Non-profit limited liability company (gGmbH)

The abbreviation gGmbH stands for non-profit limited liability company. This means that the profits of the GmbH are used for charitable purposes. If the gGmbH fulfills the charitable purpose in accordance with §52 AO, it is exempt from corporation tax and trade tax. This legal form is often used in non-profit companies that want to operate commercially, e.g. hospitals, kindergartens, social welfare centers.

Requirements for a gGmbH

For a GmbH to be classified as a non-profit organization, it must meet the following requirements:

• The company must pursue a charitable, benevolent or ecclesiastical purpose. An overview of these purposes can be found in the Fiscal Code under § 52 AO and § 53 AO.
• The object of the company serves directly to fulfill this charitable purpose.
• The purpose must be selfless, direct and exclusive.
• Profits may not be distributed to the shareholders, but may only serve the business purpose. In addition, all salaries are in relation to the services rendered.
• If the company is dissolved, the assets may not be distributed to the shareholders, but to another tax-privileged corporation. A distribution to the company's own shareholders is only permitted if they themselves are charitable.

Charitable purpose of a gGmbH

According to Section 52 (1) sentence 1 AO, a corporation is deemed to be charitable if its activities are aimed at selflessly promoting the general public in material, intellectual or moral terms.

The promotion of the general public includes, among other things

• Promotion of science and research
• Promotion of religion
• Promotion of art and culture
• Promotion of education, popular and vocational training, including student aid
• Promotion of animal welfare

etc. The complete list can be found in §52 of the tax code.

Advantages of the gGmbH

The advantages of a gGmbH are particularly tax-related. The gGmbH is exempt from corporation tax and trade tax. It is also authorized to issue donation receipts for donations.

Differentiation from the registered association e.V.

The biggest difference between a gGmbH and a non-profit association is the economic activity. A gGmbH pursues non-profit but economic activities. This is not the case with an association. In practice, associations are often found in leisure activities (sports clubs) or professional associations. However, as soon as an association pursues an economic activity, such as schools, hospitals or social enterprises, it can no longer operate as an association but should change its legal form to a gGmbH.

Another important aspect of the association is democracy. An association is organized on a grassroots democratic basis, which means that all decisions are made jointly by the association's general assembly. The situation is different with a gGmbH, which is represented by its managing director and is bound by the will of the shareholders in its decision-making. The legal form of a gGmbH is therefore ideal for founders who wish to exert influence on company decisions for an unlimited period of time. Here, the shareholders involved have a decision-making right, depending on the amount of the shareholding. For one-person companies, the full decision-making power therefore lies with the founder.

gGmbHs in Germany

The legal form of the gGmbH has become increasingly popular in recent years. Our statistics also show an increase of 350% over the past 15 years. Especially in the start-up sector, many social entrepreneurs choose the legal form of the gGmbH, which ideally combines economic interests with idealistic corporate goals.