How does the choice of legal form affect the annual financial statements?
July 14, 2024 | 40,00 EUR | answered by Alice Heck
Dear tax advisor,
my name is Roberta Schlüter and I am the managing director of a small GmbH. In recent years, my business has been doing well, and I am now faced with the decision of whether it would be beneficial to convert my company into a different legal form. I have heard that the choice of legal form can have a significant impact on the annual financial statements, and therefore I would like to learn more about this.
Currently, I have a GmbH, which means that as the managing director, I have limited liability. However, I am also required to prepare financial statements and publish them in the Federal Gazette. This process is time-consuming and costly, and I am wondering if there is a legal form where this effort is less.
Furthermore, I am also wondering if the choice of legal form affects my tax burden. As a GmbH, I currently pay corporate tax, trade tax, and sales tax. Is there a legal form where I would be in a better tax position?
I am also concerned about whether the conversion into a different legal form could have an impact on my business partners and customers. I want to ensure that my company continues to appear reputable and trustworthy.
Could you please provide me with more information on how the choice of legal form affects my annual financial statements and the advantages and disadvantages of the different legal forms?
Thank you in advance for your help.
Sincerely,
Roberta Schlüter
Dear Ms. Schlüter,
I am pleased that you have asked me for advice regarding converting your GmbH into a different legal form for your company. The choice of legal form does indeed have a significant impact on the annual financial statements, tax burden, and the external perception of your company. I will therefore answer your questions in detail and provide you with an overview of the different legal forms.
Firstly, regarding liability limitation: As the managing director of a GmbH, you are usually only liable with the company's assets, not with your personal assets. This provides you with a certain level of protection. However, if you choose a different legal form, such as a partnership like a GbR or an OHG, you will also be liable with your personal assets. These legal forms have a higher personal liability.
In terms of annual financial statements, it is indeed the case that a GmbH is required to prepare an annual financial statement and publish it in the Bundesanzeiger. This process can be time-consuming and costly. If you choose a legal form where this effort is lower, sole proprietorships or small business owners may be of interest to you, for example. They are not required to publish their annual financial statements.
The tax burden also depends on the chosen legal form. As a GmbH, you pay corporate tax on the company's profits, trade tax on business income, and sales tax on your sales. Other legal forms such as partnerships are subject to income tax, but corporate tax is not applicable. Depending on the profit and revenue, you may be better off financially with a different legal form.
Regarding your business partners and customers, a conversion to a different legal form can indeed have implications. It is important that you inform your partners about this and possibly adjust contracts. However, it should not be a problem to maintain your credibility and trustworthiness with a different legal form as long as you communicate transparently.
In summary, the choice of legal form influences many factors, including annual financial statements, tax burden, and the external perception of your company. It is important to carefully weigh all the pros and cons and seek professional advice if necessary.
I hope this information helps you in your decision-making process. If you have any further questions or require personal guidance, I am at your disposal.
Best regards,
Alice Heck
