Civil Law Partnership

General Information

The German Civil Law Partnership is, by law, a partnership of persons in pursuit of a common purpose (Sec. 705 of the German Civil Code).

It is of great importance in practice, and is chosen as corporate structure if no trade activity proper is pursued.

For example it is used for the joint exercise of free professions.

Civil law partnerships exist in many different forms reaching from car-pooling to property owner’s partnerships.


A civil law partnership is founded by conclusion of the partnership agreement which, as a minimum specification, has to include the statement that the members shall set up a partnership to pursue a common purpose and will make the contributions agreed upon.

The partnership agreement does not require to be set up in a specific form.

Foundation is only possible if at least two individuals or legal entities participate.

Capitalisation and Financing

The Contributions to be made by partners are defined by the partnership agreement. The civil law partnership holds legal capacity and is thereby capable of having assets of its own. There is no minimum capital for civil law partnerships.

Board Structure

Business is conducted jointly by all partners. Therefore, in principle, every business act requires the consent of all of the partners. However, a vote of majority may be provided in the partnership agreement.

Another possibility is to provide power of sole representation as manager for one of the associates or a third party entitlement to manage business.

The company is represented in and out of court by the managing partner. Unless otherwise provided in the partnership agreement, collective power of representation will apply.

Annual Costs

Annual Costs will arise in the form of legal, information and control costs especially as regards accountancy, auduting and publicity. Other possible items are legal and tax consultancy as well as costs for various supervisory and managing individuals.

The amount of these costs varies and depends on size, structure and equity requirements of the company. Costs tend to be lower for partnership structures than for corporations.

 Corporate Taxation and Financial Accounting

In Germany the taxable income of a private company is determined at enterprise level although the company itself is not a tax subject.

In fact, a piercing of the corporate veil occurs in respect of the partners. Thus, for tax purposes, profits generated at enterprise level are treated equally to the partner’s other revenue.

The civil law partnership company is not obligated to maintain accountancy, but rather has to produce a statement of revenue profits.

Employee Participation in Corporate Bodies