Kapitalgesellschaft in Germany denotes a legal person under private law whose shareholders are liable only with their contributions. Typical forms are the GmbH (Gesellschaft mit beschränkter Haftung — limited liability company) and the AG (Aktiengesellschaft — stock corporation/public limited company). For accounting this means: the Kapitalgesellschaft is independently subject to tax and bookkeeping obligations; its business transactions are recorded separately from those of the shareholders and give rise to specific reporting and tax duties under HGB, KStG and GewStG (e.g., German Commercial Code, Corporation Tax Act, Trade Tax Act).
Legal forms and legal characteristics
Key characteristics of Kapitalgesellschaften are separate legal personality and limited liability. These features have direct effects on accounting and financial reporting:
- Separate assets: Kapitalgesellschaften maintain their own commercial balance sheet (§242 HGB) and are holders of rights and obligations.
- Limited liability: Shareholders generally are liable only with their contribution; this affects equity and the reserves structure in the balance sheet.
- Formal requirements: Kapitalgesellschaften are subject to stricter disclosure and audit obligations (e.g., publication in the Federal Gazette; depending on size classes, audit obligations by an auditor/chartered accountant).
Typical legal forms and their implications for accounting:
- GmbH: Minimum share capital, share capital reported on the balance sheet (subscribed capital), managing directors responsible for the annual financial statements.
- AG: Share capital in the form of shares, management board and supervisory board, more extensive reporting and disclosure obligations.
Relevance for accounting
For freelancers or small businesses that convert to or form a Kapitalgesellschaft, this specifically means increased formal effort in bookkeeping:
- Obligation to maintain double-entry bookkeeping: Kapitalgesellschaften are generally required to prepare financial statements under the HGB; the simplified cash-basis income statement (Einnahmen-Überschuss-Rechnung) is usually not sufficient.
- Separate tax returns: Corporate income tax, trade tax and VAT returns as well as corporate tax prepayments.
- Payroll accounting: If managing directors or employees are employed, payroll tax registration, social security contributions and payroll processing are required.
Practical bookkeeping implications:
- Opening balance sheet at incorporation or when assets are contributed.
- Maintenance of reserves accounts (legal reserve, capital reserve) and their accounting treatment.
- Distinction between drawings (in partnerships) and distributions/dividends (in corporations).
Tax treatment and annual financial statements
Kapitalgesellschaften are subject to specific tax rules that directly affect accounting:
- Corporate income tax: Tax rate 15% on taxable profit; the solidarity surcharge also applies to corporate income tax (check current law for updates).
- Trade tax: Subject to trade tax; the municipal multiplier (Hebesatz) affects the effective burden; offsetting against personal income tax for shareholders is not applicable.
- Value added tax: VAT applies to supplies and services; input VAT deduction must be accounted for in the bookkeeping.
Annual financial statements under HGB generally include the balance sheet, profit and loss account and, if applicable, the notes and management report. Important accounting items are:
- Subscribed capital / share capital
- Capital reserve and retained earnings
- Net profit / net loss for the year
When distributing profits, the following steps must be recorded in the books: determination of the annual profit, resolution on the distribution, payment to shareholders and tax handling (e.g., withholding of capital income tax by the company on distributions).
Practical examples and booking scenarios
Concrete booking cases so you can follow the practical application:
1. Contribution on formation of a GmbH
A shareholder pays EUR 25,000 share capital into the company bank account.
| Entry | Debit | Credit |
|---|---|---|
| Payment of share capital | Bank EUR 25,000 | Subscribed capital EUR 25,000 |
2. Purchase of a company vehicle (gross amount incl. VAT)
Invoice: EUR 30,000 net plus 19% VAT = EUR 35,700. Payment by bank.
- Vehicle fleet account / fixed assets EUR 30,000 to Bank EUR 35,700
- Input VAT EUR 5,700 (if entitled to deduct input VAT) to Bank EUR 5,700
3. Profit distribution
Resolution: Payment of EUR 10,000 to shareholders. Provisions for corporate income tax and trade tax have already been made.
- Appropriation of profit: Net profit / retained earnings to Liabilities to shareholders EUR 10,000
- Payment: Liabilities to shareholders to Bank EUR 10,000
Practical tips:
- Use a meaningful chart of accounts tailored to GmbH/AG requirements.
- Plan the formation of reserves strategically (consider tax and balance sheet effects).
- When converting to a Kapitalgesellschaft, involve a tax advisor and, if necessary, an auditor early.
In conclusion: the Kapitalgesellschaft offers formal advantages (limited liability, separation of private and company assets) but increases requirements for bookkeeping and tax planning. For specific booking questions and tax structuring, seek professional advice from a tax advisor or auditor.