GmbH

GmbH stands for form of doing business “Gesellschaft mit beschränkter Haftung”, meaning "company with limited liability" in English. It is widespread among such countries as Germany, Austria, Switzerland. This suffix is usually added after the name of an organization.

GmbH Explained

A limited company (GmbH)  juridically is a company set up by one or more shareholders by accumulating capital. The shareholders aren’t liable for the organization's debts. However, they bear the risks of loss related to the company's activities within the value of their shares in the authorized capital of the company. A private and a public limited company differ because the shares in a private limited company are targeted at a narrow audience and are not placed on a public stock exchange.

GmbH is considered to be the most basic corporate legal form in Germany. To set up a company, a start-up share capital of €25,000 is required, of which €12,500 should be placed in a bank account before registration in the Company Register. That’s how the government makes sure that entrepreneurs have enough money to establish a GmbH. 

After you get your constituent documents notarized, the company may start its business activity. It should be noted that when carrying out any activity on behalf of the GmbH before registration of the company, the individuals have personal liability. Nevertheless, after the registration of the company the shareholders will be offered protection against personal liability. 

Requirements for GmbH

One of the requirements of the Company Register for setting up a Gmbh is to choose a director and  provide a list of names of shareholders. A supervisory board is not mandatory when establishing a GmbH, which makes the company's structure simpler. If the number of employees is more than 500, the law requires a company to establish a supervisory board. 

An organization should be registered in a local court, according to the official address of a company or its legal seat. 

Since November 1, 2008 the opportunity to register the so-called mini-GmbH, or Unternehmergesellschaft, arose. It requires a minimum share capital of €1. This legal form was introduced to strengthen the spirit of entrepreneurship in Germany. The company is obliged to form a reserve capital by saving 25% of the net profit every year. Upon reaching the minimum of €25,000, the company can transit from this form to GmbH.