Finding the right (legal) form

A professional appearance to the outside begins already with the choice of the right legal form. However, there are many of them, but which is the right one for implementing your own corporate philosophy? An overview of the different possibilities from the non-profit association to the GmbH & Co KG can bring more clarity here.

If some like-minded people come together with a common goal, sooner or later the question arises of a suitable roof under which to act as a community either on the economic market or on the political or social plateau.

Depending on the number of members, project or business idea, financial resources and degree of commitment, different legal forms may be considered.

Association/club: If several persons (at least seven) wish to merge for a non-economic purpose, the form of the association may be considered. The association is considered to be a relatively uncomplicated method of merging, since the admission and resignation of members are rather easy, so that a high fluctuation of the members does not harm. If the association pursues certain charitable or church purposes (§ 52 Tax Code), tax exemptions or reductions can be claimed at the tax office.

GbR: If you unite several persons and pursue a common purpose, you automatically form a “Gesellschaft bürgerlichen Rechts” (GbR), society of civil law. This is uncomplicated in so far as neither share capital nor other formalities must be observed. However, since this also does not regulate the liability issue, it should be noted that in case of doubt each of the founders is responsible for the debts or failures of his partner. Incidentally, the GbR becomes an OHG – general partnership – if the company operates a commercial business.

GmbH: The GmbH belongs to the corporations. The advantage of the GmbH lies in the limitation of liability of the founders. The GmbH is founded by at least one shareholder. For small commercial companies, especially service providers who want to limit their liability and whose companies get by with little capital (share capital 1 EUR). Further information is available at:

AG: Like a limited liability company (GmbH), a stock corporation (AG) is also a corporation. The requirements of the AG are relatively demanding, since the capital required for the foundation amounts to at least EUR 50,000. However, this share capital of an AG can be divided into individual shares, which is why participation in this type of company is also possible with small contributions.

Cooperative: The eG is a partnership and a democratic form of society in which each member has one vote – irrespective of the amount of capital participation. This protects against the dominance of individuals and ensures independence from external interests. Further information at:

Foundation: The foundation is the carrier of a fortune. The Foundation invests the assets transferred to it safely and profitably. The surpluses thus generated are spent for the charitable purpose, whereby the donated assets themselves must remain the foundation’s share capital, since a foundation is intended for eternity and usually cannot simply be dissolved. Further information is available at:

Non-profit status: In addition to the non-profit association, companies such as the “gemeinnützige GmbH” (gGmbH) or the “gemeinnützige Genossenschaft” (geG) can also be recognised as non-profit. They pursue a non-profit, charitable or ecclesiastical purpose in the sense of tax law and therefore enjoy tax exemptions and benefits. Additional information on charitable work is provided by the state network for civic engagement:

Important to note: In some cases, the discussion about the appropriate legal form and internal organisation may lose sight of the actual objective and project work. Since the start-up process is associated with corresponding costs and effort, this usually only makes sense with a view to a concrete project to be implemented. It is therefore rightly pointed out that the question of the correct legal form should also take the temporal dimension into account, in accordance with the motto “Which legal form is best for us at what time”.


Further Information

An overview of the most common legal forms including the cooperative can be found here.

On this page you will find further information, especially for voluntary – not necessarily profit-oriented – projects:

Frank Heller, lawyer and mediator in Hohenahr (Hesse) focuses on the law of non-profit organisations:

Interesting in this context is also the political discussion about facilitating entrepreneurial initiatives from civic engagement by “a suitable form of enterprise in cooperative or association law […], which avoids unreasonable effort and bureaucracy” (so the coalition agreement of the Federal Government 2013, cf. also


Stories of success

When “KlimaKom eG” was founded, it was initially limited to the usual business forms in the business world: GbR, OHG, GmbH and AG. Neither our lawyer nor a management consultant consulted considered an alternative legal form to date, as this is apparently not on the agenda either in legal or in business management training. Due to the limitation of liability, we considered the GmbH to be well suited to keep the entry calculable for all parties involved and as low-risk as possible. Only shortly before the founding assembly the question arose why we did not form a cooperative, when this comes closest to our philosophy of grassroots democracy and solidarity. As a consulting company for municipalities and organisations, we are rather exotic in the field of cooperatives. This has also made itself felt in many tax and procedural issues for which there has simply not yet been a legally proven patent solution due to the few cases of application. In that regard, the exchange with cooperatives in similar cases was particularly valuable, where we found a great willingness to help through the idea of solidarity (many thanks at this point especially to “7-it Informations-Management & Services eG”!). Moreover, creativity and courage (also on the part of the authorities) were in demand.