Private Limited Partnership (KG)

The legal form of a private limited partnership (KG) allows at least some of the shareholders to limit their liability: A full partner must take over full personal liability (so-called general partner), while the others are only liable with their limited partners’ capital contribution (so-called, limited partners).

The advantages of a private limited partnership (KG) are not only limited to the fact that they – different than by a private limited liability company (GmbH) – require no minimum capital. They can also be attractive from a tax perspective: The profits of the private limited partnership (KG) are not subject to corporation tax. In fact, distributed dividend profits represent income of the shareholders, which is subject to income tax together with other forms of income. By the amount of the dividend distribution, the taxable income can thus be controlled and optimized under tax law aspects.

Anyone that wants to utilize these tax advantages but shies away from the risk of the personal liability, will opt for founding a private limited liability company & private limited partnership company (GmbH & Co. KG). This company form is a private limited partnership, in which the role of the personally liable full partner (partner with unlimited liability) is taken over by a private limited liability company (GmbH). Strictly speaking, two companies are established: a private limited partnership (KG) and a private limited liability company (GmbH). The disadvantages of a private limited company & private limited partnership company (GmbH & Co. KG) therefore lie in the high costs that are associated with the establishment and the continuing management of the two companies.