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Civil Law Partnership in Germany

Civil Law Partnership in Germany

Updated on Monday 02nd November 2015

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Civil-Law-Partnership-in-GermanyThe German civil law partnership

The civil law partnership (Gesellschaft bürgerlichen Rechts, GbR) falls under the regulations of the German Civil Law and is an entity based on a partnership agreement meant to support a business activity conducted by at least two partners. Even it has no legal capacity, the civil law partnership can operate as any other type of German company. The German civil law partnership can be organized in two ways:

  • -          under the Trades Regulations Act,
  • -          under the German Commercial Code.

Under the German Commercial Law, the partners in a GbR are called merchants, while the Trade Regulations Act calls them traders. If the civil law partnership is registered with the Trade Register it will automatically turn into a German general partnership.

Setting up a civil law partnership in Germany

The civil law partnership in Germany must have at least two members who are natural persons or legal entities. The partners will sign a partnership agreement. The partnership agreement can be made orally. However, it is advisable to be concluded in writing even if it must not be notarized.

Civil law partnerships are usually suitable for German lawyers or other types of freelancers. The German civil law partnership can be employed for both short-term and long-term objectives. Also, both partners will have unlimited liability for the company’s debts and obligations. All partners in German civil law partnership have equal management rights in the company. There are no minimum capital requirements to open a civil law partnership in Germany.

Taxation of German civil law partnerships

As a non-commercial entity, the German civil law partnership is not required to keep accounting books. The company can document its business activities by submitting a cash journal to the German tax authorities.

As any other German partnership, the civil law partnership is not subject to the income or the corporate tax. The profits are stablished separately and each partner will be subject to taxation depending on their profits. However, the partners’ shares in a civil law partnership are subject to the income and corporate taxes, depending on the legal form.

For complete information about opening a civil law partnership you can contact our law firm in Germany.

 

 

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