Kommanditgesellschaft KG (Limited Partnership)
At a glance
- swift formation at low cost
- the limited partner (Kommanditist) has limited liability
- flexible design of the role of the limited partners in the company:
- mere capital contribution, in addition employment or self-employed activity
- simple cash-based system of accounting or accrual-based system of accounting
- the general partner (Komplementär) has unlimited personal liability
Articles of Association
The formation of a Kommanditgesellschaft (KG) requires the adoption of Articles of Association.
A Kommanditgesellschaft KG comes legally into being upon entry of all partners in the companies register. The signatures of all partners must be certified by a notary or by the court. This incurs fees.
At least one of the partners has unlimited liability as general partner (= the partner with personal general liability in a Kommanditgesellschaft) with the business assets and also his/her private assets, i.e. jointly and severally (for all of the company’s liabilities) and directly (creditors may directly take recourse on the general partner without having to sue the company first). One or several limited partners have limited liability to the extent of their contribution to the company.
The general partners are responsible for management and representation. The limited partners have no say in day-to-day business. The Articles of Association may include provisions to the contrary, these must, however, be recorded in the companies register.
The company name of a Kommanditgesellschaft KG may be a real or invented name with the addendum “KG”. A personal name may also be chosen, however only that of a personally liable partner. The company name must not be misleading and must be recognizable.
Accounts / Financial statements
If the revenues in two consecutive years exceed EUR 700,000, or EUR 1 million in one year, the company must keep accrual-based accounts and prepare a balance sheet (accounting and disclosure requirement).
The allocation of profits and the right of withdrawal is laid down in the Articles of Association.
The partners tax their total profits themselves (income tax). The company is VAT liable.
Partners with unlimited liability are subject to mandatory insurance under the Social Insurance Law for Commerce and Trade (Gewerbliches Sozialversicherungsgesetz GSVG). Limited partners who are employed by the company are insured under the General Social Insurance Law (Allgemeines Sozialversicherungsgesetz ASVG). Limited partners who have made a mere capital contribution are not subject to mandatory insurance. If the limited partner bears the entrepreneurial risk, mandatory insurance may arise under the GSVG.
If the exercise of the activity of a Kommanditgesellschaft KG falls under the Trade Code (Gewerbeordnung), a managing director must be appointed for trade licencing purposes. This may be a partner with unlimited liability (general partner) who is in possession of the required trade licence, or an employee who is subject to mandatory insurance who must be employed for at least 50% of the standard weekly working hours.
The reasons for dissolution are; a resolution of the partners, the commencement of bankruptcy proceedings concerning the company’s assets, bankruptcy of a partner, death of a general partner, timely termination by a partner, an action for termination brought by one partner.