Forms of Nonprofit Corporations in Germany
Comparison of the most relevant legal forms of nonprofit organizations
In Germany, various legal entities can acquire the status of a nonprofit corporation:
- Corporate enterprises (especially gAG and gGmbH),
- Cooperative societies
- Associations (registered and non-registered),
- Foundations (with and without legal capacity) as well as
- Commercial businesses of a legal entity under public law.
We would like to briefly introduce the four most common legal forms for nonprofits in Germany, which are nonprofit entrepreneurial company (gUG), nonprofit limited liability company (gGmbH), association (e.V.) and foundation (Stiftung) and clarify the most important questions in a quick and simple manner:
- How many persons does the incorporation require?
- Who holds the power of representation?
- Is it possible to change the articles of association or the purpose later on?
- Is it required to provide an annual balance sheet?
Overview of all relevant facts:
|Nonprofit entrepreneurial company (gUG)||Association (e.V.)||Nonprofit LLC (gGmbH)||Foundation|
|Number of persons required||Min. 1||Min. 7||Min. 1||Min. 1|
|Number of managing directors (UG/GmbH) or board members (association/foundation)||Any (min. 1)||Any (min. 1)||Any (min. 1)||Any (min. 1)|
|Capital stock||Min. EUR 1 capital stock||EUR 0||Min. EUR 25,000 capital stock||Min. EUR 100,000 capital stock|
|Payment of assets upon foundation||Full payment upon foundation||-||¼ of each share, min. EUR 12,500 in total||Full payment after approval|
|Liability||Limited to company assets||Limited to assets of association||Limited to company assets||Limited to assets of foundation|
|Possibility of exempting the managing directors from the ban on self-contracting||Yes||Yes||Yes||Yes|
|Authorization to represent (in principle)||Managing director||Board of directors||Managing director||Board of directors|
|Flexibility in ongoing operations||Flexible||Flexible||Flexible||Less flexible, as committed to founder's will|
|Options in arranging the statutes||Largely free||Largely free||Largely free||Largely free|
|Reputation/prestige of the legal form||Low||High||High||Very high|
|Possibility of economic activity (within the framework of what's permissible under nonprofit law)||Yes||Yes||Yes||Yes|
|Democratic basic order||No||Yes||No||No|
|Change of partners/members||Complicated (transfer of business shares requires certification by notary)||Simple (entry/exit by written declaration)||Complicated (transfer of business shares requires certification by notary)||No members|
|Later amendments to the statutes||Possible, but requires certification by notary||Possible||Possible, but requires certification by notary||Only possible in exceptional cases|
|Change of purpose at a later time||Possible||Possible||Possible||Only possible in exceptional cases|
|Running expenses||Higher (mandatory accounting)||Moderate||Higher (mandatory accounting)||Moderate|
|Governmental supervision||Low||Very low||Low||High|
With our team of several experienced attorneys, legal specialists and tax consultants, we provide legal counsel to charitable organizations and nonprofit organizations in the third sector nationwide. We advise you in all legal and tax matters and support companies, private individuals and associations as well as the public sector when it comes to the establishment and restructuring of nonprofit organizations.
Your attorney for nonprofit corporations
WINHELLER is listed as one of Germany's top tax law firms in the field of "Nonprofit and Foundations".