Types of Companies in Germany: Legal Forms Compared

Which form should you pick?

This matrix is a self-selection tool for orientation, not legal advice. Read along the row that matches your situation, your available capital and your liability need, to find the best-fit form.

If you are…	Capital ready	Liability need	Best-fit form
Solo, low-risk, testing an idea	€0	Accepts personal liability	Einzelunternehmen
2+ people, informal/low-risk	€0	Accepts personal liability	GbR / eGbR
Trading partnership, 2+ active partners	€0	Accepts joint personal liability	OHG
Want a passive investor + active partner	€0	Limited for the silent partner	KG
Want partnership tax + capped liability	small	Capped via a GmbH general partner	GmbH & Co. KG
Limited liability but capital-light startup	€1–€1k (realistic)	Limited to company assets	UG (haftungsbeschränkt)
Standard credible limited company	€25,000 (€12,500 paid in)	Limited to company assets	GmbH
Plan to raise large rounds / list shares	€50,000	Limited to company assets	AG
Pan-European group structure	€120,000	Limited	SE
Foreign company entering the market	none (parent capital)	Parent stays liable	Branch office

Sole proprietorship (Einzelunternehmen)

The cheapest and simplest way to do business in Germany: no minimum capital and no notary. The trade-off is the heaviest one, unlimited personal liability: your private assets stand behind the business. Tax is transparent, meaning profits flow to your personal income tax, with trade tax due if the activity is commercial. If you are a commercial trader (Kaufmann), you register as an e.K. in Handelsregister A; otherwise a trade-office registration is enough. It suits a solo freelancer or small trader who wants to start with minimal formality and accepts the liability. See sole proprietorship vs GmbH for the direct comparison.

Partnerships, GbR/eGbR, OHG, KG, GmbH & Co. KG

Partnerships are for two or more founders and, with one exception, expose the partners personally.

The GbR is the simplest: €0 capital, unlimited joint-and-several liability, transparent taxation to the partners (§§705 ff. BGB). Since the MoPeG reform, a GbR can register as an eGbR in the new Gesellschaftsregister from 01.01.2024; registration is optional in principle but de-facto required if the partnership is to hold GmbH shares or real estate. The OHG is the commercial trading partnership (HGB §105 ff.), registered in Handelsregister A, again with unlimited joint-and-several liability and transparent taxation. The KG (HGB §161 ff., also HRA) introduces two tiers: the general partner has unlimited liability, while a limited partner's liability is capped at their contribution, which is what makes it the classic structure for an active partner plus a passive, silent investor.

The GmbH & Co. KG is the clever hybrid: a KG whose general partner is a GmbH, so you get partnership taxation together with capped liability, because the unlimited-liability slot is filled by a limited company rather than a human (HGB §161 + GmbHG). Note on formalities: partnerships generally do not notarise the partnership contract itself, but eGbR, OHG and KG entries require notarised public certification for the register.

UG (haftungsbeschränkt), the capital-light corporation

The UG is the most-searched and most-misunderstood form, so two corrections up front. First, the UG is not a separate legal form: it is a sub-type of the GmbH under §5a GmbHG, with most GmbH rules applying. Second, the famous "€1" figure is technically the statutory minimum but misleading in practice; a UG founded with €1 cannot pay its own notary and Handelsregister costs and is undercapitalised. Plan for a realistic ~€500–€1,000 (Orrick puts it at around €900 to cover incorporation).

The UG mechanics that matter. A UG may take cash contributions only, §5a(2) bars contributions in kind (Sacheinlagen), so founders contributing equipment or IP must use a GmbH instead. It must retain a 25% statutory reserve of its annual profit until it reaches €25,000, at which point it can resolve a capital increase and notarise a rename to "GmbH", and §5a(5) ends the special UG rules. The full suffix "Unternehmergesellschaft (haftungsbeschränkt)" is mandatory in the company name (§5a(1)).

Liability is limited to the company's assets, it sits in Handelsregister B, and it is taxed like any corporation (corporate tax 15.825% + trade tax, ~30% combined). To start one, form a UG (haftungsbeschränkt) or weigh GmbH vs UG formation costs first.

GmbH, the standard limited company

The GmbH is the default credible limited company in Germany, which is why most foreign founders end up here. The minimum share capital is €25,000, of which at least €12,500 must be paid in before registration (§5 GmbHG). Liability is limited to the company's assets, formation requires a notary, and the entity is registered in Handelsregister B. It is the standard, recognised vehicle for a serious business, and the form banks, suppliers and counterparties expect to deal with. To proceed, open a GmbH.

AG, the stock corporation

The AG (Aktiengesellschaft) is built for raising large amounts of capital and for listing shares. The minimum share capital is €50,000. It carries more governance than a GmbH: a mandatory two-tier board (a management board, Vorstand, and a supervisory board, Aufsichtsrat, with at least three members), plus a mandatory audit. It is registered in Handelsregister B under the AktG. The AG is the right choice when you plan large funding rounds or a public listing and can carry the heavier structure. To set one up, set up an AG.

SE, the pan-European company

The SE (Societas Europaea) is a European public company designed for pan-European group structures and holdings. The minimum capital is €120,000 (confirm the exact figure before relying on it). Liability is limited, it is registered in Handelsregister B, and the legal basis is the SE Regulation (EC) 2157/2001. It is a niche choice, relevant mainly to groups that want a single European corporate form across multiple Member States.

Branch office (Zweigniederlassung)

A branch is how a foreign company enters the German market without forming a new German entity. It has no own capital (it draws on the parent's), and crucially the foreign parent remains liable. There are two types: an autonomous branch (selbständige Zweigniederlassung) is entered in Handelsregister B and requires a notary, while a dependent branch needs only a trade-office registration. It is taxed on the profit of its German permanent establishment (~30%). The legal basis is HGB §13d ff. To open one, see open a German branch office.

How each is taxed

The decisive tax split in Germany is corporation versus transparency. Corporations (GmbH, UG, AG, SE) pay corporate income tax of 15% plus the 5.5% solidarity surcharge, which is 15.825%, plus municipal trade tax, giving roughly ~30% combined. Partnerships and sole proprietors are tax-transparent: profits flow through to the partners' personal income tax, up to about ~47.5%, though with trade-tax relief available.

A legislated step-down of the corporate rate is scheduled for the future (toward 14% from 2028 and 10% from 2032), but for 2026 the working headline remains ~30% combined. Trade-tax rates also vary by municipality, so treat ~30% as an orientation figure, not a precise quote.

GmbH vs UG vs AG, the real decision

For most English-speaking founders, the real choice is between these three, and it is about numbers, not the €1 headline. A GmbH needs €25,000 (€12,500 paid in) and is the standard credible form. A UG can start below that, realistically €500–€1,000, but it is the GmbH's capital-light entry point, not a cheaper company to run: it carries the same corporate tax and the 25% reserve obligation until it grows into a GmbH. An AG needs €50,000 and adds a mandatory two-tier board, so it only makes sense if you plan to raise large rounds or list.

For US and UK founders, the closest equivalent of a GmbH is the LLC in terms of the liability shield. But the analogy breaks on tax: a GmbH is taxed at entity level, which makes it behave more like a US C-corporation, whereas an LLC is by default tax-transparent and has no minimum capital. GmbH vs UG: which to choose goes deeper on the most common decision.