The Uniquely German Business Structure GmbH & Co. KG In The Context Of Legal Translation
Many of you have perhaps seen that little “GmbH” ending tagged onto the names of many German companies. So, what exactly does GmbH & Co. KG mean, and how can we best translate it?
What Is A “GmbH & Co. KG”?
Of the various different company structures seen among German businesses, it’s said that the GmbH (Gesellschaft mit beschränkter Haftung), or 有限会社 (yuugengaisha, Limited Company) in Japanese, is the most common. This company structure is prescribed by the similarly named Limited Liability Company Law (GmbHG). If we were to translate this German term directly, it would indeed be 有限責任会社 (yuugensekiningaisha, or Limited Liability Company), but in actuality the conventional Japanese translation is yuugengaisha (Limited Company).
However, for German family companies, from small- to medium-sized businesses all the way to major companies known worldwide, the most commonly used company structure is GmbH & Co. KG, or, Gesellschaft mit beschränkter Haftung & Compagnie Kommanditgesellschaft, or Limited Liability Company & Limited Partnership (yuugengoushigaisha). This is a type of company which is not found in Japanese law, but there’s a chance you might have seen it used by other parties when handling business and standard form contracts.
The Characteristics Of A GmbH & Co. KG
German companies (commercial companies) are classified into either “capital companies” (public companies, limited joint-stock partnerships, and limited companies) which are administered by laws other than the Commercial Code (the HGB), and “partnerships” (including unlimited and limited partnerships), which are dictated by the Commercial Code. The latter “partnership” according to German law corresponds to the Japanese 持分会社 (mochibungaisha), which happens to have status as a juridical entity. The German equivalent “partnership” does not. However, by registering a firm name (Firma) with the business register, a company can become a party to a lawsuit (HGB Article 17 Paragraph 2).
In contrast to an unlimited company, which is made up of individuals who bear unlimited legal liability to their company creditors, a limited partnership is comprised of both individuals who have limited liability and those who have unlimited liability. In this respect, it is the same as the definition of a “limited partnership” (合名会社, goumeigaisha) under Japanese law as well. The most notable features of a Limited Liability Company & Limited Partnership (GmbH & Co. KG) are the facts that a limited company becomes the general partner of a limited partnership (a KG), and that in many cases, the director of the limited company which is acting as general partner can become a limited partner of said limited partnership (KG).
Why Choose GmbH & Co. KG?
So then what exactly are the merits of adopting such a complex legal structure for one’s limited company? For one, they run the advantage of not incurring taxes under corporate tax law, as a Limited Liability Company & Limited Partnership (GmbH & Co. KG) is not considered a juridical person.
Another reason would be that the general partner of a limited partnership, despite being liable for the company with their own personal assets, does not need to bear any responsibility for the liabilities of the limited partnership outside the scale of their own investments into the limited company, provided that said limited company consists entirely of partners who only bear limited liability.
As you can glean from the above, the Limited Liability Company & Limited Partnership (Gmbh & Co. KG) is an extremely logical choice both legally and financially even for large companies, as it provides investors with a great degree of safety in managing their company.
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