The change of form of a GmbH into a partnership can have various tax advantages in individual cases. The civil law implementation of the change of legal form must take place in accordance with the relevant provisions of the Conversion Act. The following article provides a brief first overview of the essential steps on the way from the GmbH to the partnership.

In the video we explain how you can save taxes when selling the GmbH by converting it into a GmbH & Co. KG by changing form.

1st Process Basis for Mould Change

The civil conversion process by which a legal entity can change its legal form is comprehensively regulated by law. In principle, §§ 190 following the Conversion Act (UmwG) apply to changes of form in all variants permitted under conversion law. If a GmbH is to receive the legal form of a partnership through the conversion process, §§ 228 of the UmwG apply in addition. The aforementioned statutory provisions regulate in detail the requirements and prerequisites to be observed for this specific change of legal form.

When is a change of form allowed?

As a corporation, the GmbH is always a legal entity that changes its legal form (§ 191 (1) no. 2 UmwG). By contrast, according to the statutory provisions, a new legal entity in the form of a partnership can be considered both a company under civil law (GbR) and all commercial partnerships (OHG, KG, GmbH & Co. KG) (§ 191 paragraph 2 number 1, 2 UmwG). For this purpose, this statutory regulation is worth noting insofar as the GbR does not represent a permissible legal entity changing forms (cf. § 191 paragraph 1 UmwG), but a GmbH can be changed into a GbR without further ado.

However, it should be noted that a GbR, if it operates a commercial trade within the meaning of § 1 (2) HGB, is also civil law OHG without registration in the commercial register. Thus, the consequence of this distinction is in particular the applicability of the provisions of the HGB to the legal form of the OHG. Furthermore, a change of form into the legal form of the GbR is excluded in these cases. Conversely, the same applies to a change of form into an OHG, should no commercial trade be operated (see § 228 (1) UmwG). Therefore, only a change of shape into a GbR is possible in this constellation.

The managing directors of formwechselnden GmbH have to prepare a comprehensive conversion report (§ 192 paragraph 1 UmwG). For this purpose, the conversion report must be drafted in writing and must contain legal and economic explanations and justifications of the desired change of legal form. In particular, the managing directors are to deal specifically with the future participation of the current shareholders. However, the preparation of the conversion report is not necessary if either only one shareholder is involved in the capital offormwechselnden GmbH or all co-shareholders waive the preparation of the report (§ 192 (2) sentence 1 UmwG). In the event that all shareholders waive the reimbursement of the conversion report, the waivers must be notarized (§ 192 (2) sentence 2 UmwG).

3.2. Decision to change forms

Following the preparation of the conversion report, the shareholders of the GmbH must take a conversion decision (§ 193 (1) UmwG). In addition, the draft of this Decision shall already be attached to the conversion report, if such a report is to be drawn up. For this purpose, the minimum content of the conversion decision is expressly stipulated by law (§ 194 (1) UmwG). In principle, this includes in particular the new legal form, the new name/company and the participation of the previous shareholders according to the regulations applicable to the new legal form. In the special constellation of a change of form of a GmbH into a partnership, the conversion decision must also include the registered office and the new company contract (§ 234 UmwG).

The required majority with which the conversion decision is to be made is based on the desired target legal form for the conversion of a GmbH into a partnership. If the change of legal form is to result in a GbR or OHG, all GmbH shareholders have to agree to this, since as a result of the change of legal form all shareholders are henceforth liable personally (§ 233 (1) UmwG). In the context of a change of legal form into a limited partnership, on the other hand, a majority of 75% of the votes of the shareholders’ meeting is usually sufficient. However, in this case the social contract may determine the requirement of a larger majority. In any case, however, the approval of all shareholders who will in future be involved in the limited partnership as personally liable shareholders is required (§ 233 paragraph 2 UmwG). If the conversion decision is taken by the required majority and including the legally prescribed content, it must be notarized for its effectiveness (§ 193 paragraph 3 UmwG).

3.3. The registration of the new legal form for registration in the Commercial Register

After the conversion decision has been authenticated, the new legal form of the company must be registered by the managing directors of formwechselnden GmbH with the competent register court for registration in the commercial register (§ 198 (1) UmwG). If, on the other hand, the targeted legal form constitutes a GbR, then instead of the new legal form, the implementation of the change of form is simply to be entered in the commercial register, since the GbR is not subject to registration in the commercial register (§ 235 (1) UmwG). As an annex, the application for registration must be accompanied in particular by a copy of the conversion decision and a copy of the conversion report or the waivers in this regard (§ 199 UmwG). By entering the new legal form/change of legal form in the commercial register, the change of legal form becomes fully effective.

4. The civil effect of a change of form

In fact, the change of form – as the name suggests – changes only the legal form of the legal entity. In doing so, the legal entity remains as such. Thus, he is also before in principle, for example, civil owner of all assets. This legal entity continuity leads, among other things, to the fact that no real estate transfer tax is incurred in the context of a change of legal form, since real estate does not change ownership under civil law. The shareholders in the original GmbH are still involved in the legal entity of a new legal form, but according to the provisions of the new legal form. Therefore, this means in particular that the shareholders, with the exception of limited partnership partners, will in future be personally liable for company liabilities.

5th Summary of the Change of Form

The change of legal form of a GmbH into a partnership is, like all conversion processes of the UmwG, comprehensively regulated by law and therefore well structured feasible. Depending on the circumstances, however, further details for the change of legal form must be taken into account regarding the essential requirements explained in the foregoing. The need to draw up a conversion report should also be reviewed separately in each individual case. In particular, the ratio of expense/benefit for the respective formwechselnde GmbH must be weighed. Our company law experts are happy to advise you on a change of form.