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Pros and Cons of Creating a GmbH (Germany)

We often think about opening our own business empire. Before finalizing your decision take a peek through the advantages and disadvantages of creating a GmbH. I hope, it will help you in making a better decision.


  • Liability is given to the company’s assets.
  • The GmbH is for trade, service and production, but also for freelance, artistic or scientific interests.
  • Best administration: Corporate income tax is applied, which is usually more expensive, including income tax for partnerships.
  • Great freedom of design for the partnership agreement.
  • The fulfillment is also possible for one person. One then speaks of the one-person GmbH, in which one partner is also administered.
  • Partners can be employees for their own company.
  • The personnel costs must be the taxable profit of the GmbH.
  • It is easy to change shareholders.
  • Its simple to sell the company by selling the shares.
  • Partners can also be legal persons, including corporations.


  • The minimum capital for founding a GmbH is 25,000 euros, at least half of which must be paid in.
  • However, the liability of the shareholders relates to the entire minimum capital, i.e. at least 25,000 euros.
  • There must be a strict separation between the assets of the shareholders and the GmbH. Otherwise there is a risk of sanctions for hidden profit distribution.
  • The establishment of the GmbH must be notarized and entered in the commercial register.
  • The formation formalities are much more extensive than for the formation of a GbR.
  • The assignment of shareholder shares must also be notarized and entered in the commercial register.
  • The GmbH law makes strict regulations among other things with regard to bookkeeping, accounting, and the publication thereof.
  • If these obligations are violated, the managing director is threatened with criminal consequences and civil liability from his private assets.
  • Banks often demand absolute guarantees from the shareholders, which in many cases cancels the exemption from liability.
  • The GmbH is subject to trade tax.

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Ankit Goyal

Agile coach, founder of “master investment”, and a writer. Discovering myself anew by writing and vlogging —