The best way to optimize a GmbH sale is by converting it into a company. This benefits both seller and buyer. Sellers can apply the so-called half tax rate, which can be used once from the age of 55, in order to significantly reduce the tax on such capital gains. Buyers, in turn, benefit from the possibility of depreciation, which they are allowed to use for the acquired assets in the following years. They also save considerably on taxes. However, this requires some advance planning. Because the conversion requires a blocking period of five years. If the sale nevertheless takes place within this blocking period, trade tax is incurred.

Optimize 1st GmbH sale – Introduction

They are the rule rather than the exception: successful entrepreneurs who, at the end of their entrepreneurship, think about what life could be like after all those grueling years. After all, you should take the time at some point to enjoy your own success, also the financial one. You give yourself more free time, more freedom, and quickly realize that it is time to let go. If no descendant or other family member wants or can continue their own company, the sale is the logical alternative. After that, the well-deserved retirement can finally begin.

GmbH shareholders, however, are confronted with an uncomfortable truth in these considerations. As practical and advantageous as a GmbH has served its company faithfully as a legal form over the years, it now proves to be an obstacle in the sale of GmbH that should be optimized. That is exactly what we want to inform you about here.

optimize GmbH sales? Why?

There are two classic ways to sell a GmbH, the Share Deal and the Asset Deal. In the share deal you sell the shares in the GmbH. In this way, the buyer becomes a new shareholder. The GmbH can continue to exist unchanged and unaffected by the purchase process. In the asset deal, strictly speaking, no GmbH sale takes place. Rather, a buyer acquires only the assets of the GmbH, while the GmbH is nominally still attributable to the original shareholder, because he is still their shareholder even after the purchase process. Therefore, after an asset deal, the shareholders often simply go and liquidate their now empty, because contentless, GmbH. Or they sell it as a shelf company to founders who prefer an already established GmbH to their own start-up for practical reasons.

Both options, Share Deal and Asset Deal, have their advantages and disadvantages. On the one hand, the share deal is advantageous for the seller. Because the profit from the GmbH sale is taxable at about 28%, which can hardly be optimized. At the same time, however, the buyer has the disadvantage that the acquisition of the shareholdings does not allow depreciation on the goodwill. This is the big advantage of the asset deal that buyers can get when acquiring the individual assets. As a seller, however, you have the disadvantage, because then you have to tax the profit in such a way that in the end only half remains. The rest comes from the Treasury.

3rd optimization You sell your GmbH by conversion

Therefore, we recommend converting the GmbH into a partnership before the sale. This can be an OHG, a KG or even a sole proprietorship. Because the sale of a partnership is in this situation the GmbH sale tax superior. Thus, although there are regular taxes with a tax rate of up to 45 %, but since we spoke in our starting situation that you want to cede the company for reasons of age, you can claim here a special regulation in the German income tax law, the so-called half tax rate according to § 34 EStG. According to the name, one might think that only half of the taxes are incurred, but for some years now the tax rate has not been halved. However, a reduction in the applicable rate to 56 % of the tariff actually applicable is still very attractive.

For example, if you had to expect an average tax rate of 30%, you now pay just under 17% in taxes. Even if you calculate the rich tax rate and ignore the calculation of the average tax rate, you get a fantastic value of 25%.

And this is only the advantage that you can use as a seller. However, as we have already mentioned, the purchaser also enjoys a particularly tempting tax advantage. Because the depreciation of the acquisition costs, which is achieved in the aftermath of the acquisition over the period of use, can hardly be overstated. Every entrepreneur is happy about this.

Optimize the sale of GmbH: the requirements

4.1. Target legal form of conversion

As beautiful and tempting as these advantages may be, you have to prepare them first. What do we mean by that? Well, first of all, there's the conversion. As a rule, we prefer a GmbH & Co. KG for this, because in its characteristics it shares the most advantages of all partnerships with the GmbH, in particular the exclusion of liability with the private assets.

4.2. Temporal aspects for conversion

Then we absolutely must also talk about the time of conversion. This should be done at least five years before the sale. Although such a conversion can also be carried out retroactively for eight months, some preparatory work must also be done in a tight schedule. The five years that should precede the GmbH sale are due to the fact that otherwise the profit also accrues trade tax. It would be nice if we could avoid this.

4.2. Conditions for granting half the tax rate

And finally – sorry – we also need to talk about your age at the time of sale. Because half the tax rate is only due to you from the age of 55. Alternatively, half the tax rate can be granted if applicants prove that they are permanently disabled within the meaning of the Social Code. In addition, you can apply for half the tax rate only once in a lifetime and only for a company sale. So if you plan to sell several companies, you should first think carefully about which transaction half the tax rate will bring the greatest financial benefit. Furthermore, half the tax rate is only applicable to a profit of up to EUR 5 million. Finally, there is one caveat to mention. For taxation, there is a lower limit for the applicable tax rate: it is 14%. So you have to pay at least that much tax.

Just because of the unique applicability, we advise you to sit down with a tax consultant skilled in the field of corporate transactions in advance to clarify all aspects and eventualities. Because once the taxation has been initiated, there is no room for manoeuvre to optimize a GmbH sale.

Optimize 5th GmbH sale? Here is our conclusion

Half the tax rate is a perfect addition to our design model. But even without this unique tax advantage, it is worthwhile to optimize the GmbH sale by conversion into a person company. Because by giving a buyer a considerable tax advantage, you can negotiate a higher selling price during the sales negotiations. In addition, a buyer who at least partly finances the purchase price can make the better tax conditions when buying a partnership vis-à-vis a GmbH as a negotiation argument in the design of the loan. Finally, the depreciation on the acquired assets allows a higher profit to remain for repayment. And if the repayment takes place relatively quickly, the default risk of the creditors decreases accordingly quickly.

By the way, the GmbH sale, as we have presented it here, is also transferable 1:1 to a holding company. In this case, the parent company is converted from a GmbH into a GmbH & Co. KG and then sold together with the subsidiaries included in its operating assets. It does not matter in which legal form the subsidiaries operate.