General Partnership (OHG)

Definition of the General Partnership (OHG)

The General Partnership (Offene Handelsgesellschaft, OHG) is a partnership that operates a commercial business under a common company name. It is regulated by the German Commercial Code (Handelsgesetzbuch, HGB) and is formed by the union of at least two partners, who may also be natural persons.

Characteristics of the OHG

• The OHG is a legal partnership with its own rights and obligations.
• It must be registered in the commercial register.
• The partners have unlimited and joint-and-several liability with their private assets.
• There is freedom to choose the company name, with the addition "OHG" or "& Co."
• The OHG is represented by its partners.
• Management and representation can be regulated in the partnership agreement.

Liability in the OHG

A key feature of the OHG is the personal liability of the partners. Each partner is liable unlimitedly and jointly and severally for the company’s obligations. This means:

• Creditors can directly approach the individual partners.
• Partners are liable with their personal assets.
• There is an obligation to make additional contributions in case of losses.

Formation of an OHG

Forming an OHG requires at least two partners and a partnership agreement. This agreement should be drafted in writing and include provisions on the following points:

• Company name and registered office
• Business purpose
• Rights and obligations of the partners
• Management and representation
• Profit and loss distribution
• Contributions of the partners
• Duration and dissolution of the partnership

Registration in the commercial register is constitutive, meaning the OHG legally comes into existence only upon registration.

Advantages and Disadvantages of the OHG

Advantages:

• Simple formation and amendment of the partnership agreement
• No minimum capital requirements
• Flexibility and rapid decision-making
• Tax benefits due to the transparency principle

Disadvantages:

• Unlimited and joint-and-several liability of the partners
• Difficulties in raising equity capital
• Challenges in succession planning
• High demands on the trust relationship among partners

Conclusion

The OHG is a suitable legal form for small and medium-sized enterprises where the partners are willing to accept unlimited liability and maintain a close trust relationship. It offers flexibility and tax advantages but also requires a high level of responsibility and risk for the partners.

Other legal forms can be found in the articles on AG, GbR, GmbH, GmbH & Co. KG, and KG.