Family Partnership (GmbH & Co. KG): Planning Succession to Family Assets, Including on Emigration

Published on 12.11.2026

Family GmbH & Co. KG: Succession

Anyone who wants to pass real estate, securities or business holdings to the next generation in an orderly way sooner or later comes across the family company in the legal form of a GmbH & Co. KG (a limited partnership whose general partner is a limited liability company). For succession to assets it offers a rare combination: the assets stay pooled, the children are given a stake step by step through limited partnership interests, and the parents’ generation keeps management through the general partner GmbH. Whether the structure holds is decided in the partnership agreement, in the tax classification and in periods that in part run for twenty years. Often overlooked: if a family member moves abroad, this can affect the entire construction for tax purposes. This article explains the structure, the gift of limited partnership interests, the most important contract clauses, the inheritance tax relief and the consequences of an emigration (legal position: October 2026).

What a Family GmbH & Co. KG Is

The family company is not a legal form of its own but a company whose shares stay in the family and which manages and passes on the family assets. In practice it is also called a family pool.

In a GmbH & Co. KG, a GmbH is the only personally liable partner (general partner, Komplementär). The family members are limited partners (Kommanditisten) and are liable to creditors only up to the amount of their liability sum entered in the commercial register (Section 171 (1), Section 172 (1) of the Commercial Code (Handelsgesetzbuch, HGB)). The managing director of the general partner GmbH is typically a parent. No natural person is therefore liable without limit, and management nevertheless remains with the parents’ generation.

The typical process in three steps:

1. Establishment of the general partner GmbH and the KG; registration of both companies in the commercial register and notification of the beneficial owners to the transparency register.
2. Contribution of the assets to the KG, for example let properties or a securities account. For real estate, the contribution agreement and, where applicable, even the partnership agreement require notarial certification (Section 311b (1) of the Civil Code (Bürgerliches Gesetzbuch, BGB)); the KG is entered as owner in the land register.
3. Gift of limited partnership interests to children or grandchildren, staggered over years and adjusted to the allowances.

What is then transferred is not individual properties but precisely measured percentage shares.

Comparison of Legal Forms: Why the GmbH & Co. KG?

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A purely asset-managing KG with a natural person as general partner earns income from letting and investment assets; real estate can be sold tax-free after ten years (Section 23 (1) sentence 1 no. 1 of the Income Tax Act (Einkommensteuergesetz, EStG)). In a GmbH & Co. KG, by contrast, commercial coinage (gewerbliche Prägung) generally applies. The foundation as an alternative is covered in the article on the family foundation as asset protection for emigrants.

Commercial Coinage under Section 15 (3) No. 2 EStG

A partnership that does not itself carry on a trade is deemed under Section 15 (3) no. 2 sentence 1 EStG to be a commercial enterprise in its entirety if only corporations are personally liable partners and only they or non-partners are authorised to manage. The classic GmbH & Co. KG fulfils both criteria.

Consequences of the coinage:

• The assets are business assets; increases in value are tax-entangled without a holding period.
• The income is commercial and is in principle subject to trade tax. For pure real estate holdings, the extended reduction under Section 9 no. 1 sentence 2 of the Trade Tax Act (GewStG) can help.
• There is an obligation to keep accounts, and running costs rise.
• Under Section 6 (3) EStG, limited partnership interests can be transferred free of charge at book values without hidden reserves being disclosed.
• Only the coinage in principle makes the interests business assets within the meaning of Sections 13a, 13b of the Inheritance and Gift Tax Act (ErbStG). Whether relief actually follows depends on the administrative assets (see below).

If a limited partner becomes authorised to manage, the coinage ceases (decoinage, Entprägung). In the single-entity GmbH & Co. KG (Einheits-GmbH & Co. KG), in which the KG itself holds all shares in its general partner GmbH, the coinage is preserved according to the Federal Fiscal Court (BFH) judgment of 13 July 2017 (IV R 42/14) if the limited partners exercise only the shareholder rights from the GmbH shares. If the coinage later lapses, this can be treated as a cessation of business with disclosure of all hidden reserves.

Gift of Limited Partnership Interests: Allowances, Valuation, Tax Rate

Children have an allowance of EUR 400,000 against each parent, grandchildren EUR 200,000, spouses EUR 500,000 (Section 16 (1) ErbStG). Acquisitions from the same person within ten years are aggregated (Section 14 (1) ErbStG). After that the allowance is available again.

Example: The parents Anna and Bernd hold a family GmbH & Co. KG with a tax value of 4 million euros. In a first tranche, they transfer to their two children interests worth EUR 400,000 per parent and child, together 1.6 million euros, without gift tax. After ten years they repeat this. Over two cycles, 3.2 million euros is thus transferred covered by allowances, provided the values remain stable and the rules do not change.

Beyond that, in tax class I a rate of 7 percent applies up to EUR 75,000, 11 percent up to EUR 300,000, 15 percent up to EUR 600,000 and 19 percent up to 6 million euros (Section 19 (1) ErbStG).

Three valuation questions are often underestimated:

• Valuation route: For a commercially coined KG, the interest is valued as business assets (Sections 97, 109 of the Valuation Act (BewG), where applicable net asset value as a floor). For a purely asset-managing KG, the individual assets are recognised proportionately, for example land under Sections 176 et seq. BewG; gifts are treated in this respect as an acquisition of the proportionate assets (Section 10 (1) sentence 4 ErbStG).
• Disproportionate contributions: If a parent contributes more than corresponds to their participation quota, this can constitute a gift to the co-partners.
• Compensation clauses: If the contractual compensation is below the tax value, accrual of the share on a partner’s departure can be treated as a gift to the remaining partners (Section 7 (7) ErbStG, on death Section 3 (1) no. 2 sentence 2 ErbStG).

Rights of reclaim and compulsory share issues are explored in the article Lifetime transfer of assets instead of a will. The gift must in principle be notified to the tax office (Section 30 ErbStG), even if it stays within the allowance.

Relief under Sections 13a, 13b ErbStG and Administrative Assets

Eligible for relief are interests in commercially active or commercially coined partnerships (Section 13b (1) no. 2 ErbStG). The standard relief leaves 85 percent of the eligible assets tax-free (Section 13a (1) ErbStG); on application, the option relief leaves 100 percent if the administrative assets amount to at most 20 percent (Section 13a (10) ErbStG). The limit for acquisitions of up to 26 million euros within ten years must be observed.

This is where the most common mistake in thinking about the family pool lies: commercial coinage alone brings no relief. Administrative assets (Verwaltungsvermögen) include in particular land made available to third parties for use (Section 13b (4) no. 1 ErbStG), securities (no. 4) and financial assets (no. 5). Financial assets count as administrative assets only above 15 percent of the business assets, and this threshold applies only if the main purpose of the business serves an active activity. In a purely asset-managing family KG, financial assets therefore count from the first euro; financial assets that were attributable to the business for less than two years always count. If the administrative assets reach 90 percent or more of the eligible assets, the relief is lost completely (Section 13b (2) sentence 2 ErbStG). A family KG that holds exclusively let flats or a securities account therefore regularly falls outside the relief.

Exceptions apply, for example, to housing companies with an economic business operation (Section 13b (4) no. 1 sentence 2 letter d ErbStG) and in cases of business split (Betriebsaufspaltung) and group lending (letters a and c); their requirements are often disputed in the individual case.

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If relief is granted, holding periods of five years (standard relief) or seven years (option) apply. Sale, cessation of business or withdrawals beyond EUR 150,000, to the extent they exceed contributions and profit shares, lead to proportionate forfeiture (Section 13a (6) ErbStG). In addition, the payroll rule applies from more than five employees.

The relief rules of Sections 13a, 13b ErbStG are before the Federal Constitutional Court (1 BvR 804/22 on relief of business assets; alongside 1 BvF 1/23, the abstract judicial review application of the Free State of Bavaria on legislative competence, allowances and tax rates); the oral hearings took place on 12 and 13 October 2026, and a decision is pending. Until then the current law continues to apply. Anyone who bases a transfer on the relief should check the current status and consider a binding ruling from the tax office under Section 89 (2) of the Fiscal Code (AO) before implementation; it is subject to a fee (Section 89 (3) to (7) AO).

Advance Discount for Family Businesses under Section 13a (9) ErbStG

If the partnership agreement contains three restrictions, Section 13a (9) ErbStG grants a discount of up to 30 percent before the actual relief:

1. Withdrawals and distributions are limited to at most 37.5 percent of the taxable profit reduced by the taxes on the profit share.
2. Dispositions of the interest are permitted only in favour of co-partners, relatives within the meaning of Section 15 AO or a family foundation.
3. The compensation on departure is below the fair market value (gemeiner Wert); the amount of the discount corresponds to the percentage reduction, at most 30 percent.

The provisions must exist two years before the tax arises and be observed for twenty years afterwards; changes must be notified to the tax office. For a pure real estate KG with predominantly administrative assets, the discount does not help because it presupposes eligible assets.

The Partnership Agreement: Succession, Compensation, Voting Rights

For the participation, the partnership agreement takes precedence over the will; the two must be coordinated. Key provisions:

Succession clauses. If a limited partner dies, the company is, absent a different provision, continued with his heirs (Section 177 HGB). With a qualified succession clause, the circle can be limited to certain persons, for example biological descendants. If the will names a different heir, the interest does not pass to him; compensation and equalisation claims threaten. For inheritance tax, Section 13a (5) ErbStG must also be observed: anyone who has to pass on eligible assets on the basis of a disposition by the deceased receives no relief for them.

Executorship. In principle, permanent executorship (Dauertestamentsvollstreckung) over a limited partnership interest is possible if the partnership agreement allows it.

Transfer restrictions (Vinkulierung). Transfers require the consent of the co-partners; this keeps sons- and daughters-in-law and creditors out. In addition, many agreements require a marital agreement that takes the participation out of the equalisation of accrued gains; in international marriages, the applicable matrimonial property law matters here.

Compensation. Compensation restrictions protect the company’s liquidity. They must not, however, be in gross disproportion to the real value, otherwise invalidity or adjustment threatens; pure book-value clauses are risky where hidden reserves are high. Common are discounts on the market value and payment in instalments. A low compensation can trigger claims for supplementary compulsory share (Pflichtteilsergänzung), see compulsory share law and foreign assets.

Voting rights and control. The parents steer through the management of the general partner GmbH. In addition, voting rights in the KG can be distributed disproportionately and reservations of consent agreed. The limit: the children must become co-entrepreneurs (Mitunternehmer), that is, bear entrepreneurial risk and be able to exercise entrepreneurial initiative. Otherwise the income is not attributed to them for tax purposes, and relief under Sections 13a, 13b ErbStG is excluded for their acquisition. A complete removal of control rights under Section 166 HGB or free reservations of revocation endanger recognition.

Minors. If the parents are themselves participants, they cannot represent their child on joining; a supplementary guardian (Ergänzungspfleger) is required (Section 1629 (2), Section 1824, Section 1809 BGB). Whether a family court approval is additionally needed depends on the structure (Section 1643 in conjunction with Section 1852 BGB); that can take months.

Usufruct over the Limited Partnership Interest

With a reserved usufruct (Vorbehaltsnießbrauch), parents transfer the substance and keep the income. Its capital value reduces the value of the gift; it results from annual value times multiplier (Section 14 (1) BewG, multiplier under the annual Federal Ministry of Finance letter), and the annual value is capped at the value of the asset divided by 18.6 (Section 16 BewG). The younger the usufructuary, the higher the deduction.

Two pitfalls for the commercially coined KG:

• Co-entrepreneur status: If the donor reserves not only the income but also the voting and administrative rights, the donee may not become a co-entrepreneur for the encumbered interest. The BFH has denied the relief of Section 13a ErbStG in this case (judgment of 16 May 2013, II R 5/12, on the legal position before 2009). The usufruct must therefore be worded so that the child retains at least the voting rights on fundamental matters.
• Double consideration: If relief is granted for the interest, the usufruct is deductible as a burden only to a limited extent (Section 10 (6) ErbStG).

A usufruct also has a civil-law side effect: according to the case law of the Federal Court of Justice (BGH), the ten-year period for supplementary compulsory share claims (Section 2325 (3) BGB) regularly does not begin to run in the case of a comprehensive reserved usufruct.

Real Estate Transfer Tax on Contribution and Gift of Interests

Under Section 5 of the Real Estate Transfer Tax Act (GrEStG), the contribution of land to a partnership is tax-exempt to the extent that the contributor participates in the company’s assets. If his participation decreases within ten years, the exemption lapses proportionately (Section 5 (3) GrEStG). The planned gift of interests to children can collide with this; whether the exemptions for gifts and relatives in the direct line (Section 3 nos. 2 and 6 GrEStG) catch this is to be examined in the individual case. Since the Act on the Modernisation of Partnership Law (MoPeG), these rules rest on the joint-ownership fiction of Section 24 GrEStG, which was originally limited until the end of 2026. The time limit has since been dropped; Section 24 GrEStG applies in its current version without an end date. The status should nevertheless be checked before any contribution.

Emigration of a Limited Partner or Family Member

If a parent, child or grandchild moves abroad, distinct questions arise. The emigration of the entrepreneur holding shares in corporations and the interplay with the relief are covered in the article Business succession on the emigration of the shareholder; here the focus is on the particularities of the family KG.

Permanent establishment and attribution. For a commercially active KG with a German permanent establishment, the interest of the limited partner who has left generally remains attributed to this permanent establishment; under most double taxation treaties, Germany keeps the right to tax current profits and capital gains. It may be different for a KG that is merely commercially coined but in substance asset-managing: according to the case law of the BFH, such a company does not necessarily earn business profits for treaty purposes. The right to tax parts of the interest can then, after the emigration, belong to the new state of residence, with the exception of real property, which is regularly taxed in the state where it is located.

Disentanglement (Entstrickung). If Germany’s right to tax is excluded or restricted, this is treated as a withdrawal (Section 4 (1) sentence 3 EStG); hidden reserves are disclosed without any money flowing. Within the EU and the EEA, a compensating item can be formed on application for withdrawn assets and is released over five years (Section 4g EStG). Payment in five annual instalments under Section 36 (5) EStG concerns the cessation gain under Section 16 (3a) EStG; it is generally granted only against security and ends with the taxpayer’s departure from unlimited tax liability. For old cases, Section 50i EStG contains special rules. Assets in special business assets (Sonderbetriebsvermögen) can also be affected, for example the shares in the general partner GmbH held directly by the limited partner. If these shares are not allocated to the business assets, exit taxation under Section 6 of the Foreign Tax Act (AStG) can apply to them. This also applies if a non-commercial (asset-managing) family KG holds shares in corporations: they are attributed proportionately to the limited partner (Section 39 (2) no. 2 AO); if his look-through participation reaches the threshold of Section 17 (1) EStG (at least 1 percent), Section 6 AStG can apply on emigration even without special business assets. Since 2022, exit taxation is deferred only on application in seven annual instalments; details in the article Exit tax on GmbH shares. The single-entity GmbH & Co. KG avoids this problem because the KG itself holds the GmbH shares.

Management from abroad. If the managing director of the general partner GmbH runs the business from abroad after his emigration, the place of management can shift, with consequences up to disentanglement of the KG; see Permanent establishment through a home office abroad.

Holding periods. The emigration of a donee is not in itself an event under Section 13a (6) ErbStG. But if it triggers a disentanglement that is to be treated as a withdrawal or cessation, the relief can lapse proportionately within the five- or seven-year holding period. Likewise, the twenty-year commitment of Section 13a (9) ErbStG must not be violated by an emigration-related contract amendment.

Gift and inheritance tax after emigration. German nationals remain subject to unlimited inheritance tax liability for five more years after emigration (Section 2 (1) no. 1 letter b ErbStG). After that, domestic business assets, including a limited partnership interest in a German KG with a domestic permanent establishment, remain subject to limited tax liability (Section 2 (1) no. 3 ErbStG in conjunction with Section 121 BewG). The allowances in this case are explained in the article Inheritance tax allowance in case of limited tax liability. The new state of residence can additionally tax the acquisition; whether and how credit is given there must be clarified by an adviser on the ground there.

Contractual precautions. Sensible are clauses that make a planned emigration subject to notification, allocate emigration-related taxes to the person leaving and allow a restructuring before the emigration.

How the tax office assesses the attribution is often open. Before implementation, a binding ruling from the tax office can be applied for under Section 89 (2) AO; it is subject to a fee (Section 89 (3) to (7) AO). Where there is a foreign element, it can make sense to obtain in addition a ruling from the tax authority in the state of arrival.

Common Mistakes in Practice

• Model agreement without coordination with the will and marital agreements.
• Clauses under Section 13a (9) ErbStG only shortly before the gift, so the two-year lead time is missing.
• Assuming a coined real estate KG is automatically relieved.
• Usufruct with a complete reservation of voting rights.
• Unintended decoinage by appointing a limited partner as managing director.
• Emigration without prior tax review.

Conclusion

The family GmbH & Co. KG combines limitation of liability, staggered transfer of interests and control by the parents’ generation. Commercial coinage opens up book-value transfers but does not automatically lead to relief, because let real estate and securities are administrative assets; in addition, the relief is under constitutional review. Partnership agreement, will and usufruct must fit together. If a family member moves abroad, disentanglement, exit taxation and loss of relief threaten unless the structure anticipates this.

Frequently Asked Questions

Is the GmbH & Co. KG suitable for pure real estate assets?

It can be suitable if limitation of liability is the priority. It generally does not achieve relief under Sections 13a, 13b ErbStG with predominantly let real estate. An alternative is often a non-coined, asset-managing KG.

How much can I transfer tax-free every ten years?

EUR 400,000 per child and parent, EUR 200,000 per grandchild (Section 16 ErbStG); with two parents and two children, that is 1.6 million euros per ten-year period.

Do I keep control after the gift?

Yes, through the management of the general partner GmbH and reservations of consent. The children need minimum rights, however, otherwise they do not become co-entrepreneurs.

What happens if my child moves abroad?

With a merely commercially coined KG and with shares in the general partner GmbH held directly, disentanglement or exit taxation can threaten. Have the emigration reviewed in advance.

Does the partnership agreement take precedence over my will?

For the partnership interest, yes. A qualified succession clause determines who can succeed. If the will contradicts it, compensation and equalisation issues arise. Both documents should therefore be drafted together.

Attorney Dr. Johannes Fiala and the law firm, with a focus on international inheritance law, tax law and asset protection in Munich, advise families and entrepreneurs on succession to assets through a family GmbH & Co. KG, from drafting the partnership agreement and the gift of limited partnership interests to tax protection when a family member emigrates. Dr. Fiala has published extensively on emigration and asset protection. Get in touch with the firm without obligation to discuss your individual situation in an initial consultation.