In short:
- The GbR is the leanest legal form for two or more founders. No minimum capital, no notary appointment, no commercial register.
- The GmbH separates company and private assets. In return it asks for €25,000 in share capital, €12,500 of it before registration.
- Liability is the biggest difference. In a GbR the partners are liable personally and jointly, in a GmbH only the company assets are.
- A GbR pays no income tax itself. The profit is split and taxed in each partner’s own return, while a GmbH pays corporation tax.
- For a lean start with manageable risk the GbR is enough. Once large order values, investors or big clients come in, the GmbH fits better.
Two people, one idea, and the question is already on the table: GbR or GmbH? One legal form is ready in an afternoon and costs almost nothing. The other asks for capital, a notary appointment and patience. In return, private assets stay out of it. This guide covers what a GbR means and what setting one up and running it costs. Plus how liability works and at what point a GmbH starts to pay off for you.
What is a GbR? Meaning and abbreviation
GbR stands for Gesellschaft bürgerlichen Rechts, a civil-law partnership. It is governed by sections 705 ff. of the German Civil Code, and the first section already gives away the whole principle: several people commit to promoting a shared purpose. The law does not ask for much more.
Two people are enough. That can be two designers, a pair of tradespeople or a joint medical practice. Companies may hold a stake in a GbR as well. Since 1 January 2024 a reformed partnership law applies, the MoPeG. It states explicitly that the GbR has legal capacity and gives it a register of its own.
That puts the GbR among the partnerships. There is no such thing as a GbR structured as a corporation, and almost everything later hangs on that line: liability, taxes, effort. The GmbH sits on the other side of it.
How a GbR comes into being without a founding act
Written out, GbR means Gesellschaft bürgerlichen Rechts, and this particular legal form needs no founding act at all. It comes into being by itself. As soon as two people pursue the same goal and work together on it, a GbR already exists in law. No contract, no stamp, often without the people involved noticing.
An everyday example: two photographers take on a job together and share the costs and the profit. That is a GbR. Some paperwork still follows. Anyone running a trade registers it with the trade office, each person separately. Anyone in a liberal profession only registers with the tax office. The tax registration questionnaire goes through ELSTER either way.
Is a GbR a company?
Is a GbR a company? Yes. It signs contracts, issues invoices, employs staff and owns property. It is still not a Firma in the sense of the Commercial Code. There, Firma means the trade name a merchant holds in the commercial register. The GbR is not in that register.
For business dealings that means the partners appear with their first and last names plus the suffix GbR. A made-up business name may sit alongside them, but it does not replace them. The GbR as a business form therefore stays more personal than a GmbH, whose name is freely chosen and on the register.
Advantages and disadvantages of a GbR
The advantages and disadvantages of a GbR sit close together. What makes the start easy is what sets the limits later. Little form, little capital, little bureaucracy. In exchange, full personal responsibility. Here are both sides of the GbR at a glance.
Advantages: fast, cheap, free of formalities
The advantages of a GbR show on day one. There is no minimum capital, so you tie up no €25,000 before the first order arrives. No notary appointment. No commercial register entry costing time and fees. Day-to-day, the effort stays small too:
One more advantage of a GbR over a GmbH sits with the profits. They go straight to the partners, with no second tax layer on the distribution. Losses from the early months can be offset against other income.
Disadvantages: liability with private assets
The most-cited GbR disadvantage sits in section 721 of the Civil Code. All partners are liable to creditors personally and as joint debtors. Personally means private assets count. Jointly means one person can be called on for the full amount, whatever the share. The balance between the partners is settled internally afterwards. The rule cannot be contracted away.
It is easy enough to place. Business liability insurance covers the usual claims. A clean agreement sets out who decides what. And with consistently large order values, the corporation is worth a look.
Two further points belong on the list of GbR disadvantages. Banks and leasing providers assess a partnership differently from a corporation. And important resolutions need every vote unless the agreement says otherwise.
In brief: in a GbR every partner is liable in full and in person. In a GmbH only the company assets are, under section 13(2) GmbHG. That single sentence decides the choice of legal form more often than every cost question put together.
What does setting up a GbR cost?
People searching for GbR formation costs usually expect a three-figure sum. Mostly you pay far less. Exactly one item is compulsory: the trade registration. It applies per partner and costs €20 to €60 depending on the municipality. A GbR made up purely of liberal professions does not pay even that; it only registers with the tax office.
Everything else is optional. A partnership agreement reviewed by a lawyer costs a few hundred euros, but it is not required. A notary is only needed for property or for registration as an eGbR. Here are the formation costs of both legal forms side by side:
| Item | GbR | GmbH |
|---|---|---|
| Minimum capital | none | €25,000, of which €12,500 before registration |
| Notary | only for property or an eGbR | compulsory, from around €500 with the model protocol |
| Commercial register | no entry | compulsory, around €150 registration fee |
| Trade registration | €20 to €60 per partner | €20 to €60 once |
| Partnership agreement | no prescribed form, advice optional | notarised |
| Total before launch | usually under €150 | usually €700 to €1,500 plus share capital |
Running costs compared with a GmbH
GbR costs largely stop after the setup. What remains for you is tax advice, if you want it, business liability insurance and the business account. The bookkeeping runs on cash-basis accounting, and an organised team often handles that itself.
For a GmbH the sum works out differently. How much does a GmbH cost per year? The running costs of a GmbH consist of double-entry bookkeeping, annual financial statements and publication in the Bundesanzeiger. Depending on scope, budget a four-figure amount a year for tax advice. Register changes come on top whenever the shareholder circle or the management changes. That is the price of limited liability.
GbR and GmbH compared
The difference between a GbR and a GmbH comes down to three axes: liability, capital, effort. Everything else follows from them, from the bookkeeping to the public image. Answer those three points for your own plan and the decision has usually already fallen into place.
Liability, capital, formation effort
GbR vs GmbH starts with liability. A GbR puts no assets between the company and its partners, so liability is personal. The GmbH does exactly that: under section 13(2) GmbHG only the company assets are available to creditors. The suffix mbH stands for “mit beschränkter Haftung”, with limited liability, which also answers anyone looking for the difference between mbH and GmbH. The two labels name one and the same thing.
On capital the position is clear. A GbR starts at €0. A GmbH needs €25,000 in share capital, at least €12,500 of it before registration. The money is not lost; it belongs to the company and may be used for the business.
That leaves the effort. A GbR arises without form. The other legal form needs a notarised agreement, a formation account for the capital and the commercial register entry. Before that entry it does not exist yet. Between the notary appointment and the register entry, expect two to six weeks.
Taxes: income tax instead of corporation tax
The second big GbR and GmbH difference lies in tax law. A GbR pays no income tax itself. The profit is determined for the business as a whole, then split between the partners. Each person taxes their share through their own income tax return. Specialists call it the transparency principle.
A GmbH is a taxable entity in its own right. It pays corporation tax of 15% plus the solidarity surcharge, 15.825% together. Whatever is then distributed is taxed once more at the shareholders. In exchange, retained profit stays lightly taxed for as long as it works inside the company.
Trade tax applies to both as soon as the activity is commercial. The difference sits in the allowance: €24,500 of trade income stays free for a GbR, once per partnership. A GmbH does not get that allowance. A GbR made up purely of liberal professions pays no trade tax at all.
Comparison table: GbR and GmbH
This table of GbR advantages and disadvantages sets both company forms side by side, row by row. It is no substitute for advice, but it shows where the two paths separate:
| Criterion | GbR | GmbH |
|---|---|---|
| Formation effort | no formalities, from two people | notary and commercial register |
| Minimum capital | none | €25,000 |
| Liability | personal and joint | company assets only |
| Bookkeeping | cash-basis accounting | double-entry, annual statements |
| Tax on profit | partners’ income tax | corporation tax 15.825% |
| Trade tax allowance | €24,500 | none |
| Public image | partners’ own names | free company name on the register |
| Fits | small services and side projects | liability risk, investors, large contracts |
Two rows carry the decision. Liability says how much private money is exposed. Minimum capital says how much cash is tied up before the first order. Everything below follows from that. The bookkeeping grows with the legal form, the tax burden shifts from the person to the company, and the name gains weight.
When a GbR is enough and when a GmbH makes sense
The GbR is enough for as long as the risk stays manageable. Two designers with a laptop and software, a team of coaches, a handful of projects a year. There, business liability insurance protects more than a legal form does, and the admin stays light.
The reasons for a GmbH grow with the size of the orders. Anyone buying stock, employing staff or delivering construction work deals in sums that private cover no longer carries. Investors also come in almost exclusively at corporations, because shares there can be transferred. And some clients simply insist on it.
That leaves the cost question. For the cost of setting up a GmbH with 2 people, notary and register come on top of the €25,000 in share capital. That is usually €700 to €1,500. Carry that too early and you tie up money the business needs. Which is why many teams start as a GbR and switch later.
Switching from a GbR to a GmbH
The route from a GbR to a GmbH is well trodden. There are two variants. In a contribution in kind, the GbR business is transferred into the new GmbH as a non-cash contribution, valued in a formation report. In a cash formation, the GmbH is set up with money and the business moves across by contract.
Either way it takes a notary, share capital and the commercial register. Contracts with clients, suppliers and landlords are transferred, which needs their consent. The business account runs in the name of the company from then on. The reverse step, converting a GmbH into a GbR, is rare and goes through a liquidation.
In brief: the GbR is the cheap way in, the GmbH is the answer to risk and growth. Moving from a GbR to a GmbH is possible at any time, so the first choice is not a one-way street.
Setting up a GbR: the steps
When you set up a GbR, costs arise in almost only one place, the trade office. The rest is organisation. These five steps take a GbR from the first conversation into business:
Five steps to a working GbR
Settle what the partnership does, who contributes what and how the profit is split. Without an agreement the statutory split applies.
Written form is not compulsory, but it is almost always sensible. It makes contributions, voting rights and exits traceable.
Every partner running a trade registers with the trade office, for €20 to €60 depending on the municipality. Liberal professions skip this step.
The tax registration questionnaire goes through ELSTER. The tax number follows, and only then are correct invoices possible.
A shared account separates company money from private money and keeps the cash-basis accounts clean.
The partnership agreement: what belongs in it
Verbal agreement is enough for a GbR contract. In writing it is still the better idea, because it settles the evidence if anything is disputed. Without your own rules the law applies, and it splits profits by head rather than by effort. A template from the internet is a usable start, but it does not replace a conversation in your team. These points belong in it:
The last line in particular deserves attention. Since the 2024 reform, a partner leaving no longer dissolves the partnership automatically; the others carry it on. What happens to the departing share is set by the agreement.
eGbR: entry in the partnership register
The partnership register has existed since 2024. A GbR may enter itself there and is then called an eGbR. In principle the step is voluntary, in practice not always. For property transactions section 47(2) of the Land Register Code requires prior entry. The same applies when a GbR is to hold shares in a GmbH.
Entry brings advantages with it. The name is protected, the power of representation is publicly visible, and business partners can see at a glance who may sign. The price for that: notarised application, register fees and the duty to report changes from then on. If you only offer services, you rarely need it.
A business account for a GbR and a GmbH
Nothing obliges a GbR to hold a business account, yet in practice it is the first step after registration. Shared finances need an address of their own. Once income, spending and withdrawals run through one shared account, you have the cash-basis accounts done in minutes at year end. For a GmbH the account is set anyway, because the share capital has to be paid in verifiably.
The Vivid business account for a GbR is built for shared use. A German IBAN, access for every partner with their own role and card, sub-accounts for reserves and tax. The Free Start plan is €0 a month. If you are planning a corporation, you will find the formation account that takes the capital under business account for a GmbH and UG. All products are on the Vivid Business page.
Conclusion: GbR for the simple start, GmbH for the protection
The two legal forms solve two different problems. The GbR gets two or more people started within days, without capital and without a notary. The GmbH draws a line between the company and private assets, and charges money, time and ongoing admin for it.
The most useful test is one question: what order values does your plan move? If they stay within the range of business liability insurance, the GbR fits. If they grow beyond it, the GmbH is the calmer choice. And because the switch stays open to you at any time, the first decision is not one for ever.
Start together, keep the finances apart
Open the Vivid business account online and manage the money of your GbR or GmbH in one place from day one.
Frequently asked questions
What is a GbR, simply explained?
A GbR is an association of at least two people pursuing a shared purpose. It comes into being through the collaboration itself, often with no contract at all. It asks for no minimum capital and no notary. It is governed by sections 705 ff. of the Civil Code, and since 2024 it expressly has legal capacity.What is the disadvantage of a GbR?
Liability. Under section 721 of the Civil Code all partners answer for the obligations of the partnership personally and as joint debtors. Private assets count, and the size of the share makes no difference. The rule cannot be contracted away. It can be cushioned, through business liability insurance and clear rules in the partnership agreement.Does a GbR have tax advantages?
The tax advantages of a GbR are real. There is no corporation tax, because the profit is taxed directly at the partners. On trade income, €24,500 a year stays free, an allowance a GmbH does not get. At high profits the picture reverses, because the income tax rate rises with income.Who is a GbR suitable for?
For you and at least one other person, when you are building a small to mid-sized service business with manageable liability risk. Agencies, joint practices, trade teams and side projects are typical. Anyone starting alone sets up a sole proprietorship, because a GbR needs at least two people.Why is a GbR not a Firma?
In the Commercial Code, Firma means the trade name of a merchant in the commercial register. A GbR is not in that register, so it carries no Firma in that sense. In business it appears under the partners’ first and last names plus the suffix GbR. An additional business name is allowed but does not replace them.What is the difference between a GbR and an eGbR?
An eGbR is a GbR entered in the partnership register. The legal form and the liability stay the same. What is new is the protected name, the publicly visible power of representation and the duty to report changes. For property transactions and for holding GmbH shares, the entry is a precondition.Can a GbR be converted into a GmbH?
Yes, and the route is well trodden. The business is either contributed to the new GmbH in kind. Or the GmbH is set up with cash and takes the business over by contract. Both need a notary, share capital and the commercial register entry. Costs usually run to €700 to €1,500 on top of the €25,000 in share capital.
Note: this article is general information and does not constitute legal, tax or financial advice. Before choosing a legal form, discuss your case with a notary and a tax adviser.
