If you intend to sell your GmbH, you should consider the option of conversion into a GmbH & Co. KG. In this way, you will avoid the dilemma that the alternatives share deal and asset deal otherwise give you. While the share deal gives the seller an advantage and the buyer a disadvantage, the asset deal is exactly the opposite. On the other hand, the change of form presented here combines the advantages of share deal and asset deal. The only small disadvantage of this option is that if the advantages are to be achieved, it can only be implemented in the medium to long term, because a blocking period of 5 years must be observed.

First of all, we would like to explain the requirements for our explanations about the GmbH sale. For the sake of simplicity, we assume that a single GmbH shareholder owns the company to be sold. Of course, this is also possible with several shareholders, but then also requires some further considerations when converting into a GmbH & Co. KG, which we will discuss in more detail elsewhere. Furthermore, we assume that the GmbH sale is planned in the medium to long term. For information within a period of less than 5 years, we recommend our articles on the Alternative Share Deal and Asset Deal.

2nd GmbH sale by conversion into a GmbH & Co. KG

2.1. Establishment of a complementary GmbH

If the GmbH sale is to take place in 5 years or later, then you prepare the change of form of the GmbH into a GmbH & Co. KG. For this it is necessary that another GmbH is founded, which then acts as a general partner of the GmbH & Co. KG. The shareholder may hold a participation of up to 100% in both companies. In other words, this means that a 0 % shareholding of Komplementär-GmbH in the operative and actually for sale GmbH is possible.

2.2. Change of form into a GmbH & Co. KG

Now the change of form into a GmbH & Co. KG can take place by notarization. Since the change of form represents a conversion, the relevant guidelines of the conversion law must be observed. Furthermore, regulations from the Conversion Tax Act are also considered. For example, it is possible to retroactively arrange the mould change by up to 8 months. In this way, the blocking period of 5 years to be explained below is shortened by up to 8 months.

2.3. Tax Effects of Change of Form

But what tax effects does the change of form of a GmbH into a GmbH & Co. KG have? In principle, there is only a taxation during the change of form if there is a profit carried forward in the GmbH. It is understandable that the legislature provides for taxation in this case. Finally, the profit could otherwise be taken tax-free from the GmbH & Co. KG, which is excluded with the original GmbH. Thus, in the case of conversion, accumulated profits in the GmbH are taxable at 25 % capital gains tax by the GmbH shareholder.

2.4. Observance of the 5-year period after conversion

After the conversion, the associated 5 year lock period should be observed. The sale of the GmbH within this blocking period leads to the taxation of the profit from the sale of the GmbH & Co. KG on the conditions as if it had continued to be a GmbH. This represents a share deal in which the seller enjoys certain tax advantages. However, the buyer should be less satisfied. Finally, he misses the possibility of depreciation of the acquisition costs. Consequently, the seller should assume that the buyer takes this fact into account in his offer when negotiating the purchase price. Thus, the sales price achieved is correspondingly lower, which therefore causes an indirect disadvantage for the seller.

If the blocking period has expired, however, the GmbH & Co. KG can also be sold as such quite regularly.

In order to show you the tax advantages of selling GmbH after conversion into a GmbH & Co. KG, we would like to develop two examples. One example will show the sale of the GmbH, while the second then reflects the variant by shape change that we favour here. For both, we assume a uniform sales profit of EUR 1,000,000. In addition, a personal tax rate of the shareholder of 42 % is to apply to the income tax. This ensures a direct comparison between the two models in a transparent manner.

3.1. Example 1: Sale of GmbH without conversion

The sale of a GmbH led to a taxation of 60% of the profit made by the GmbH shareholder. So 40% remains tax-free. Thus, EUR 600,000 is subject to the personal tax rate of 42%. Therefore, an income tax of EUR 600,000 x 42 % = EUR 252 arises. 000.

3.2. Example 2: Sale of GmbH after conversion into a GmbH & Co. KG

Unlike the 40% tax-free GmbH sale, the sale of GmbH & Co. KG is taxable at 100%. Of course, this is an exclusion ground for the use of this sales model. However, we recommend the application of the so-called half tax rate according to § 34 (3) EStG. Therefore, the one-off option is to tax the profit at only 56 % of the normally applicable tax rate. However, this is subject to certain conditions. So the shareholder must either the 55. have reached the age of one’s life or are permanently disabled within the meaning of the Social Code in order to benefit from this tax exemption. Furthermore, the requirement must be met that the tax rate adjusted in this way is at least 14%. In addition, this scheme applies up to a limit of EUR 5.000.000. If the profit exceeds this amount, then the profit in excess of this amount must be taxed quite regularly.

So if there is a profit of EUR 1,000,000, then the tax on it is EUR 1,000,000 x 42 % x 56 % = EUR 235,200. Without the application of half the tax rate, the tax would be EUR 1,000,000 x 42% = EUR 420,000 and thus almost twice as high as half the tax rate. In addition, if half the tax rate is applied, the tax is lower than that charged for the example with the GmbH sale without conversion (see 3.1.).