What is GmbH?
GmbH (Gesellschaft mit beschränkter Haftung) is Germany's most common private limited company structure. It provides limited liability for shareholders, requires €25,000 minimum share capital (€12,500 paid up at formation), and must be formed by notarial deed and registered in the Handelsregister.
Current Rate (Steuerjahr 2025)
N/A (structure, not a tax rate)
Example
A founder forms a Berlin GmbH with €25,000 share capital, pays €12,500 on day one, appoints herself as Geschäftsführerin, and the notary files the Handelsregister application. The company exists legally once registered.
How GmbH works in Germany
The GmbH is Germany's workhorse corporate structure — equivalent to the UK's private limited company or the US LLC/S-Corp. It combines limited liability (shareholders are only liable up to their capital contribution) with relative simplicity and flexibility compared to an AG (Aktiengesellschaft).\n\n**Formation requirements**\nForming a GmbH requires:\n1. A Gesellschaftsvertrag (articles of association) executed before a German notary\n2. At least €25,000 share capital, with at least €12,500 actually paid up before registration\n3. Appointment of at least one Geschäftsführer (managing director)\n4. Registration with the Handelsregister at the local Amtsgericht\n5. Commercial register entry — the GmbH only exists as a legal entity from the date of registration\n\nA pre-registration entity (GmbH in Gründung, or GmbH i.G.) can operate in the interim but founders bear personal liability for its obligations.\n\n**Haftungsbeschränkte Unternehmergesellschaft (UG)**\nThe UG (haftungsbeschränkt) is a GmbH variant allowing formation with as little as €1 share capital. However, UGs must retain 25% of annual profit until cumulative retained earnings reach €25,000, at which point the UG can convert to a full GmbH. The UG carries less prestige with suppliers and banks and is typically a stepping stone.\n\n**Tax treatment**\nA GmbH pays:\n- Körperschaftsteuer: 15% + 5.5% SolZ = 15.825%\n- Gewerbesteuer: ~10.5–17.5% depending on municipality\n- Combined effective rate: typically 29–33%\n\nShareholders are taxed separately on dividends received (25% Kapitalertragsteuer + SolZ), or on salary paid to themselves as Geschäftsführer (subject to personal Einkommensteuer and social insurance).\n\n**Ongoing obligations**\nA GmbH must:\n- Prepare annual Jahresabschluss (financial accounts) under HGB rules\n- File accounts with the Bundesanzeiger (electronic disclosure)\n- Hold at least one shareholder meeting per year\n- Maintain a share register (Gesellschafterliste)\n- File annual tax returns (KSt, GewSt, USt) via ELSTER\n- Register changes (directors, shareholders, address) with the Handelsregister\n\n**Geschäftsführer compensation**\nThe managing director (who may also be the sole shareholder) can be paid a salary as Geschäftsführer. This salary must be at arm's length (market rate) and agreed in a formal Anstellungsvertrag before payment. The Finanzamt scrutinises Geschäftsführer salaries as a means of profit extraction — unreasonably high salaries may be reclassified as hidden dividend distributions.
Related terms
Körperschaftsteuer (KSt) is Germany's corporate income tax at a flat rate of 15% on taxable profits, plus a 5.5% solidarity surcharge on the tax itself, giving an effective KSt rate of 15.825%. GmbHs and AGs also pay Gewerbesteuer separately.
Gewerbesteuer (GewSt) is Germany's municipal trade tax levied on all commercial businesses. The base rate is 3.5% applied to adjusted taxable profit, then multiplied by the local Hebesatz (municipal multiplier, typically 300–500%). Effective rates range from ~10.5% to 17.5%.
The Handelsregister is Germany's official commercial register maintained by local Amtsgerichte (district courts). GmbHs and AGs must register; Einzelkaufleute (sole traders meeting certain criteria) may also register. Registration is mandatory before a GmbH can legally exist.
The Jahresabschluss is Germany's annual financial statements. GmbHs must prepare and file these under HGB (Handelsgesetzbuch) accounting rules. They include at minimum a Bilanz (balance sheet) and Gewinn- und Verlustrechnung (P&L). Must be filed with the Bundesanzeiger within 12 months of the financial year end.
Confused by Germany accounting jargon?
AccountsOS explains Germany terms in plain English and applies the right rules to your books automatically.
Try Free