Structure of a Company: How a GmbH, UG and Other Legal Forms Are Built

Anyone founding a GmbH, UG or another company quickly encounters terms such as share capital, articles of association or shareholders’ meeting. Behind them lies a clear system. We explain how a company is structured and what role the legal form, articles of association, management and capital play.

At a glance

Setting up a company follows a clear sequence. Anyone who knows the individual steps and carries them out in the right order avoids delays and builds a solid foundation for the start. Some requirements differ depending on the legal form, but the basic process remains similar.

The key steps at a glance:

Refine the business idea and choose the right legal form.
Draw up the articles of association and have them notarised (where required).
Pay in the share capital and prepare the commercial register application.
Wait for registration in the commercial register, then start business operations.
After formation, further obligations follow, such as tax registrations, bookkeeping and, where necessary, trade registration.

Anyone who knows the process early and prepares each step carefully saves time, avoids typical mistakes and starts on a legally secure footing.

What does “structure of a company” actually mean for you?

When we talk about structure, we do not just mean drafting a contract. We mean the entire framework that defines who may do what, who is liable and how decisions are made. This framework accompanies your company for years, often longer than you would think on the day of formation.

This matters to you for one reason: most disputes between shareholders arise not at the beginning but years later, when one wants to leave, new people join or views on the direction of the company drift apart. Much of this can be avoided if the foundation is clear from the outset. The cleaner you build today, the fewer disputes, queries and costs you will have later. This is exactly where the notary comes in.

Which legal form fits, and what it changes for you

Anyone starting a business usually thinks first about the product, the website or the first customers. The legal form, by contrast, often feels like a tedious bureaucratic step to get out of the way quickly. In fact, it is one of the most important decisions of all, because it determines how much capital you need, how you are liable and how your company presents itself externally.

Partnerships (GbR, OHG, KG)

A GbR, OHG or KG comes into existence as soon as a partnership agreement is concluded. A notary is not strictly required here, which sounds practical at first. The decisive point for you comes later, though: in these legal forms the partners are generally personally liable, including with their private assets.

Corporations (GmbH, UG, AG)

GmbH, UG and AG are separate legal entities. Here, notarisation of the articles of association and registration in the commercial register are mandatory. In return you gain a major advantage: as a rule, you are liable only with the company’s assets, not with your private money. For most founders, this is precisely the reason to choose a GmbH or UG.

Which form suits your project in practice is covered in our article on choosing a legal form.

The official start-up portal of the Federal Ministry for Economic Affairs (Existenzgründungsportal, in German) also offers a neutral overview of the legal forms.

In our experience, most founders do not know the difference between a shareholder and a managing director. Both can be the same person, but they do not have to be. The shareholder owns the company, the managing director runs it. We are happy to clarify this before the appointment so that you know in which capacity you are signing.

The articles of association, the heart of your formation

At the beginning, everyone usually gets along well. You found the company together, full of energy, and can hardly imagine ever falling out. That is exactly why the articles of association are often underestimated. They do not govern the good start but the situations that may come later: when a shareholder wants to leave, when someone new is to join, or when two founders suddenly have different ideas about the future.

The articles of association, called the statutes in the case of corporations, are the foundation. They define how your company works and what happens when things do not go to plan. These seven points belong in them:

Purpose of the company
Contributions and shareholdings
Voting rights and resolutions
Management and representation
Succession and withdrawal
Rules on profit and loss
Resolution of disputes

Example: Two friends form a GmbH together, each holding 50 percent. Three years later, one wants to leave and sell his shares. If the articles state how the share is valued and who may take it over, this is settled within a few weeks. If this rule is missing, a long dispute often begins that can paralyse the whole company.

What additionally applies to GmbH, UG and AG

For these legal forms, the articles of association must be notarised and contain certain minimum details: the company name, registered office, company purpose and capital. You will find guidance on choosing a legally sound name in the article choosing a company name. How to define the company purpose properly is covered in a separate article.

Who decides what? The bodies of your company

As long as you found the company alone, decisions are usually simple. As soon as several people are involved, sooner or later the question arises: who is actually allowed to decide what? The answer depends on the legal form.

Partnerships

There are no formal bodies here. The partners manage the business themselves and represent the partnership externally. In a KG, the general partners take on this role, while limited partners stay out of it.

Corporations

In a GmbH or UG there is the managing director for day-to-day business and the shareholders’ meeting for the major decisions. An advisory board or supervisory board is optional. In an AG the structure is stricter: management board, supervisory board and general meeting are clearly separated.

The key point for you: in corporations, ownership (shareholders) and management (managing directors) are cleanly separated. This creates clarity, especially when several people are involved and not everyone should have a say in every detail.

Share capital, what it is and what happens to it

Hardly any topic raises as many questions among founders as share capital. The most common are: is the money gone after formation? Do I really have to pay the full 25,000 euros? And what is it actually for? One thing at a time.

Share capital is not money that disappears, and it is certainly not a fee for the notary. It stays in your company and is available for day-to-day business, such as rent, materials or the first invoices. So you are not paying it away, you are making it available to your own company. Different requirements apply depending on the legal form:

GmbH: at least EUR 25,000 share capital, of which only EUR 12,500 actually has to be paid in at formation
UG: formation from as little as EUR 1, but a reserve must be built up until EUR 25,000 is reached
AG: at least EUR 50,000 share capital
GbR, OHG, KG: no statutory minimum capital

Contributions can be made in cash (cash contribution) or in kind (contribution in kind). In corporations, contributions in kind must be precisely documented and confirmed by the notary.

Example: One shareholder contributes EUR 20,000 in capital, the other mainly his work and know-how. This is possible, but must be properly regulated in the articles, because work does not legally count as share capital. Those who set clear rules early avoid later feeling treated unequally.

Management and representation, who may act for the company?

Two things are often confused here. The management runs the company, complies with statutory duties and implements the strategy. This must be distinguished from the power of representation: it determines who may legally represent the company externally, for example who can sign contracts. This rule is recorded in the commercial register and is binding for business partners.

The options are:

Sole representation, one person acts alone
Joint representation, several people must sign together
Mixed forms where there are several managing directors

Especially with several managing directors, it is worth looking closely: do you want each to be able to act alone, or should important decisions always be taken by two? How this can be arranged in practice is explored in the article representation by managing directors.

Limited liability, what it means for your private assets

For most people, this is the real core question, even if it is rarely said out loud: can I end up personally liable? Are my savings, my car, perhaps even my house protected if the company fails? This concern is justified, and this is exactly where it becomes clear why the legal form matters so much.

In concrete terms:

Partnerships: the partners are personally and unlimitedly liable, including with their private assets.
KG: the general partner is liable without limit, the limited partner only up to the amount of their contribution.
GmbH, UG, AG: liability is generally limited to the company’s assets. Your private money normally stays out of it.

For most people, that is the reassuring news. There is one limitation, though, and you should know it: “limited liability” is not a blank cheque. As a managing director, you can still be personally liable in certain cases, for example in the event of:

breaches of statutory duties
late filing for insolvency (delayed insolvency filing)
breaches of tax obligations
disregard of bookkeeping or disclosure obligations

In normal business operations, you need not fear this. It concerns cases in which duties are clearly breached. Those who act correctly are well protected. You can read more about how liability works up to registration in the article liability before registration.

After formation, the work continues

With the entry in the commercial register, everything seems done, but in fact the organisational part of setting up a company only really begins afterwards. Your company has now officially come into existence, but a few steps are still outstanding:

Trade registration
Tax registration with the tax office
Notification to the transparency register
Opening a business bank account
Proper bookkeeping and record-keeping
Disclosure obligations for corporations

Do not worry if that sounds like a lot. These steps come one after another, not all at once, and there are clear procedures for most of them.

The role of the notary, neutral at your side

Most people come to their first notary appointment with a long list of questions. Some have already planned exactly what their company should look like, others first want to understand which structure makes sense at all. In both cases, the notary accompanies the formation and ensures that all legal steps are carried out properly. In concrete terms, this means:

Preparing and notarising the articles of association
Reviewing and documenting the contributions
Legal structuring that keeps liability risks small
Coordination with the register court
Filing the company with the commercial register

The notary stands neutrally and independently at your side. He does not represent one shareholder against another, but ensures that the structure is clear and legally sound for everyone. You can check at any time what the commercial register publicly records in the official commercial register.

What to pay particular attention to when forming a company

unclear or incomplete articles of association
missing rules on succession or withdrawal
imprecise powers of representation
too little capital
late or missing filings with the register
inadequate checking of the company name

Back to the Founders Plus overview

Still unsure which structure makes sense for your formation?

Book an appointment and discuss your questions directly with the notary, often within a few working days.

Frequently Asked Questions

What does the structure of a company include?

This includes choosing the legal form, the articles of association, determining the capital, the corporate bodies, notarisation, the commercial register application and tax registration.

Do I really need a notary for a GmbH?

Yes. The articles of association of a GmbH must be notarised and filed with the commercial register. This is required by law.

How long does registration in the commercial register take?

Usually a few days to a few weeks. This depends on the register court and on whether the documents are complete.

How much capital do I need for the formation?

A GmbH requires EUR 25,000 in share capital, of which EUR 12,500 at formation. You can set up a UG from as little as EUR 1. The capital remains with your company.

What is the difference between a shareholder and a managing director?

The shareholder owns the company, the managing director runs the day-to-day business. Both can be the same person, but they do not have to be.

Am I liable with my private assets?

Generally not with a GmbH, UG or AG, where only the company’s assets are liable. With partnerships, on the other hand, you are personally liable. Only in the case of clear breaches of duty can a managing director of a GmbH also be personally liable.

What bodies does a GmbH have?

Managing directors and the shareholders’ meeting. An advisory board or supervisory board is optionally possible.

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“Very competent and professional support in setting up our company. The advice was clear, the process fast and straightforward.”

Build your company on a clear foundation

Setting up a GmbH or UG requires notarisation of the articles of association and filing with the commercial register. Notary Franke guides you through this from the legal review to notarisation and registration: neutral, clear and reliable.