General Partnership

General Information

General partnerships are most common in medium-sized businesses.

Their economic importance is declining. The main reason for this is he unlimited liability of partners that results in a high risk of liability.


A general partnership is a company whose purpose is to conduct a trade business under a common corporate name.

If no trade is pursued and only own assets are managed or a (non-mandatory) trade business is operated (Sec. 2 of the German Commercial Code [Handelsgesetzbuch- HGB-], a general partnership is incorporated only when the company is entered into the Commercial Register.

Consequently, the entry in the first case is of declaratory, in the second case of constituent nature.

The partnership agreement if basically subject to the same rules that apply to the civil law partnership.

Capitalisation and Financing

The contributions to be made by the associates are defined by the partnership agreement. The general partnership holds legal capacity and can have company assets of its own. However, there is no minimum capital.

Board Structure

Business is managed by all partners individually. Due to that fact, every partner may act on behalf of the company independently from the other partners, concerning daily business.

For all acts exceeding this scope, a joint resolution by all partners is necessary.

Since the statutory rules on the OHG are not mandatory, the authority to manage the company’s business may be awarded to one or more individuals in the partnership agreement. There is also the possibility to allow for rights of veto for partners who are excluded from business management.

Every associate is entitled to represent the general partnership in and out of court individually, although collective power of representation may also be provided.

Another possibility is a mixed collective power of representation: unless several associates act jointly, the acting partner may only represent the partnership in accordance with a Prokurist (company officer with statutory authority).

To the extent that representation rules in the partnership agreement deviate from the legal provisions, entry of these deviations into the Commercial Register must be applied for.

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 general partnership is not obligated to maintain accountancy, but rather has to produce a statement of revenue profits.

 Employee Participation in Corporate Bodies