gGmbH: What is the German non-profit limited liability company?

Contents

• What is a gGmbH?
• Purpose of the gGmbH
• Forming a gGmbH
• How to qualify as a non-profit
• Prerequisites
• Want to know more?

gGmbH: Definition and meaning

The gGmbH is a non-profit company with limited liability under German law. In German this is gemeinnützige Gesellschaft mit beschränkter Haftung – gGmbH for short.

Here gemeinnützig (non-profit) means that the company’s purpose is to benefit the common good. ‘GmbH’ is the abbreviation for Gesellschaft mit beschränkter Haftung (limited liability company in English). This means that in Germany, the legal form of a gGmbH is bound by GmbH law. The increasing number of hospitals, kindergartens, and museums now being conducted as gGmbHs serve as a good example.

Do you have a charitable mission and don’t need much share capital to form a company? Then, establish a gemeinnützige Unternehmergesellschaft, or gUG (non-profit entrepreneurial company) with haftungsbeschränkt (limited liability) instead. This requires as little as a €1 investment.

The gGmbH is the non-profit variation of the GmbH (the German limited liability company). Our guide explains the GmbH legal form in more detail.

Purpose of the gGmbH

The legal form of the gGmbH aims to combine the benefits of a non-profit with those of a GmbH. The increased economic demands on charitable organisations have made gGmbHs more attractive and relevant for healthcare, cultural, and educational institutions.

For example, a gGmbH makes long-term planning and implementation easier by employing a professional full-time executive director while continuing to benefit from tax breaks.

Forming a gGmbH

The most essential requirement and difference between the GmbH and gGmbH legal forms is the charitable aspect. A gGmbH must serve a charitable function, as established in the articles of incorporation (Satzung), which must be approved by the Finanzamt (tax office). Learn more about the pros and cons of the corporate form GmbH.

When does my GmbH qualify as a non-profit?

• A gGmbH is considered non-profit if it serves a non-commercial, charitable, or religious function.
• The company objective must fulfil this charitable function.
• The objective of a gGmbH must be altruistic, direct, and specific. Profits must not be distributed among the shareholders but used to further the company’s objective. Additionally, all salaries must be related to work performance.
• The articles of incorporation need to establish a Begünstigter (beneficiary). If the gGmbH is disbanded or loses its non-profit status, the company assets go to this beneficiary. However, the initial investment is paid out to the shareholders. The beneficiary must also be recognised as a non-profit. Beneficiaries can also fall under the category gGmbH, Stiftungen (foundations), gemeinnützige Vereinegemeinnützige Vereine (charitable organisations) or gUGs, for example.

Source: Deutscher Spendenrat (German charity council)

Prerequisites for forming a gGmbH

• The legal form of gGmbH dictates that a charitable purpose must be established in the articles of incorporation.
• The company must directly work towards fulfilling this charitable function.
• A charitable beneficiary must be established in the articles of incorporation.
• Share capital must be deposited.

Want to know more? 

Our gGmbH essential reading:

• What is the German non-profit LLC?<<<
• The pros and cons of the gGmbH
• How to set up a gGmbH

Master list:

All Company Formation articles