Conducting a legal comparison
In our global working environment, we encounter a wide variety of corporate forms. In order to clarify the question of whether a company is a partnership or a corporation from the perspective of German tax law, a so-called legal comparison must be carried out on a regular basis. The American LLC is a special case because it is a hybrid legal form that does not exist in German tax law.
In order to ensure a classification nevertheless, a case-by-case examination is to be carried out. The LLC agreement serves as a basis for this. With reference to the BMF letter published in 2004 (BStBl I. p. 411), the following characteristics are decisive:
- Centralized management and representation
- Limited liability
- Free transferability of shares
- Profit allocation
- Capital contribution
- Unlimited lifespan of the company
- Profit distribution
- Formal foundation requirements
The overall assessment of the different characteristics is then used to determine whether it is a partnership or a corporation.
Although the BMF letter is still considered authoritative today, some of the characteristics can no longer be clearly distinguished by the MoPeG, which has been in force since January 1, 2024. For example, the lifespan of a GbR no longer depends on the continued existence of its shareholders and therefore does not apply.
Another case not covered by the BMF letter is the one-member LLC, which has an additional special status. In this case, the shareholder and managing director are usually the same person, which makes a clear legal distinction difficult.
Nevertheless, or perhaps precisely because of this, the tax authorities regularly demand an expert opinion in order to be able to classify the company under German tax law.
We would be happy to support you with such an expert opinion.
Florian Schindler | TLI Steuerberater
