Advantages of a partnership can also occur in questions of annual financial publication. The aim is to regularly avoid the publicity of the annual accounts or to conceal earnings power. In this article, we explain the advantages of partnerships compared to corporations in terms of annual financial publication.

1st Annual Publicity in Germany

Until 01.01.2007, companies had to submit their financial statements to the commercial register. However, in the event of non-compliance, the registry court only took action at the request of a person entitled and could impose a fine.

But this changed with the law on the electronic commercial register and cooperative register as well as the company register. The requirements of the European Union were thus transposed into national law by the Publicity Directive and the Transparency Directive. In particular, the digitization of the Federal Gazette enables the Federal Office of Justice to prosecute violations of the disclosure obligation. It can then prove these violations with fines of up to 25,000 €. However, these can also be imposed several times. However, companies regularly shy away from annual financial publication. They also often do not know the disclosure obligation or existing disclosure facilitations.

2. regulation of annual financial publication in partnerships

2.1 Definition of a commercial partnership

The provisions of § 264a HGB apply to commercial companies. These are partnerships without a natural person as a personally liable partner. In most cases, these are companies in the legal form of a GmbH & Co. KG. However, the rules for commercial partnerships differ in some respects from the rules on annual financial publication for corporations.

2.2. Modification of the facilitation of annual financial publication

The size-dependent facilitations that exist for disclosure obligations for corporations also apply to commercial partnerships. There are no differences in this respect.

However, the rules for the publication of the financial statements of group companies are less restrictive if the subsidiary to be exempted is a commercial partnership. Then, according to § 264b HGB, the inclusion in the higher-level consolidated financial statements and group management report, its publication and the disclosure of the exemption of the subsidiary in the group notes is a prerequisite. However, the obligation to assume losses is eliminated. For this reason, it is possible to use the Group financial statements in a partnership group and still achieve a limitation of liability by means of GmbH & Co. KG between the individual units. The inclusion in a consolidated financial statement also extends. This allows a self-exemption of the corporate parent company, which is not possible with a corporation.

The use of § 264b HGB is already to be considered for medium-sized GmbH & Co. KG and recommended for large GmbH & Co. KGs. In the consolidated financial statements, all recognition and valuation options are revived. This makes an independent Group balance sheet policy possible. It is possible, for example, in isolation from tax considerations that may otherwise be visible in the annual accounts and considerations with regard to distribution policy.

3. regulations for persons trading companies not covered by § 264a HGB

3.1. Annual accounts according to the PublG

The other partnerships are not covered by § 264a HGB. A common feature of the companies is that at least one natural person exists as a personally liable partner. This includes, for example, individual merchants.

For such companies, the publicity obligation may result from the provisions of the Publicity Act. The accounting rules of the PublG are always subordinate to those of the HGB. As a result, the accounting obligations under the PublG therefore only apply to such companies in which a natural person is a full partner directly or indirectly.

However, even then, a size-dependent gradation of the requirements for accounting obligations, including the annual financial statement publicity, takes place. The accounting obligations start significantly later than in accounting according to HGB. The balance sheet total must be EUR 65 million, the revenue EUR 130 million and the number of employees 5,000. If the partnership does not exceed two of the three thresholds, there is no obligation to draw up and publish. Furthermore, for the accounting according to HGB, the thresholds according to § 267 paragraph 4 HGB must be exceeded for two consecutive financial years. In the case of the regulations of the PublG, this obligation arises pursuant to § 1 (1) PublG only if exceeded for three consecutive financial years. Therefore, the obligation to set up and thus publish falls on the company one year later.

Furthermore, according to § 9 (2) PublG, it is possible to waive the publication of the profit and loss statement if this information is published in an annex to the balance sheet: revenue, income from participations, wages, salaries, social contributions, expenses for pension provision and support, valuation and depreciation methods including significant changes and the average number of employees.

3.2. Consolidated financial statements after the PublG

3.2.1. Delayed disclosure requirement

The peculiarities of the 1PublG must also be observed if a person trading company is obliged to draw up consolidated financial statements. In this respect, too, the thresholds for the consolidated financial statements are above those of HGB. In addition, according to the HGB, exceeding the thresholds again leads to the corresponding annual financial publication obligations after two years and, according to the PublG, only for three consecutive cut-off dates.

When preparing the group financial statements of the partnership, according to § 13 (3) sentence 2 half sentence 2 PublG, the preparation of a cash flow statement and an equity mirror may be waived. However, these are required for companies that fall under the HGB. In the case of the consolidated financial statements, too, it applies that the publication of a profit and loss statement can be waived if the above-mentioned five disclosures have been made in an annex to the balance sheet.

3.2.2 Restrictions on the discharge of liabilities of the consolidated financial statements

However, restrictions apply with regard to the companies involved with regard to the liberating effect of the consolidated financial statements according to the PublG. The consolidated financial statements exempt the other companies pursuant to § 5 (6) PublG only under the conditions of § 264 (3) HGB, i.e. in the case of a liability or loss assumption declaration. Therefore, no limitation of liability between the individual units is possible. Accordingly, § 291 HGB in conjunction with § 11(6) sentence 1 no. 1 PublG exempts the participating companies from the obligation to draw up (partial) consolidated financial statements.

A liberating effect of the consolidated financial statements according to §§ 291 and 292 HGB results for included sub-group financial statements with parent companies in the legal form of a corporation only if a complete consolidated financial statement is prepared according to HGB and thus in particular the facilitations of § 5 (5) sentence 3 is waived, § 13 (3) sentence 3 PublG.

This shows that corporate structures consisting exclusively of partnerships have a clear advantage. By means of an option for corporate taxation (§ 1a KStG) this advantage can be used and at the same time the tax advantages of corporate taxation can be availed, in particular in the case of the ongoing burden of accumulated profits.

3.3 Obligation to interpret consolidated accounts for natural persons

The obligation to interpret the group accounting of § 11 PublG may also arise for natural persons. Unlike the HGB, the PublG does not relate to the legal form of the parent company. Then the natural persons behind the company are subject to group accounting interpretation. It is sufficient that the natural person meets these five criteria: