Potential methods and solutions for successfully transforming a GbR into a GmbH
To ensure that the process of transforming your “Gesellschaft bürgerlichen Rechts” (partnership under the German Civil Code known under the acronym “GbR”) into a GmbH (German limited liability company) can be executed as efficiently, cost-effectively, professionally, and systematically as possible, you will need to carefully consider and evaluate the GbR’s current situation. You will also need to obtain competent advice from a specialist attorney for corporate law. Finally, you will need to familiarize yourself with the various methods and solutions available in your individual case to pave the way for a successful transformation into a GmbH.
Changing the company’s legal form
One scenario is this: After operating successfully for years under the legal form of a GbR, the partners of this civil-law partnership wish to reduce their risk and professionalize their company. Thus, they would like to transform their GbR into a GmbH. Changing a GbR into a GmbH is not an easy undertaking, however, since the German Transformation Act has made no provision for this scenario. Fortunately, there are other possible ways to achieve the desired objective:
One way is to implement an indirect change of legal form. The first step is to transform your GbR into an “offene Handelsgesellschaft” (OHG, general partnership) or into a “Kommanditgesellschaft” (KG, limited partnership). Once the new company has been entered into the commercial register, you can then proceed to transform it into a GmbH. It should be noted, however, that this process involves considerable time and effort.
Another possibility would be for the partners of the GbR to form a GmbH and to then transfer all the GbR’s assets into the newly founded GmbH. A potential pitfall, however, is that this can lead to the uncovering of hidden reserves! Thus, a tax advisor definitely should be consulted in advance to determine a process of contributing the assets to the new company that will not impose a tax burden.
Although the entire process is a complex one, it will ultimately result in a reduction of liability risk that will absolutely be worth the effort. With the aid of competent advice from your tax advisor and from an attorney specialized in corporate law, you will be able to turn your successfully operating GbR into a professional, well-organized and less risky GmbH.
For more information on this topic, please watch for next week’s blog. Or feel free to contact us directly with any questions or needs you may have. We are ready to assist you as your legal counsel specialized in corporate law!