date | theme

26. September 2018 | Typical and Atypical Silent Society (this post)

11. November 2018 | Atypical silent company to GmbH: trade tax exemption

10. May 2019 | Advantages of the silent partnership: trade tax – inheritance tax – losses – sales

27. May 2019 | Silent Society: Accounting / Legal / Economical

05. May 2020 | Silent Society: The Contract Design and the Social Contract

The Silent Society is a popular design model in tax law. In taxation, a distinction is made between the typically silent society and the atypically silent society. In practice, the atypical silent participation occurs particularly frequently. Because here the investors are taxed as co-entrepreneurs and also earn commercial income.

In the video we explain to you what advantages the atypical silent and the typical silent participation in a GmbH bring to the silent shareholder.

1. The definition of silent society

The silent company is a form of enterprise that falls within the group of partnerships. However, unlike the “usual” partnerships (examples: GbR, OHG, KG, GmbH & Co. KG), the silent society is not recognizable in the external relationship, because its occurrence is limited exclusively to the internal relationship. In addition, legal transactions are only carried out in the name of the business owner, who alone is entitled and obliged to do so.

Use of Silent Society

Quiet participation, the creation of a silent society, is often chosen in order to use the possibility of funding from outside. Therefore, in many cases, the silent participant is called “money or loan provider”. Differentiated by the type of silent participation, typical or atypical silent participation, the participant receives an appropriate share of profits and, in accordance with the provisions of the articles of association, a loss allocation, up to the amount of his silent participation. In the event of insolvency of the commercial sector, the silent party takes the position of creditor and is not subject to liability obligations. Furthermore, the participants are probably convinced by the uncomplicated handling and construction of the possibility to choose the silent society.

Typical and Atypical Silent Participation

Both the typically silent participant and the atypically silent participant make a contribution to the assets of the company at the beginning of the shareholder relationship. In addition, both types of shareholders are guaranteed an appropriate share of profits. This also includes possible losses appropriately, according to contractual arrangement, both types of silent partnership. Whereas only the atypical silent partner, when leaving the company, is entitled to an appropriate participation in the hidden reserves. The typically silent participant, on the other hand, is not entitled to a share of the company value. For this reason, the consideration as a co-entrepreneur is a property that is dominated by the atypically silent partner alone. On the one hand, the atypically silent participant enjoys, in addition to the right of participation and influence on the management, a right of objection, whereby he decides the co-entrepreneur initiative for himself. On the other hand, it also proves co-entrepreneur risk by its participation in the hidden reserves. Finally, the atypical nature of the silent participation is regarded as co-entrepreneurship in the commercial sector.

Silent participation in private assets

Insofar as the typically silent participant holds his shares in private assets, he earns surplus income. The surplus of income over the savings flat-rate amount according to § 20 Abs. 9 EStG flows to the capital income of the shareholder acc. § 20 Abs. 1 No. 4 EStG. Consequently, the withholding tax according to § 43 Abs. 1 No. 3 EStG i.V.m. § 43 a Abs. 1 sentence 1 no. 1 EStG in the amount of 25 % plus the solidarity surcharge of 5,5 % application. The consideration of the church tax also takes place. This capital gains tax offsets the taxes. The income no longer has to be included in the income tax return.

silent partnership participation in operating assets

As long as the atypical silent participation is in the company’s assets, the income is subject to the principle of subsidiarity acc. § 20 Abs. 8 EStG. As a result, the atypically silent participant earns income from commercial operations acc. § 15 Abs. 1 sentence 1 no. 1 EStG. Consequently, business income is subject to income tax treatment.

4.2.Income from an atypically silent society

As soon as the atypically silent participant generates income, these are equal to the income of a co-entrepreneurship. Just like an open commercial company, or a limited partnership. Since the income can be determined separately and uniformly, these are the income from business acc. § 15 Abs. 1 sentence 1 no. 2 EStG. Special remuneration and transferred assets also take into account income determination. However, this is done via the special assets and must be taken into account separately.