General partnership: offene Handelsgesellschaft (oHG)

The oHG is a form of company whose purpose is to operate a commercial enterprise under a joint name and in which all partners have unlimited liability to creditors. It is particularly suitable for small and medium-sized companies.

According to the German Commercial Code (HGB), companies that carry out typical commercial activities are considered commercial enterprises: e.g., wholesale and retail, manufacturing, banking and insurance, transport, commercial agents, etc., but also people who run a craft or other commercial enterprise are considered merchants.

The law governing the oHG is regulated in Paragraphs 105-160 HGB. In addition, the provisions on the basic form of every company, the GbR (Paragraphs 705-740c BGB) apply accordingly. In terms of its corporate form, the oHG can also be seen as a special form of the GbR for a commercial enterprise with a commercial scope of business.

The oHG is a commercial partnership. Unlike a corporation, the focus is not on the contribution of capital, but on the personal commitment of the partners. As a rule, they contribute their own labour, which results in a certain personal connection to the company. The formation of a partnership is not dependent on a certain minimum capital.

Constitution, executive bodies

The oHG has no legal personality of its own, distinct from the partners themselves. Nevertheless, it is similar to a legal entity in that it can sue and be sued in court. It can acquire rights and enter into liabilities, acquire property and other rights in rem to real estate. Each partner has sole management authorisation and sole power of representation. However, deviating agreements can also be made.

Legal relationships of the partners, liability

The partners themselves are fully qualified merchants. The oHG is liable for company debts with the company assets (joint assets). In addition, all partners are personally liable, i.e., also with their private assets. It is not possible to limit liability to the company's assets. Each partner is fully liable to third parties. However, they can assert compensation claims against the company or the other partners after claims have been made by third parties.

As self-employed persons, the partners of an oHG are not normally subject to social security contributions (pension insurance, health insurance and unemployment insurance). Voluntary continued insurance in the statutory health insurance scheme is possible for former employees. It is also possible to apply for compulsory or voluntary insurance in the statutory pension insurance scheme. In some sectors, entrepreneurs are also required to take out statutory accident insurance (employers' liability insurance associations) if they do not have any employees.

Shareholding structure

The partner's stake in the company determines its share of the profit and loss as well as its voting power. It is advisable to regulate the shareholding ratios in the articles of association, as this is primarily used to determine the shareholding. In the absence of such an agreement, the voting power and distribution of profit and loss is determined alternatively according to the ratio of the agreed values of the contributions and, in the highest case, on a per capita basis

Partners

The oHG is formed by a partnership agreement between at least two partners. Partners of an oHG can be domestic and foreign, natural and legal persons (e.g., in the case of a GmbH & Co. oHG). Other commercial partnerships can also participate as partners. A change of partners is only possible with the consent of all partners, unless otherwise stipulated in the agreement.

Capital

The amount of the capital can be freely agreed. A minimum capital is not necessary.

Object

The oHG is a trading company, i.e., according to the definition of the HGB, its business purpose is the operation of a trade. In addition to a typical, traditional commercial trade (wholesale, retail), an oHG can also pursue all other purposes permitted in the form of a trade (in particular also industry, crafts and other services), like any merchant registered in the commercial register

Company name

The company name is the name of a company with which it appears in legal and business transactions. The company name of an oHG can contain the surname of a partner, fanciful additions or factual additions, as long as it has distinctive character and thus a naming function. It can also be formed as a combination of these elements. The legal form ‘offene Handelsgesellschaft’ must always be stated. It can be abbreviated to ‘oHG’.

The company components must not be capable of misleading as to the nature or scope of the business or the relationships of the business owners. The company name must be clearly distinguishable from other companies already entered in the commercial register at the same location or in the same municipality.

Only the company entered in the commercial register can have a company name that can be sold, inherited and leased together with the business operations

Registered office of the company

A distinction is made between the administrative seat (the place where the business of the oHG is actually conducted) and the contractual seat (a different place in Germany agreed as the seat in the articles of association).

The partners of an oHG can exercise a right to choose a registered office and freely choose and specify a contractual registered office in the articles of association - irrespective of the place of registration of the company. This enables the oHG to conduct business outside of Germany via a formal contractual domicile in Germany and an administrative domicile abroad. This means that an oHG registered in Germany can also operate exclusively abroad and still be registered here and subject to German law.

The only requirement is that the chosen registered office is in Germany and that the company - in the case of a registered office abroad - is recognised as such in the respective country. This is generally the case in countries within the European Union.


Fulfilment of publication directives

The oHG is to be notified to the Register of Commerce for entry via a Notary Public. The partnership agreement does not have to be submitted to the Register of Commerce.

The application to the Register of Commerce is to be done by all partners. It must contain the surname, first name(s), Date of birth and residence of the partners, the company’s corporate name and the location of its headquarters as well as the time of the start. The application is made electronically in a publicly certified form. .

Internal management

Management is exercised jointly (principle of self-organisation). Individual management authorisation applies. However, the partnership agreement can also provide for other regulations and, for example, exclude individual partners from the management in whole or in part. However, the other managing partners authorised to manage the company have a right to object to the transaction internally, with the result that the transaction must not be carried out.

The individual management authorisation provided for by law only applies to actions that are part of the normal operation of the commercial business of this general partnership. A partner resolution is required for unusual transactions.

Passing of a resolution

In contrast to the management, the internal decision-making of the oHG takes place by means of resolutions passed by the partners at meetings. The procedure is largely informal. All that is required is that the purpose of the meeting is announced when it is convened, and that the invitation is issued within a reasonable period of time before the date of the meeting.

In principle, every partner is entitled to voting rights regardless of the size of their shareholding. In individual cases, the exclusion of voting rights is regulated by law. This concerns serious conflicts of interest.

As a rule, the law stipulates a unanimous partner resolution (Para. 109 HGB); other majorities can be agreed in the articles of association.

External representation

External representation vis-à-vis third parties is carried out by the partners themselves (organisational representation). In principle, each partner is authorised to represent the company individually. However, the partnership agreement can also provide for deviations in accordance with Para. 124 sec. 1, 2 and 3 HGB. In particular, individual partners can be excluded from representation or joint power of representation can be agreed.

The scope of the power of representation can be limited internally, but not vis-à-vis third parties. The company must therefore also take credit for transactions with third parties that a partner has concluded for it internally without power of representation.

Non-partners can be granted power of representation with the power of attorney. The granting of the power of attorney must be entered in the commercial register.

Partners' right to information

Every partner may inspect the company's documents, in particular accounting documents. In addition, every partner has the right to request information about the company's affairs. This applies even if they are excluded from the management of the company.

Bookkeeping and annual financial statements

As a commercial company, the company is obliged to keep commercial books and to list its commercial transactions and assets in accordance with the principles of proper accounting. At the end of each financial year, a balance sheet (annual balance sheet) and a profit and loss account must be prepared in German and in euros.

The audit of the annual financial statements and the disclosure or publicising of the annual financial statements are also not required, except in the case of credit institutions or companies subject to the law on the accounting of certain companies and groups.

The oHG is a partnership. Partnerships themselves are not subject to income tax or corporation tax. Instead, the profit is determined uniformly and separately and allocated directly to the partners. The partners' profit shares are subject to income tax or corporation tax, depending on their legal form

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