Germany in general is a statute driven country with different business organizations. First there is the German “Aktiengesellschaft”, a business organization owned by shareholders, comparable with a US stock corporation. Then there is the “GmbH”, a business organization with limited liability, like a US LLC. German Law has the possibility for a partnership, but not like the US Business Law for the limitation of the liability of the Partners in a LLP. But Germany has the KG as a comparative to the limited partnership and the general partnership is called “Offene Handelsgesellschaft”.
The US system has even if it is not statutory different similar business organizations like in Germany. The US business organizations are as an exception from common law generally regulated in Acts. The US law system knows the agency, sole proprietorship, general partnership, limited partnership, limited liability partnership, limited liability company and the corporation.
In particular there are some general policies for each business organizations which are adopted in most of the states and can be found for example in the RUPA, RULPA, RMBCA, and ALI.
The US agency is the basis of corporate law, the agency represents the simplest form of business organisation. The agency is the relationship between principal and agent. An agent is authorized to act on behalf of the principal. There could be actual, apparent, or inherent authority.
The sole proprietorship is a US business organization in which one person owns all the assets, owes all the liabilities and operates in his or her personal capacity.
The US general partnership is a voluntary association of two or more persons who jointly own and carry on a business for profit. The partners share equally in profits and losses. There is no formation for the US general partnership required.
A US Limited partnership (LP), like a German KG is composed of one or more persons who control the business and are personally liable for the partnership’s debts, and one or more persons who contribute capital and share profits but who cannot manage the business and are liable only for the amount of their contribution (limited partner). In terms of formation there has to be filed the LP certificate with secretary of state of fulfill the formation requriment of a LP.
A limited liability partnership (LLP) is a US business organization in which all partners are exempt from liability for certain kind of debts/obligation of the partnership. For the LLP there must be file a “registration statement” with secretary of state. A procedural advantage can be that the LLP can keep the original general partnership agreement. Therefore it is a fast and practial way to form a LLP out of a general partnership.
The US limited liability company (LLC) is a legal entity distinct from members. Can be taxed as partnership or corporation. For Formation there must be filed the articles of organization with Secretary of state. Must elements under ULLCA are Name of company, address of office; name and address of agent for service, name and street address of each organizer, whether the is to be a term company;,whether the company is manager manage if so name and street address of each initial manager; whether one or more members are liable for its debts and obligation (usually only the LLC). The LLC is managed by the members (Default ULLCA) or by managers (in Operating Agreement). The LLC is a legal entity, therefore the members are not liable except otherwise declared in Article of Organization, but there could be piercing the Veil. The members of the LLC have fiduciary duties (Duty of care & Duty of Loyalty).
Finally there is the US corporation. The corporation is comparable to the German Aktiengesellschaft. Generally the corporation is owned by shareholders. When no stockholders exist, a corporation may exist as a non-stock corporation, and instead of having stockholders, the corporation has members who have the right to vote on its operations.
There are two broads of corporate governance forms in the world. In most of the world, control of the corporation is determined by a board of directors which is technically elected by the shareholders. In practice, with the exception of takeovers, the board members are determined by the previous board. Board is for all corporations (elected by shareholders) the decision making body. Fundamental corporate changes require approval by the shareholders. Germany the control of the corporation is divided into two tiers with a supervisory board which elects a managing board. The chief executive officer (CEO) and other titled officers are usually chosen by the board to manage the affairs of the corporation. The officers do day-to-day business. In terms of Formation according to RMBCA the Incorporator is the person who delivers the articles to the secretary of state. Within the articles of incorporation there are “must” Elements and “may“ elements to consider.
If you have any questions about German or US corporate law please do not hesitate to contact us at SanDiego@Thieler-Boeh-Seitz.com
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