German Partnership Law
Overview of German Partnership Forms
German law recognises several forms of partnership (Personengesellschaften), each with distinct legal characteristics regarding formation, liability, registration, and governance. Partnerships are distinguished from corporations (Kapitalgesellschaften) by the principle of personal liability of the partners and the primacy of partner management. The core forms are the civil law partnership (Gesellschaft burgerlichen Rechts, GbR), the general commercial partnership (offene Handelsgesellschaft, oHG), the limited partnership (Kommanditgesellschaft, KG), and the hybrid GmbH & Co KG.
The Civil Law Partnership (GbR)
The GbR (Gesellschaft burgerlichen Rechts) is governed by Sections 705-740 BGB. It is the default form for any partnership not engaged in a full commercial business (Vollkaufmann). Section 705 BGB defines the GbR as a contract by which the partners mutually oblige themselves to promote the achievement of a common purpose in the manner specified by the contract — particularly by making agreed contributions.
Formation requires a partnership agreement (Gesellschaftsvertrag) between at least two partners. No particular form is required unless the partnership involves contributions of real property. The GbR may be formed for any lawful purpose — professional collaborations, joint ventures, property holding pools, or ad hoc business undertakings. Until 2001, the GbR lacked full legal personality; in BGHZ 146, 341, the Federal Court of Justice recognised the GbR as a legal entity (Aussen-GbR) capable of holding rights and obligations, owning property, and being a party to legal proceedings.
Liability of GbR partners is personal, joint, and several (gesamtschuldnerisch) for all partnership obligations. Each partner is liable with their personal assets. This unlimited liability is the principal disadvantage of the GbR form. Internal contribution and indemnity obligations exist between partners but do not affect external creditors’ rights. Management is exercised jointly by all partners under Section 709 BGB unless the partnership agreement provides otherwise. Decisions require unanimous consent for matters outside the ordinary course of business.
The GbR may be registered in the Partnership Register (Gesellschaftsregister) under the GesRuaCKG reform (effective 2024), allowing the GbR to acquire registered rights such as real property and to limit the liability of new partners.
The General Commercial Partnership (oHG)
The oHG (offene Handelsgesellschaft) is governed by Sections 105-160 of the Commercial Code (Handelsgesetzbuch, HGB). The oHG is a partnership formed for the operation of a full commercial business under a common firm name. Section 105(1) HGB defines the oHG as a partnership whose purpose is the operation of a commercial business (Handelsgewerbe) under a common firm name, where all partners are personally liable without limitation.
Formation requires: (1) a partnership agreement; (2) operation of a commercial business requiring a commercial organisation; and (3) registration in the Commercial Register (Handelsregister). The oHG acquires legal personality upon registration. The firm name must identify the partnership and indicate the legal form. At least one partner must have unlimited liability.
Management and representation under Sections 114-126 HGB: each partner has the right and duty to manage the partnership’s affairs unless excluded by the partnership agreement. Management covers all acts within the ordinary course of business. Extraordinary acts require unanimous consent. Each partner has authority to represent the partnership in dealings with third parties; the scope of representation authority is unlimited and cannot be restricted against third parties.
Liability under Section 128 HGB: partners are personally, jointly, and severally liable for the partnership’s obligations. Liability is direct — creditors may proceed against partners without first pursuing the partnership. A partner who leaves the oHG remains liable for obligations incurred during their membership for five years.
The Limited Partnership (KG)
The KG (Kommanditgesellschaft) is governed by Sections 161-177a HGB. The KG is a partnership with at least one general partner (Komplementar) with unlimited liability and at least one limited partner (Kommanditist) whose liability is limited to their agreed capital contribution (Haftungseinlage). The KG combines the advantages of partnership structure with limited liability for some investors.
Formation requires registration in the Commercial Register. The partnership agreement must specify the capital contribution and limitation of liability for each limited partner. The firm name must include the indication “KG” and at least one general partner’s name. The limited partner’s liability is limited to the amount of their contribution; however, if the contribution has not been fully paid, the limited partner remains liable up to the unpaid amount. Once the contribution is fully paid, the limited partner is not personally liable for partnership debts.
Management and control: general partners manage the KG and represent it externally. Limited partners are excluded from management (Section 164 HGB) but have rights: (1) to inspect the partnership’s books and records; (2) to receive the annual financial statements; (3) to object to extraordinary acts. Limited partners may not perform acts of management in the name of the partnership without authority.
Profit and loss allocation under Sections 167-172 HGB: the partnership agreement governs distribution. Failing agreement, a fair annual share of profits is allocated based on capital contributions, with limited partners receiving a preferential share up to 4 per cent of their contribution.
The GmbH & Co KG
The GmbH & Co KG is a hybrid form combining a limited partnership (KG) with a limited liability company (GmbH) as the sole general partner. The GmbH serves as the Komplementar with unlimited liability, but liability is limited to the GmbH’s assets, effectively limiting the partnership’s overall liability exposure while maintaining partnership tax treatment.
The GmbH & Co KG is the most common German partnership form for mid-sized businesses (Mittelstand). It offers: (1) limited liability for all economic participants (the GmbH’s shareholders); (2) retention of partnership governance flexibility; (3) favourable tax treatment under the German Income Tax Act (Einkommensteuergesetz, EStG), as the KG is treated as a transparent entity; (4) simplified management structure.
Requirements: (1) the GmbH must be properly incorporated with minimum share capital of EUR 25,000 (Section 5 GmbHG); (2) the KG must be registered in the Commercial Register; (3) the GmbH’s managing directors must be appointed; (4) the firm name must indicate the legal form, e.g. “Muster GmbH & Co KG.” The GmbH is exempt from the requirement of having a natural person as general partner under Section 177a HGB.
Conversion Between Forms
The German Transformation Act (Umwandlungsgesetz, UmwG) permits conversion between partnership forms. A GbR may convert to an oHG or KG through registration. An oHG may convert to a KG by designating some partners as limited partners. Cross-form conversions between partnerships and corporations are also available under the UmwG, allowing a partnership to convert to a GmbH or AG (and vice versa) while preserving legal identity. Conversions require: (1) a resolution of partners; (2) compliance with creditor protection requirements; (3) registration in the Commercial Register. The conversion does not dissolve the entity; the legal entity continues in its new form.