Master Investment
Published in

Master Investment

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.

Pros

  • 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.

Cons

  • 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.

If you liked what you read, then don’t forget to “clap” or “like” this article :-) If you are interested to know which stocks I am buying and selling and want to get access to my complete portfolio. Then consider joining master investors community by clicking here.

If you found this article or any other articles on my channel valuable, buy me a cup of coffee from here.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Ankit Goyal

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