GmbH, UG, GbR, sole proprietorship, or GmbH & Co. KG? A comparison of business structures: liability, costs, formation, and registered office.
Short answer
The most common business structures in Germany are sole proprietorships, GbRs, UGs, and GmbHs. Sole proprietorships and GbRs can be established without a minimum capital requirement. The UG protects personal assets starting at €1. The GmbH is the standard choice for scaling businesses, requiring €25,000 in share capital. All corporations must have a valid business address for registration in the commercial register.
What you'll learn in this article
Whether you’re starting a business on your own, building a team, or securing an existing business: Choosing the right legal structure has direct implications for your liability, your startup capital, and your administrative burden. This overview compares the most important business structures in Germany.
| Feature | Sole proprietorship | General Partnership | UG | LLC |
|---|---|---|---|---|
| Minimum capital | none | none | starting at €1 | 25.000 € |
| Liability | in person | in person | limited | limited |
| Start-up costs | ~50 € | ~50 € | €400 to €800 | €1,000 to €2,000 |
| Commercial Register | no (optional) | no (optional) | Requirement | Requirement |
| Accounting | EÜR | EÜR | Balance Sheet | Balance Sheet |
| Who is this for? | Freelancer, Solo | 2 or more people | Startups, Bootstrap | Scaling, B2B |
A sole proprietorship is the simplest form of business in Germany. No minimum capital, no notary appointment, no articles of incorporation. You simply register your business with the Trade Licensing Office or register as a freelancer with the tax office, and you’ll be up and running within a few days.
Liability: Fully personal. There is no legal separation between you and your business. Your personal assets are liable without limit.
Suitable for: freelancers, self-employed individuals working on their own, side hustles, and small service businesses with a manageable liability risk.
Not suitable for: Those who work with contracts that could become risky in the event of a dispute, or those who wish to bring in co-partners.
A GbR is formed automatically as soon as two or more people engage in a self-employed activity together. Even without a written contract. This makes it the quickest form of partnership, but also the riskiest.
Liability: All partners are jointly and severally liable with their personal assets. Each partner is liable for all debts of the entire GbR.
Suitable for: project partnerships, creative duos, small collaborative projects that can get off the ground quickly.
Not suitable for: Those who want to scale up over the long term, bring in investors, or clearly separate liability.
An entrepreneurial company is a limited liability company (GmbH) with reduced initial capital. In theory, 1 euro is sufficient; in practice, however, 1,000 to 2,500 euros is recommended to ensure the company is operational from the start.
Liability: Limited to the company's assets. The personal assets of the shareholders are protected.
Special feature: 25% of the annual profit must be set aside as a reserve until the share capital reaches €25,000. After that, the company may be converted into a GmbH.
Suitable for: Founders with limited startup capital, bootstrappers, and early-stage business ideas with liability protection.
Costs, Process, and Notary Appointment in Detail: Starting a UG in Berlin – The Complete Guide.
The GmbH is the most popular legal structure for growing businesses in Germany. It offers full limited liability, a professional public image, and the option to bring in investors and co-owners.
Minimum capital: €25,000, of which at least €12,500 must be paid in at the time of incorporation.
Liability: Limited to the company's assets. Managing directors are personally liable only in exceptional cases.
Suitable for: Startups with growth plans, B2B service providers, teams with multiple partners.
The incorporation process, notary fees, and all documents in detail: Incorporating a GmbH with a Virtual Office – the complete guide.
A GmbH & Co. KG is a limited partnership in which a GmbH acts as the general partner (Komplementär). This protects the limited partners from personal liability and offers tax planning opportunities that a standard GmbH does not provide.
Suitable for: Companies that want to use a limited partnership (KG) structure but require liability protection. Common in real estate, investment fund, and family-owned businesses.
Not suitable for: Founders who want to get started quickly and easily. The administrative burden is significantly higher than for a GmbH or UG.
The decision depends on three factors: liability risk, available capital, and growth plans. A quick overview:
Start as a sole proprietor, no liability risk
Sole proprietorship or self-employed individual
Start a business as a duo—quickly and affordably
GbR (must have a written partnership agreement)
Limited liability, but little startup capital
LLC (limited liability)
Scaling, investors, professional image
LLC
Limited partnership structure with liability protection and tax optimization
Limited Liability Company and Partnership
This article answers the question of whether you even need a physical office: Can I start my business without an office?
No matter what legal structure you choose—there’s one thing you’ll always need
Whether you’re setting up a UG, GmbH, GbR, or sole proprietorship: To register with the Trade Licensing Office, the tax office, or the Commercial Register, you need a business address that can be used for legal service of process. No address means no registered office. No registered office means no start.
Teeberg offers two packages tailored specifically to your legal structure. For sole proprietors and freelancers, a mailing address is sufficient. For GmbHs, UGs, and all corporations, the Virtual Office is the right choice—only this package includes a registered office for the commercial register.
Virtual Office
Starting at €63/month
Official business address for the commercial register and notary. For GmbHs, UGs, and all corporations. Includes daily mail scanning service and office space on demand.
Postal address
Starting at €28/month
Business address for legal notices, business registration, and tax purposes. For sole proprietorships and freelancers. Does not include registration in the commercial register.
"I needed an address for the notary right away so I could set up my LLC. Teeberg provided everything in just a few minutes. It was straightforward and professional."
Sarah B., Founder
Related articles
Sole proprietorships and GbRs are the most cost-effective options: all that’s required is a business registration (approx. €50). If you want liability protection, you can form a UG with start-up costs starting at around €400 using a standard articles of incorporation template.
Both offer limited liability. The main difference is that a GmbH requires €25,000 in share capital, while a UG can be established with as little as €1. In return, the UG must set aside 25% of its annual profits as reserves until the company reaches €25,000. A GmbH projects a more professional image and is the preferred form of business for B2B customers and investors.
No. As a sole proprietor, you are always liable with your entire personal assets. There is no legal separation between you and the business. If you need liability protection, you must form a corporation (UG or GmbH).
Yes. Every type of business needs a valid mailing address for the Trade Licensing Office, the tax office, and (for corporations) the Commercial Register. Using your personal address is permitted, but many entrepreneurs choose to protect their privacy by using a virtual business address.
A limited partnership (KG) in which a limited liability company (GmbH) serves as the general partner. This structure combines the limited liability of the GmbH with the tax flexibility of the KG. It is common in the real estate and fund industries. The administrative burden is too high for simple incorporations.
The sole proprietorship is the most common form in terms of numbers, as it has minimal requirements. Among corporations, the GmbH is the most prevalent, with over 1 million registered companies in Germany.
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