Austrian law offers a number of options for establishing a business here. The legislative jungle can be quite confusing, so here’s a brief overview
Austrian law aims to cater to the various needs of entrepreneurs and investors alike. Here are some of the legal types of businesses that can be established in Austria.
In general, a business in Austria can be established either as a sole proprietorship or
as a company. The latter category can be broken down into partnerships (Personengesellschaften) and capital corporations (Kapitalgesellschaften). All partnerships have at least one shareholder assuming personal and unlimited liability. In capital corporations, the shareholders’ liability is limited to the face value of each shareholder’s share capital.
In contrast to the sole proprietorship, at least two stakeholders are required to form a partnership. Most common are the general partnership (Offene Gesellschaft), or OG, and the limited partnership (Kommanditgesellschaft), or KG. In a general partnership, all partners assume unlimited, joint personal liability. The limited partnership, on the other hand, consists of at least one general partner (Komplementär), who assumes unlimited personal liability, and at least one limited partner (Kommanditist), whose liability is restricted to the agreed liability amount (Haftsumme) published in the commercial register. The general partners in all partnerships may themselves be limited liability companies, thus effectively limiting their “unlimited” liability.
There is no minimum capital requirement for partnerships and no need for a notarial deed. Setting up a partnership simply requires a partnership agreement, which can be made orally, and the partnership’s registration in the commercial register.
Establishing a partnership is thus less expensive and formalistic than establishing a corporation.
The most common capital corporations in Austria are the limited liability company (Gesellschaft mit beschränkter Haftung), or GmbH, and the joint stock company (Aktiengesellschaft), or AG.
GMBH VS AG
Usually, (foreign) investors prefer capital corporations over partnerships because of the limited liability granted to shareholders, even though establishing and operating a capital corporation is costlier than founding and operating a partnership. A corporation may be set up by a single shareholder, but there are several formalities to observe. Among others, the articles of association must be made in the form of a notarial deed, and the corporation only comes into legal existence upon registration in the commercial register. Also, the shareholders are required to provide a minimum share capital, either in cash or as an investment in kind. A GmbH must have a minimum nominal capital of €35,000, half of which must be paid in cash at the time of the GmbH’s formation. There is also a so-called “privileged formation” (gründungsprivilegierte) GmbH, which only requires €5,000 to be paid in cash (instead of €17,500).
The statutory minimum share capital of an AG is €70,000 and ¼ of the cash contributions must be paid in when the AG is founded. The AG also requires at least four separate executive bodies to be nominated, while the GmbH must at least have one managing director.
In general, the GmbH is less formalistic and costly than the AG; and as of 2018, it is possible to establish a single shareholder GmbH without a notary under certain conditions. Still, the GmbH is not as easy to set up as a US limited liability company (LLC) which neither requires a notarial deed nor a minimum share capital to be paid in. The Austrian government, however, is very aware of this and is slowly but steadily loosening the formalities for establishing a GmbH.