A German charitable limited liability company (gemeinnützige GmbH, gGmbH) offers many advantages, especially in terms of taxation. However, it must comply with numerous requirements of the German law on nonprofit organizations. When founding a gGmbH, serious mistakes can therefore occur, which might later lead to the loss of its charitable tax-exempt status.
The charitable LLC is not an independent legal form, but a regular commercial GmbH. However, it differs from the commercial GmbH above all in its objectives.
The formation of a charitable LLC in Germany is therefore largely similar to the formation of a commercial LLC:
- Draft of the gGmbH statutes
First, the shareholders draft and establish the articles of association, which are often referred to as the gGmbH statutes.
- Coordination with the tax office
The next step is to coordinate the articles of association with the responsible tax office in order to ensure that the regulations in the articles of association comply with the requirements of the German nonprofit tax law.
- Appointment of the managing director(s)
Via a shareholders' resolution, the shareholders then appoint the managing director(s). The cooperation with the managing director(s) should be based on a suitable managing director service agreement from the outset in order to avoid unnecessary disputes in the event of a conflict.
- Provision of the original capital contributions
The shareholders must now provide their respective capital contributions. At least half, i.e. EUR 12,500, must be paid in on the minimum share capital of EUR 25,000.
- Entry in the commercial register
Finally, the LLC must be registered for entry in the commercial register. The registration is important because it is only then that the LLC comes into existence legally. The limitation of liability takes full effect from this point on.
During the incorporation process of a charitable limited liability company, particularities arise mainly with regard to the statutes. These must comply with the requirements of German nonprofit tax law. The basic prerequisite for the recognition of the charitable status is the inclusion of a tax-privileged purpose in the statutes. The law distinguishes between charitable, religious and benevolent purposes. In addition, it must be determined in what specific way this purpose is to be achieved.
In Germany, when drafting the statutes, also the principles of exclusivity, immediacy and selflessness must be observed:
- According to the principle of exclusivity, the organization may only pursue its charitable, religious and benevolent purpose(s) specified in the statutes. If further purposes are to be added at a later time, the statutes must be amended accordingly in advance.
- According to the principle of immediacy, the charitable LLC must itself pursue the realization of its purpose(s). This must be expressed in the statutes themselves. As an exception to this principle a charitable LLC can also be active in the way that it (financially) supports other charitable organizations.
- Selflessness presupposes that the charitable LLC acts altruistically. Of particular importance for the charitable LLC in this regard is the principle of asset commitment: The resources of the charitable LLC are available exclusively for the promotion of the charitable purpose(s). Distributions to the shareholders or other benefits in favor of the shareholders are strictly prohibited (“non distribution constraint”).
If the managing director is to receive a comparatively high salary, it is also advisable to get the salary assessed and to prepare a so called salary report at an early stage. Managing directors of charitable LLCs may not receive an unreasonably high remuneration, if the tax-exempt character of the company is not to be jeopardized.
Founding a charitable LLC in Germany at a fixed price
In order to support you in founding a German charitable LLC, we prepared three different packages. We offer all of the following services in English or German.
Basic | EUR 4,995
- 15-minute short initial call to clarify the facts and discuss our cooperation (if it turns out that chosen package is not suitable: rebooking to other package possible)
- 1 hour telephone consultation for detailed discussion of the facts and circumstances as well as your wishes and goals
- If Orientation Plus Package was booked in advance: Discussion of the statement and its results
- Detailed guide for establishing the German corporation: i.e. description of the specific steps necessary for the establishment of the German charitable LLC
- Drafting of bilingual (German/English) articles of association for the company to be founded based on the client's specifications, including 2 work loops (further work loops on an hourly rate basis or after upgrading to Founder Package or All inclusive Package)
- Telephone conference to discuss the outcome (guideline/articles of association) and the next steps to be taken (max. 2 hours)
- Fixed price: EUR 4,995 plus expenses and VAT
Founder | EUR 9,995
Includes all services of the Basic Package, as well as:
- Assistance in the complete establishment of the company. This includes the following services:
- Making adjustments to the draft of the articles of association, if necessary (2 work loops incl. 2 telephone conferences of 1 hour; further work loops based on hourly rates)
- Request for a preliminary review of the final draft of the articles of association by the German tax authorities for the purpose of recognizing the GmbH as a tax-exempt organization (2 work loops; further work loops based on hourly rates)
- Providing the articles of association to the client's notary for notarizing;
- Preparation of a letter of attorney so that the managing director does not have to be present on site at the notary appointment
- Representation of the shareholder before the notary by a WINHELLER employee
- After founding of the entity, request of determination letter (so called “determination of compliance with statute-related preconditions”) from the tax authorities according to Section 60a German Fiscal Code
- 1 hour final consultation by phone
- Fixed price: EUR 9,995 plus expenses and VAT
- Upgrade from Basic Package: EUR 6,995 plus expenses and VAT
(Prices do not include notary fees, registration fees and translation fees)
All inclusive | EUR 16,995
Includes all services of the Basic Package and the Founder Package, as well as
- Tax registration, opening balance sheet
- Setting up nonprofit accounting plus 10% discount on nonprofit accounting in the first year and 5% in the second year after establishment
- Setting up payroll accounting plus 10% discount on payroll accounting in the first and 5% in the second year after establishment
- Managing director service contract (2 work loops)
- Business address (PO box) with postal service at our office for the first 12 months
- Annual status consultation for the first 2 years
- Discounts on the available add-ons (see below)
- Fixed price: EUR 16,995 plus expenses and VAT
- Upgrade from Basic Package: EUR 13,995 plus expenses and VAT
- Upgrade from Founder Package: EUR 9,995 plus expenses and VAT
(Prices do not include notary fees, registration fees and translation costs)
- Recruiting by WINHELLER (at the price of 3 monthly salaries)
Benefit from the years of experience of our HR team! We help you find the right personnel for your organization.
- Legal and tax advisory services at an hourly rate
We are happy to offer you any additional legal or tax services at a fair rate, e.g. assistance in setting up a German bank account.
- Business address with us (EUR 250 plus VAT per month)
Register your Business address (PO box) with postal service at our office in Frankfurt/Main.
Contact us at +49 69 76 75 77 80 or email@example.com!
No package fits your needs? Your case is so individual that we cannot provide optimal coverage with our package offers? We are as individual and flexible as you need us to be: Of course, you are more than welcome to book us at our usual hourly rates right from the start in order to book individual services. Just get in touch with us!
There are some alternatives to the charitable LLC: For larger projects the charitable stock corporation (gAG) is a suitable option, whereas for small start-ups the charitable entrepreneurial company (gUG) may be of interest. The latter can already be established with a share capital of only EUR 1. For certain projects the charitable cooperative (Genossenschaft) could also be taken into consideration.
The nationwide incorporation of charitable LLCs in Germany is part of our daily work. We would be pleased to support you fully in setting up your charitable GmbH, e.g. by:
- drafting legally compliant statutes,
- negotiating with the tax authorities,
- coordinating the formation with a notary and
- handling with the commercial register.
Once the gGmbH has been founded, we will continue to be there for you: Our tax department will be happy to take care of the LLC's tax registration and ongoing accounting. And our legal team will draw up all individual contracts for you and your charitable LLC: Managing director service agreements, complex license agreements, tax-optimized sponsoring contracts as well as cooperation agreements with your domestic or foreign partner institutions - all of course individually tailored to your charitable LLC's needs.
You would like to establish a charitable LLC or receive advice from an experienced attorney on the law and taxation of German nonprofit LLCs? Your expert partners for the establishment of charitable limited liability companies in Germany are attorneys Uwe Müller and Johannes Fein. The easiest way to reach us is by e-mail (firstname.lastname@example.org) or by telephone (+49 (0)69 76 75 77 80). We are here to assist.