A partnership is created when at least two individuals and/or legal persons join up to achieve a common goal and provide capital. A partnership has only a limited legal capacity.
For tax purposes, partnerships are also regarded as transparent entities and the income from the partnership for the partner is subject to the income tax of the partner. If one of the partners is a corporation the income from the partnership is subject to the corporation tax.
The most important partnerships in Germany are the civil-law associations ("GbR - Geselschaft bürgerlichen Rechts"), the general partnership ("oHG - offene Handelsgesellschaft") and the limited partnership ("KG - Kommanditgesellschaft").
A major characteristic of partnerships is usually the individual unrestricted liability of the partners with their private assets for liabilites of the partnership.
Unwithdrawn profits at the level of the partnership are taxed according to a special flat tax rate.