General partnership or OHG is one of the types of partnerships or legal forms with the joint liability of partners in Germany, which is usually formed to do business activities as a company.
In this article of Wise Business Group, we introduce a general partnership company (OHG) and its advantages and disadvantages in Germany.
OHG is a partnership or legal form that aims to do business activities as a joint company.
As defined in the German Commercial Code (HGB), OHG, as a merchant is required to have double-entry bookkeeping and should enter to the trademark registration.
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In a general partnership in Germany, the partners are directly and unrestrictedly liable for paying the company’s debts to creditors with all their assets (personal assets and company assets).
Limitation of liability to third parties (business partners, suppliers, customers) is ineffective.
The OHG consists of two or more natural or legal persons who are jointly and individually liable to each other.
If a new partner is added to the OHG, he will also be liable for any debts incurred until his arrival.
The opposite is also true: if one of the partners terminates his partnership with the company, he is still jointly and individually liable for the debts arising from his partnership for 5 years.
Profit distribution is regulated in the partnership contract.
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For example, an OHG in Germany is made up of two partners, both of whom are jointly and severally liable to each other. The company is now bankrupt and still owes € 500,000 to one of its creditors.
In such cases, the creditor can request the settlement of his claims from both partners or only from one of them.
The latter option is possible if, for example, only one of the two shareholders can settle debts from his own assets.
The unlimited liability of shareholders in OHG makes it very attractive to the market and gives it high credibility.
In addition, no minimum capital is defined for the establishment of a general partnership in Germany.
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Although, the risk for shareholders is relatively high. This has led to the increasing replacement of OHG. This type of partnership in Germany has been largely replaced by a variety of limited liability companies, particularly GmbH and GmbH & Co KG.
However, an OHG is becoming important again because banking regulations based on Basel II and III mean that the ratings offered must follow stricter standards.