What is a GmbH? Understanding the Basics of a German Limited Liability Company

GmbH stands for "Gesellschaft mit beschränkter Haftung" which is German for "company with limited liability". It is a type of legal entity that is commonly used in Germany and other German-speaking countries to form a company.

In essence, a GmbH is a hybrid between a corporation and a partnership. It provides the limited liability protection of a corporation, but allows for more flexibility in management and ownership structure, similar to a partnership. Shareholders are not personally responsible for the debts and liabilities of the company, which means that their personal assets are protected.

GmbHs are popular among startups and small businesses because they are relatively easy to establish and have fewer formalities than other types of companies. They also offer tax benefits and can be easily transferred or sold. However, there are some restrictions on ownership and management, as well as reporting and transparency requirements, that must be adhered to.