Offene Gesellschaft OG (General Partnership)
At a glance
- swift formation, no costs involved
- freedom in drafting the Articles of Association
- simple cash-based accounting or accrual-based system of accounting
- no minimum capital contribution required
- sharing of work among the partners is possible
- if a trade licence is required, only one liable partner must have this trade licence
- all partners have unlimited liability
Articles of Association
Like a Gesellschaft bürgerlichen Rechts GesbR (civil-law partnership), the Offene Gesellschaft OG (general partnership) is a partnership. It is established internally by two or more partners who agree on Articles of Association. Again, there is no mandatory form required by law and a broad freedom in drafting the Articles of Association.
An Offene Gesellschaft OG may be set up for gainful and also for non-lucrative purposes.
Companies register
An Offene Gesellschaft (OG) comes into existence legally and has external effect only once it has been registered in the companies register. The data recorded include the company name, the partners and their liability and who has authorization to represent the company vis-à-vis third parties.
Company name
Unlike with a Gesellschaft bürgerlichen Rechts GesbR, the company name of an Offene Gesellschaft OG may be a personal name, a factual name or an invented name with the addendum “OG”. The company name must not be misleading and must be recognizable. For instance, you may only use the names of persons who are partners. The company register records information on who has authorization to represent the company and who is liabile.
Legal capacity
The Offene Gesellschaft OG has legal personality.
Management
Under the law, every partner has the right and also the duty to represent the company.
If other provisions are agreed on, such as a limitation or exclusion of partners with unlimited liability from the company’s management, this needs to be laid down in the Articles of Association and recorded in the companies register.
Partners whose authority to represent the company is limited in the Articles of Association are not released from liability.
Liability
The partners are jointly and severally liable. They are liable, also with their private assets, without limitation, directly, jointly and severally (not just on a pro-rata basis) for the entirety of the company’s liabilities. Any partner who retires is liable for all debts entered into up to that moment, if these become due within five years after retirement.
Contribution
A minimum contribution is not required.
Taxation
The partners fully tax their total profits themselves (income tax). The company is subject to VAT.
Social insurance
The partners are subject to mandatory insurance under the Social Insurance Law for Commerce and Trade (Gewerbliches Sozialversicherungsgesetz GSVG), unless they are covered by the small business ruling.
Trade licence
Should the activity carried out by the Offene Gesellschaft OG be subject to the Trade Code (Gewerbeordnung), a managing director must be appointed for trade licencing purposes. This may be a partner with unlimited liability who is in possession of the required trade licence, or an employee who is subject to mandatory insurance, who is employed for at least 50% of the standard weekly working hours.
Accounting / Financial statements
The company is required to keep accrual-based accounts and prepare a balance sheet (accounting and disclosure requirement) if its revenues exceed EUR 700,000 for two consecutive years, or EUR 1 million in one year.
Profits
The allocation of profits and the right of withdrawal is governed by the Articles of Association. If there is no other agreement, profits are shared in equal parts.
Termination
The reasons for termination include; a resolution adopted by the partners, contractual reasons of dissolution, the commencement of bankruptcy proceedings concerning the company’s assets, commencement of bankruptcy proceedings concerning the private assets of a partner, the death of a partner, timely termination by a partner, action for dissolution of the company filed by a partner, termination by a partner's private creditor.