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The meaning of the abbreviation gGmbH is probably less familiar to some than that of a conventional GmbH. In this article, you will learn exactly what a gGmbH is and how it differs from a GmbH.
gGmbH – Meaning and definition
The non-profit limited liability company, abbreviated as gGmbH, is not a separate legal form. It is a variant of the GmbH.
- Founders can choose between different types of companies. For example, those who want to start small can set up a mini-GmbH.
- If the GmbH is a non-profit organization, the gGmbH is the ideal legal form. It offers significant tax advantages over a GmbH.
- In order for the GmbH to be classified as non-profit by the tax office, it must pursue non-profit or charitable purposes.
- Examples of non-profit purposes include companies that promote art or culture, but also religion or the preservation of customs.
- In addition, there are numerous other areas that a gGmbH can aim to promote, such as animal welfare, science, and research.
Differences between a gGmbH and a GmbH
Many of the characteristics of a GmbH also apply to a gGmbH.
- Like a normal GmbH, a gGmbH must have a share capital of at least €25,000 and appoint at least one managing director.
- Like a GmbH, a gGmbH is entered in the commercial register.
- Unlike an association, which is also classified as a non-profit organization, a gGmbH may engage in commercial activities.
- The advantage of a gGmbH over a GmbH lies primarily in its tax treatment. Due to its non-profit status, a gGmbH benefits from certain tax exemptions or at least tax breaks.
- For example, a gGmbH is exempt from trade tax, corporation tax, and the solidarity surcharge.
- A gGmbH is also not required to pay gift and inheritance tax when it receives donations of this kind.
- In addition, gGmbHs are allowed to collect donations and issue tax-deductible receipts for them.
gGmbHs are frequently used in these areas
gGmbHs (non-profit limited liability companies) are frequently used in practice in various areas, including:
- Education: gGmbHs promote a wide range of educational projects, from early childhood education to school education to adult education and vocational training. One example is BildungsChancen gGmbH, which supports educational projects and thus promotes individual support and equal opportunities. Organizations such as Lebenshilfe Bildung NRW gGmbH also offer continuing education and training programs.
- Care: In care facilities, gGmbHs are used to support health promotion, cognitive resources, and psychosocial health. In this way, they comply with legal requirements and promote the independence and skills of people in need of care through special care concepts, opportunities for social interaction, and health-promoting measures.
- Social institutions: gGmbHs play an important role in social projects by promoting social integration, supporting disadvantaged groups, and implementing family-friendly measures. They often work closely with associations and networks to improve social participation.
- Cultural sector: gGmbHs are used in the cultural sector to implement cultural projects, events, and educational programs that serve the public good. They contribute to the promotion of art, cultural education, and social engagement.
How non-profit status affects taxation
Tax-exempt status in Germany primarily affects taxation through various tax exemptions and benefits. Non-profit associations and organizations are exempt from corporate income tax and trade tax, for example, as long as they pursue idealistic goals, asset management, or so-called special-purpose operations.
- Commercial businesses, on the other hand, are only taxable if their income exceeds the limit of €45,000 per year. In addition, a reduced sales tax rate of 7 percent usually applies to revenues from asset management and special-purpose operations.
- The requirements for recognition as a non-profit organization are that the association pursues exclusively, directly, and selflessly charitable, benevolent, or ecclesiastical purposes, that these are precisely defined in its statutes, and that its actual management complies with the statutes.
- In addition, the association may not pursue any goals that are contrary to the state order. Upon recognition, the association receives a notice of exemption, which is reviewed regularly, and can then issue donation receipts that donors can claim for tax purposes.
- Other tax advantages include access to subsidies and increased credibility and attractiveness to donors through proof of charitable status.
