In Germany, various legal entities can acquire the status of a nonprofit and tax-exempt organization:
- Corporate enterprises (especially gAG, gUG, and gGmbH),
- Cooperative societies
- Associations (registered and non-registered),
- Foundations (with and without legal capacity) as well as
- Trade or businesses of a legal entity under public law.
We would like to briefly introduce the four most common legal forms for nonprofit and tax-exempt organizations in Germany which are the charitable entrepreneurial company (gUG), the charitable limited liability company (gGmbH), the association (e.V.), and the foundation (Stiftung), and answer some important questions which are for example:
- How many persons are needed for incorporating the organization?
- Who is authorized to represent the organization?
- Are foreign shareholders / members admissible?
- Is it possible to change the statutes or the purpose later on?
|Charitable entrepreneurial company (gUG)||Association (e.V.)||Charitable LLC (gGmbH)||Foundation|
|Number of persons required||Min. 1||Min. 7||Min. 1||Min. 1|
|Foreign shareholders/members admissible?||Yes||Yes||Yes||n/a|
|Number of managing directors (UG/GmbH) or board members (association/foundation)||Any (min. 1)||Any (min. 1)||Any (min. 1)||Any (min. 1)|
|Foreign managing director/board member admissible?||Yes||Yes||Yes||Yes|
|Capital stock||Min. EUR 1 capital stock||EUR 0||Min. EUR 25,000 capital stock||Min. EUR 200,000 capital stock advisable|
|Payment of assets upon incorporation||Full payment upon incorporation||-||¼ of each share, min. EUR 12,500 in total||Full payment after approval by foundation authority|
|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 (unless otherwise provided in the statutes)||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 drafting 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|
|Change of shareholders/members||Transfer of business shares requires certification by notary public||Simple (entry/exit by written declaration)||Transfer of business shares requires certification by notary public||n/a|
|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 balance sheet accounting)||Moderate||Higher (mandatory balance sheet accounting)||Moderate|
|Governmental supervision||Low||Very low||Low||High|
You would like to set up a nonprofit organization in Germany and need advice on this? Are you looking for an advisor who helps you establish your organization in Germany? You would like to have the widest possible influence on the newly set-up organization in Germany?
We are delighted to assist. With our team of experienced attorneys and tax advisors, we provide legal counsel to charitable organizations and nonprofit organizations in the third sector nationwide. We also advise German and international companies, high net-worth individuals and nonprofit organizations as well as the public sector from within Germany and from abroad when it comes to the establishment and restructuring of nonprofit organizations based in Germany.
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