In Germany, companies with limited liability are called Gesellschaft mit beschränkter Haftung, or "GmbH." Similar to the US Limited Liability Company (LLC) or British Limited Liability Partnership (LLP), the GmbH structure is such that company owners and directors are not personally liable for company's debts.

The GmbH has become the most popular form of company in Germany since it was first introduced into law in 1892.

Simpler and cheaper

The proposed legislation would reduce the amount of capital required to start a GmbH from 25,000 euros ($34,000) to 10,000, and the creation of a "mini GmbH" would also be possible with just one euro.

The proposals regarding GmbH entities are expected to be approved by the government on Wednesday and could take effect in the first half of 2008.

These new companies would have to plough one-quarter of annual profits into their capital reserves, to avoid creating a mass of groups on the brink of bankruptcy.

A law for the modern economy

The government will also provide a "GmbH creation kit" to simplify administrative procedures and make it possible in theory to launch a business in just one day.

GmbH is a common legal entity in Germany, Austria, Switzerland and other central European countries.

"The creation of a GmbH will be much easier and much quicker," Zypries told a press conference in Berlin.

"It was time to adapt GmbH statutes, which date back to 1892, to present realities," she said.

The boost to create small and medium enterprises should also help stem the tide of German companies transfering to the more flexible British Ltd. statute.