of the partnership
- The continued existence of a partnership is closely linked to the shareholders. The resignation and death of a partner can lead to dissolution
- There is an exemption from trade tax for a partnership
This is how it looks in practice
There are four main forms of partnership that appear in practice:
- GbR / company under civil law
- OHG / open trading company
- KG / limited partnership
- Partnership company
There is also the silent society or a combination with a GmbH construction, which is not the focus here. Here is an overview of the four forms:
The civil law society (GbR)
For example, two doctors set up a group practice and set up a GbR because they have a common purpose. The GbR is the simplest form of partnership. The GbR is also referred to as the BGB Society, as its legal basis is regulated in the BGB – German Civil Code. No partnership agreement is necessary to set up a GbR, but lawyers recommend that you draw up one and have it notarized. Because an arbitration clause can be very helpful in the event of a dispute. A GbR always arises when several natural or legal persons come together who pursue a common goal and provide know-how or capital for this purpose.
But liability is a tricky point here, because those involved have to stand up for the company’s liabilities with the company’s assets and their private assets. A restriction is not possible here, as with the GmbH. But it is precisely this unlimited liability that makes it easier for the GbR to access loans. The management is in the hands of the shareholders and they can control each other (overall representation) – although in practice different regulations make sense.
- The open trading company (OHG)
If, for example, a medium-sized building materials company is founded, then the OHG is a conceivable form of company. Because a fully commercial operation is necessary in order to be able / allowed to trade with building materials. Here, too, no minimum capital is required, but a partnership agreement must specify how business activities and the corporate image are to be structured.
Here, too, at least two people are required to found the OHG. Each partner can act in the name of the OHG and is responsible for the management and external representation. Important, here too all partners are personally and severally liable to the creditors and that means that a creditor can demand from a partner that the latter partially or even completely fulfills the debt. The OHG also has a high credit rating.
- The limited partnership (KG)
If the building materials trade was founded as an OHG, but fresh capital will flow into the company without a new shareholder being able to influence the management, then the conversion into a KG is advisable. This is a special type of OHG and for this reason many regulations apply here.
- The partnership company
If freelance journalists want to run a joint office, then they can set up this partnership. This type of company has only existed since 1995, and was created specifically for the liberal professions such as lawyers, doctors, journalists, etc.
According to TOPBBACOLLEGES, there are very different versions of the partnership: from the full liability of the partners in the OHG to the partial liability of the limited partners in the KG. Responsibility and influence are different in every partnership, but business risk is distributed differently. In addition, the greater the personal liability, the greater the creditworthiness – this is another aspect to consider when choosing a partnership.