KOMMANDITGESELLSCHAFT Meaning and
Definition
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Kommanditgesellschaft is a German term that refers to a specific type of business entity, often abbreviated as KG. Literally translated as "limited partnership," it is a form of partnership that combines elements of a general partnership and a limited liability company. The defining characteristic of a kommanditgesellschaft is the division of partners into two categories: the personally and fully liable general partner(s) and the liability-limited limited partner(s).
The personally and fully liable general partner(s) assumes unlimited liability for the debts and obligations of the kommanditgesellschaft, while also holding the authority to manage and represent the partnership. On the other hand, the liability-limited limited partner(s) is only liable up to the amount of their capital contribution, and they lack the power to actively manage the business.
The establishment of a kommanditgesellschaft requires a written partnership agreement, which outlines the respective rights, responsibilities, and profit-sharing ratios of the partners. This agreement must be notarized and registered with the competent local authority. The kommanditgesellschaft's name must include the name of at least one personally liable general partner, while the name of a limited partner should not be included in the business title.
Kommanditgesellschafts are commonly used by professionals such as lawyers, doctors, or architects, where the liability-limited limited partners provide capital while the personally liable general partners oversee day-to-day operations. They also offer flexibility in terms of capital contributions and profit sharing, making them an attractive option for businesses with varying investment needs.
Etymology of KOMMANDITGESELLSCHAFT
The word "Kommanditgesellschaft" is of German origin. Its etymology can be broken down as follows:
1. "Kommantit" comes from the French word "commandite", which means "limited partnership" or "silent partner". This term was borrowed from the Latin word "commenda", which referred to a mutually beneficial agreement between merchants in medieval times.
2. "Gesellschaft" is a German word that means "company" or "partnership".
Therefore, "Kommanditgesellschaft" can be translated as "limited partnership company". It describes a type of business structure in which there are both general partners (Komplementär) who have unlimited liability and active involvement in the company's management, and limited partners (Kommanditisten) who have limited liability but do not actively participate in management.
