Forms of company

General information about the different forms of company

Information for newcomers

If several people wish to run a business together, they usually start a company. The most suitable form of company in a specific case depends on many factors, such as the size and capital requirements of the business, the planned form of shareholder participation (active involvement or simply providing capital), the intended type of liability (limited or unlimited) and tax considerations.

A partnership (Personengesellschaft) consists of at least two partners who join forces in order to pursue a common objective, and who agree on articles of association to that end. It is also possible to opt for a limited partnership (Kommanditgesellschaft, abbreviated to "KG"), an general partnership (Offene Gesellschaft, abbreviated to "OG"), a GmbH & Co KG (a special form of limited partnership in which the unlimited partner is a private limited company), or a civil law partnership (Gesellschaft bürgerlichen Rechts, abbreviated to "GesbR"). All of these, with the exception of the GesbR, only come into being once they have been entered in the commercial register.

A corporation (Kapitalgesellschaft) is a legal entity with its own legal personality. It is possible to choose between an stock corporation (Aktiengesellschaft, abbreviated to AG) or a limited liability company (Gesellschaft mit beschränkter Haftung, abbreviated to GmbH). These only come into being once they have been entered in the commercial register.

Shareholders may be subject to compulsory insurance under the Allgemeines Sozialversicherungsgesetz (ASVG), the Gewerbliches Sozialversicherungsgesetz (GSVG) , the Sozialversicherungsgesetz der freiberuflich selbstständig Erwerbstätigen (FSVG) or the Bauern-Sozialversicherungsgesetz (BSVG).

Tax law

All natural persons pay income tax, whereas legal entities pay corporation tax on their income.

In the case of partnerships, the pass-through or transparency principle applies. This means that it is not the company as such that is taxed but the partner, who is taxed directly based on their personal profit and loss accounts. Any profits are subject to income tax (provided that the partner is a natural person). Partnerships with operating income are referred to in tax law as a commercial partnership (Mitunternehmerschaft).

However, in the case of corporations it is the principle of separation that applies, whereby profits and losses are attributed to the company itself. The company as an entity is subject to corporation tax. Only distributed profits are attributed to partners, which are then subject to capital gains tax, a form of income tax. Unlike income tax, corporation tax is not progressive, but is levied at a flat rate of 25 per cent. However, it is calculated based on the income determined according to income tax rules, whereby all of the income of corporations is attributed to income from industrial or commercial activity. A minimum tax is applicable to corporations subject to unlimited corporate income tax.

Further links

• Austrian Federal Economic Chamber (→ WKO)
• Start-up service of the Austrian Federal Economic Chamber (→ WKO)

Legal basis

• Einkommensteuergesetz (EStG)
• Körperschaftsteuergesetz (KStG)
• Allgemeines Sozialversicherungsgesetz (ASVG)
• Gewerbliches Sozialversicherungsgesetz (GSVG)
• Sozialversicherungsgesetz der freiberuflich selbstständig Erwerbstätigen (FSVG)
• Bauern-Sozialversicherungsgesetz (BSVG)