Advantages and disadvantages of a KG

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There are a number of important decisions to be made in starting and organizing a business. This includes the choice of a legal form with all its advantages and disadvantages. What does it look like in a limited partnership (KG)?

The legal form KG is often chosen by family businesses
The legal form KG is often chosen by family businesses

The limited partnership (KG) is a partnership such as an OHG. In contrast to the OHG, not all partners have to take the full liability risk. Because only some of the shareholders bear an unlimited liability risk.

KG and OHG as a partnership

At least two shareholders are required for the establishment. One of them acts as a personally liable partner (general partner). At the same time, he is personally liable for the company's liabilities.

  • The so-called limited partners (partners) are not involved in the management. Their function is to offer capital. The amount is entered in the commercial register. At the same time, the upper limit of liability for the limited partners is specified.
  • Well-known mixed legal forms include the GmbH & Co. KG form. Legal entities can represent general partners and limited partners.
  • A GmbH then acts as the general partner of the limited partnership. Society can enjoy several benefits. These result on the one hand from the limited liability of the GmbH. On the other hand, partnerships have advantages in terms of raising capital and taxation.
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Limited partnership - advantages and disadvantages

The broad capital base through limited partners is advantageous. The credit rating is high.
Family companies often find the right legal form for them. The business responsibility usually remains with the person with unlimited liability. In addition, there is no disclosure requirement for the annual financial statements.

  • One of the disadvantages is the unlimited personal liability of the general partners. In addition, a great deal of trust among the shareholders is necessary. Because the "sole power of representation" applies to each of the general partners. Each of them may do business on behalf of the company.
  • One of the disadvantages is that even small disputes between the general partners are enough to endanger the existence of the company. Succession problems sometimes arise because there is a lack of coordination between the articles of association and the will of a partner. Another disadvantage of the KG is that a limited partner can gain significant influence on the company despite limited liability.

The costs of the company formation for the articles of association, for notaries and courts depend on the respective business value. You should calculate around 500 euros as the minimum start-up costs.

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