The GmbH is the most commonly chosen legal form in Germany due to its flexibility and extensive limitation of liability. It allows shareholders to structure the company individually while protecting their personal assets from the liabilities of the GmbH.
However, during the formation phase, specific requirements apply: There are additional liability risks, and numerous legal regulations must be strictly observed. The following section provides you with a clear overview of the essential fundamentals, risks, and formalities of forming a GmbH — so you can start your project fully prepared.
I am always available to provide guidance and assess your individual formation plans.
Many shareholders decide on a GmbH too early, without thoroughly examining the legal and economic advantages and disadvantages. This often leads to poor decisions that are difficult to correct later and introduce additional risks during the formation phase.
Despite the later limitation of liability, significant risks exist during the formation phase. In particular, the obligation to cover losses and the liability for shortfalls can affect shareholders as long as the GmbH has not yet been registered. These liability consequences are often overlooked, even though they can be financially substantial.
A common mistake is failing to sufficiently document the payment of share capital. Since shareholders must prove that they actually made their contributions, insufficient documentation can cause major issues later — especially in the event of insolvency.
Important provisions are often omitted from the articles, such as non-compete obligations or clear rules regarding the buyout of shares. Missing such regulations can lead to disputes or financial disadvantages later, even though these issues could easily have been prevented during formation.
Forming a company shortly before the balance sheet date often creates unnecessary work, as tax returns and annual accounts must be prepared for a very short fiscal year. Unless there is a compelling reason, it is generally advisable to form the GmbH in January to avoid this additional burden.
Beyond the commercial register entry, founders must comply with further obligations. These include registration with the tax office, preparing the opening balance sheet, and submitting the business registration to the local municipality. Overlooking these steps can lead to delays and legal disadvantages.
A GmbH is established through the notarization of the articles of association. This is followed by the application for registration with the commercial register. Once the company is entered in the commercial register, the GmbH becomes a legal entity. During the formation and registration process, several formal requirements must be observed. Both shareholders and managing directors must also recognize that additional liability risks exist during the formation phase. To avoid these risks, business operations should ideally begin only after the company has been entered in the commercial register.
Below, I have outlined the individual phases of forming a GmbH in more detail. However, as so often, the devil is in the details. For specific guidance regarding your individual case, I kindly ask you to contact me for personal consultation.
The GmbH as a legal entity only comes into existence once it is entered in the competent commercial register. This registration marks the end of the formation phase and, at the same time, the beginning of the GmbH’s legal existence. The formation phase begins with the founders’ decision to establish a GmbH.
I would be happy to discuss with you which steps are required next.
If several individuals decide to pursue a common purpose in the legal form of a GmbH, a pre-formation company is created with this decision. In the case of a single-member GmbH, this stage does not apply. The pre-formation company may limit itself to initiating only the steps required for the later formation, such as drafting the articles of association. However, it may also begin preparatory actions or — to the extent permitted by law — commence initial activities, such as renting premises or organizing financing. At this stage, the entity is legally considered a partnership, either a civil law partnership (GbR) or, once a commercial business operation becomes necessary, a general commercial partnership (OHG). Accordingly, the legal relationships are governed by Sections 705 et seq. BGB and Sections 105 et seq. HGB. During this period, the shareholders are personally liable without limitation with their private assets for any obligations incurred.
With the notarization of the articles of association, the so-called GmbH in formation (GmbH i. G.), also referred to as a pre-GmbH or formation GmbH, comes into existence. It represents the necessary transitional stage between the pre-formation company and the later registered GmbH. After notarization and payment of the capital contributions, the company is registered with the commercial register. Upon registration, the newly formed GmbH assumes all assets, rights, obligations, and liabilities of the GmbH in formation, rendering both legally identical. The GmbH in formation is not a GbR or OHG, but a distinct legal entity to which the provisions of GmbH law already apply to a large extent, provided the respective rules do not explicitly require registration in the commercial register. However, only with registration does the fully valid legal entity with statutory limited liability come into existence.
A GmbH is permitted for almost any purpose, with only a few exceptions. For example, if freelancers wish to join together under the GmbH structure, it must first be clarified whether this legal form is permissible for their profession. In addition, it must be examined which further requirements professional regulations impose on freelancers who wish to operate in the legal form of a GmbH.
The articles of association of a GmbH must at minimum specify the company name (the “Firma”), the registered office, and the corporate purpose. In addition, the amount of share capital must be stated, as well as the number and nominal value of the shares that each shareholder acquires in exchange for their contribution to the share capital (Section 3(1) GmbHG).
The corporate purpose must be clearly and sufficiently specific. Descriptions that are too general, such as simply “conducting commercial activities,” do not meet legal requirements. A precise formulation is necessary so that the registry court can clearly assess and classify the actual scope of activities.
Overly broad activity descriptions carry the risk of inadvertently including areas that require governmental approval. If such approval is not granted, this may lead to the deletion of the company’s registration. It is therefore essential to determine early on whether publicly regulated permits are required for planned business activities and whether the prerequisites are met.
The articles of association must specify a minimum share capital of €25,000. It must also state which shareholder assumes which capital contribution, with at least one euro required per share. Additional provisions are not legally mandatory but may be advisable depending on the specific needs of the company.
The Unternehmergesellschaft (haftungsbeschränkt) allows formation with a lower share capital, theoretically starting from one euro. In return, 25% of the annual profit must be allocated to a statutory reserve until the minimum share capital of a regular GmbH is reached. This reserve may only be used to cover losses and later to increase the share capital.
To simplify the formation of a GmbH, the legislator has introduced model protocols that can be used for single-member GmbHs or companies with up to three shareholders. These combine the formation protocol, the articles of association, and the shareholder list into a single document, enabling very rapid formation — including for the Unternehmergesellschaft (haftungsbeschränkt). However, model protocols are only suitable if no individual provisions in the articles are required.
I am happy to assist you throughout the registration process with the commercial register.
Forming a GmbH offers entrepreneurial freedom, liability protection, and long-term structuring opportunities. At the same time, it involves legal, tax, and organizational requirements that should be carefully planned — from the articles of association to share capital and commercial register registration. Those who gain clarity early on regarding obligations, risks, and suitable structuring options can avoid delays, amendments, or unexpected liability issues.
If you would like support with preparing, implementing, or reviewing your GmbH formation, I am happy to assist you personally — feel free to reach out at any time.
