From a Limited to a GmbH

Merger

Entrepreneurial action is characterized by constant adaptation to changing conditions. This includes not only adjusting products to new market developments but often also adjusting the legal form, or the entity carrying the business.

In recent years, many entrepreneurs have chosen the Limited as their legal form. This was often done for good reason. The reasons for choosing the Limited as the legal form are as diverse as the reasons for moving away from it.

Generally, there are two ways to transition from a Limited to a German GmbH.

1. Relocating the business activities to a new GmbH followed by the dissolution of the Limited

However, this has several disadvantages for an ongoing business:

Existing contracts expire, so each contract must be individually renegotiated with the new GmbH. Also, the company's history is lost.

There are also significant tax disadvantages. Hidden reserves may be revealed, or hidden profit distributions may occur in transfers to the new GmbH. If there are lease agreements on properties of the companies, the dissolution of the Limited or the transfer of the lease agreement can often lead to devastating dissolutions of hidden business divisions.

Just considering these negative tax implications often represents a much higher effort than choosing the second possible path - converting the Limited into a GmbH.

2. Conversion by way of merger

In the conversion of the Limited into a GmbH, the Limited becomes a GmbH. Existing contracts are maintained and do not need to be renegotiated.