Legal forms which need to be registered in the German Trade Register are as follows.

Legal forms in Germany

Sole trader:

This legal form indicates that the owner is fully liable with his/her business and private capital for all liabilities of the company. The trader may sign a company name. This name will then be enlisted in the German Trade Register. There have been considerably simplified rules for the formation of a company since 1 July 1998. The company name can be chosen from the name of one or more of the proprietors (family-name firm), the object of the business, a freely invented name or a mixture of all. A company simply has to comply with the following criteria: The company may possess distinctiveness and an identification mark (name function); the company name is furthermore not allowed to be misled in any way (e.g. GbRmbH). The company name has to contain the legal form of the respective company, e.g. a suffix for the legal form in an either written out form or in a universally valid short cut. The sole trader uses the suffix "registered trader" (eingetragener Kaufmann e.K., e.Kfm or the female form e.Kfr).

Partnership (Offene Handelsgesellschaft, OHG):

A partnership may be formed by at least two proprietors in order to collaboratively carry a commerce business. The outstanding character of this legal form is the unlimited liability of all proprietors - even with their private capital - for the amounts owed to other companies. This stands for the soundness of a company and formerly led to a wide spread of this kind of legal form. There are no legal regulations for the shareholding of a partnership. The formation of a partnership (OHG) follows the same regulations as a registered sole trader. The suffix for the legal form may be in an either written out form or in a universally valid short cut (OHG). The entrepreneurship and the representation in dealings with third parties are normally entitled to all proprietors equally. There can be another regulation in the deed of partnership though. The deed of partnership normally includes the shares for profit and loss. The shares comply with the respective shares of each proprietor in the assets of the partnership.

Limited partnership (Kommanditgesellschaft, KG):

The character of a limited partnership constitutes that there has to be at least one proprietor with unlimited liability (general partner) as well as at least one proprietor only liable to a fixed amount (limited partner). The limited partner is only liable according to his/her partnership deposit. In many cases this legal form is chosen in order to expand the capital base without the participation of the limited partner in the entrepreneurship. Both the general partner as well as the limited partner is registered in the German Trade Register. The suffix for the legal form may be in an either written out form or in a universally valid short cut (KG).

Limited partnership with a limited liability company as general partner (GmbH & Co KG):

This special form of a limited partnership became more important in the last years. In this case there is no natural person as a general partner; here this role is taken by a whole limited liability company (GmbH). Even though this is still a partnership, there are only partners with a limited liability.

Limited liability company (GmbH):

The German GmbH has been for years the preferred legal form for start-ups. The big advantage is the exclusion of the personal liability which means that the liability of each proprietor is limited to the amount of their company shares. A recourse of a proprietor's private capital by a creditor is normally impossible. But it must be pointed out that this liability only applies after a registration in the German Trade Register. Debts incurred prior to the date of registration in the German Trade Register may be settled by the creditor including the private capital of the proprietors. The initial capital is fixed in the limited liability company law with a minimum of 25,000 EUR. The minimum deposit at the registration of the company for the German Trade Register is 12,500 EUR. The entrepreneurship is incumbent on one or more managing directors. They are elected by the proprietors' meeting. In a family limited liability company (Familien-GmbH) a proprietor mostly acts as the managing director. The entrepreneurship may also be fulfilled by an outsider. The yearly profit belongs to the assets of the respective limited liability company. Furthermore there has to be a respective proprietors' resolution if the profit is being distributed to the proprietors.

The limited liability company may also be formed as a so called one person limited liability company (Ein-Mann-GmbH). This kind of company appears as a sole trader with a limited liability.