Types of Companies in Germany: AG, GmbH, UG & More Explained

Anyone starting a business in Germany first has to pick a legal form — and that choice determines liability, taxes, starting capital, and the bureaucratic workload for years to come. This overview explains every major German company type, each with its closest US equivalent for international founders.

Quick comparison of German legal forms

| Legal form | Minimum capital | Liability | US equivalent | |---|---|---|---| | GmbH | €25,000 | limited | LLC | | UG (haftungsbeschränkt) | €1 | limited | Startup LLC | | AG | €50,000 | limited | Corporation | | Sole proprietorship | none | unlimited | Sole Proprietorship | | GbR | none | unlimited | General Partnership | | OHG | none | unlimited | General Partnership | | KG | none | mixed | Limited Partnership | | gGmbH | €25,000 | limited | Nonprofit Corporation | | PartnG | none | partially limited | Professional LLP |

GmbH — the standard for SMEs

The Gesellschaft mit beschränkter Haftung is Germany's most popular corporation. It protects your private assets, looks professional to clients and banks, and stays flexible in how it's run.

• Capital: at least €25,000, of which €12,500 paid in at formation
• Management: one or more managing directors, supervisory board optional
• Obligations: notarized formation, commercial register entry, full accounting

You'll find all the details in our GmbH formation guide.

UG (haftungsbeschränkt) — the mini-GmbH

The Unternehmergesellschaft was introduced in 2008 to give founders with little capital access to limited liability. Starting capital: from €1.

The catch: 25% of annual profits must be retained as reserves until there's enough capital to convert into a GmbH. For startups on a small budget, the UG is still usually the best entry point — more in our UG guide.

AG — for large companies and capital markets

The Aktiengesellschaft is the legal form for companies that want to raise capital through shares — on the stock exchange or privately.

• Capital: at least €50,000
• Management: two-tier structure with management board (Vorstand) and supervisory board (Aufsichtsrat)
• Obligations: strict disclosure and audit requirements

For most founders, the AG is oversized. It pays off when an IPO, many investors, or share-based succession planning is on the roadmap. Details in our AG guide.

Sole proprietorship — the fastest start

The simplest form of self-employment: no formation costs, no formalities beyond the trade registration (or tax office registration for freelancers). In return, you're personally liable without limit, and profits are taxed as personal income.

Merchants can register as an e.K. (eingetragener Kaufmann) in the commercial register — which looks more established but doesn't change the liability.

Partnerships: GbR, OHG, KG

GbR (civil law partnership): Two or more people, a common purpose, no formalities. All partners are personally liable. Ideal for small collaborations and side projects.

OHG (general commercial partnership): The merchant version of the GbR with a commercial register entry. Also unlimited liability for all partners.

KG (limited partnership): Combines a fully liable general partner (Komplementär) with limited partners (Kommanditisten). Popular with family businesses — often structured as a GmbH & Co. KG, where a GmbH takes the general partner role and thereby eliminates personal liability.

Special forms: gGmbH and PartnG

gGmbH: The non-profit GmbH for charitable, scientific, or cultural purposes. Tax-privileged, but bound to strict non-profit rules.

PartnG (professional partnership): For liberal professions such as lawyers, doctors, and tax advisors. Each partner is liable only for their own professional errors — not for their colleagues'.

Branches of foreign companies

If you don't want to form a new company but bring an existing one to Germany, you have three options:

1. Independent branch office: own management and bookkeeping, commercial register entry possible
2. Dependent permanent establishment: limited scope (sales, service), only a trade registration required
3. Representative office: pure information office without commercial activity

Which legal form is right for you?

Three rules of thumb:

• Solo, low risk: sole proprietorship or freelancer status — fast and free
• Limit liability, little capital: UG, later converting into a GmbH
• Growth, investors, credibility: go straight for the GmbH

Every one of these forms needs a business address in Germany — you can get one from Clevver fully digitally, including a commercial-register-ready address in Berlin and other cities.

FAQ

Can I form a German company as a foreigner? Yes. For GmbH and UG there are no nationality or residency restrictions for shareholders. Details in our guide Starting a business in Germany as a foreigner.

Can a UG become a GmbH later? Yes — once the reserves reach the €25,000 share capital, conversion is possible (and common).

Which legal form pays the least tax? It depends on profit: corporations pay corporate and trade tax (together ~30%), partnerships pay the personal income tax rate. At higher profits the corporation usually wins — have your specific case calculated.