The UG corporation in Germany
What is it & how do I start it?
UG is a corporation in Germany that has limited liability. This type of corporation is often used by small businesses and entrepreneurs. The shareholders of UG are not liable for the debts of the company. UG is easy to set up and does not require a lot of paperwork. UG is a good choice for businesses that are starting up and do not have a lot of money. UG is also a good choice for businesses that are not yet ready to go public.
At a glance
- Can be founded with just €1 in share capital – but really shouldn’t be founded with less than €1,000
- Can have one or multiple share holders
- Offers the benefit of limited liability for a fraction of the founding cost of a GmbH
- Profit payouts are limited to 75%, until share capital of €25,000 is accumulated
- Has the reputation of being less trustworthy than a GmbH
How to start a UG company: A guide to starting an limited liability entrepreneurial company in Germany
UGs, or Unternehmergesellschaft haftungsbeschränkt, are a great way to start and grow your business in Germany. UGs offer limited liability protection for their shareholders, making them ideal for businesses that are still in the early stages of development.
In addition, UGs are relatively easy to set up and operate, making them a good choice for entrepreneurs who want to get their business up and running quickly. If you’re interested in starting a UG, there are a few things you should keep in mind.
First, you’ll need to choose a company name. Next, you’ll need to draft articles of association and have them notarized as well as registered with the German Trade Register. Lastly, you’ll need to deposit at least 1.00€ in share capital with a bank. Once you’ve completed these steps, you’ll be ready to start operating your UG.
How to set up a UG company in Germany
UG, or Unternehmergesellschaft haftungsbeschränkt, is a type of business where liability is restricted to the assets of the firm. UGs are especially useful for entrepreneurs starting up a small business, as they provide protection against personal financial risk and private assets. UGs are sometimes known as “Mini GmbH” or “1 Euro GmbH” due to the low minimum capital requirements. Setting up a UG in Germany is relatively straightforward:
- The first step is to meet the notary to start the process.
- The next step after the initial paperwork and the UG i.G. (“in Gründung” in formation) is to open a business bank account. This can be done at any major bank in Germany.
- In that bank account you need to deposit the minimum share capital with the purpose “Stammkapital Einzahlung” on the transaction receipt.
- Once you forward this receipt to the notary, they will register the company with the commercial register. Now that the company is registered, it will be assigned a German company number in the German commercial register (Handelsregister-Nummer).
- After you received the “Handelsregister-Nummer”, you will need to apply for a business license (Gewerbeschein) by registering the company with the local trade office.
- The final step is to register at the German tax office (Finanzamt), to be allocated a VAT ID number (Umsatzsteuer-Identifikations-Nummer) and a tax number (Steuernummer). This can be done online through the German Tax Office website.
Once these steps are complete, your UG will be ready to start doing business in Germany!
What registration costs can I expect when registering a limited liability company such as a UG?
When registering a UG, also known as a limited liability company, there are a few standard costs that you can expect. First, you will need to pay the government fee for registering the company. This is typically a few hundred euros. You will also need to engage the services of a notary, which will cost a few hundred euros as well. Finally, you may need to register the company with the chamber of commerce, which may require an additional fee. In total, you should expect to spend around €800 when registering a UG. However, this cost may vary depending on your specific circumstances.
Determine the Stammkapital (share capital) for forming a UG
The Stammkapital, or share capital, is an important aspect of forming a UG, or Unternehmergesellschaft haftungsbeschränkt. This is because it is the amount of money that is invested into the company by the shareholders and it forms the basis for many important decisions. For example, if two people are splitting shares equally, they will need to decide how much share capital each person will invest. A total of 1.00€ up to 24,999 can be requested.
However, there are important factors to consider when making this decision, such as the size of the company and its future plans. If the company is planning to grow quickly, for example, then a larger sum of share capital may be necessary. Ultimately, the decision on how much share capital to invest will depend on the individual circumstances of each company.
Liability of a UG as a German small limited company
The liability of shareholders is limited to the capital contribution and asset value. In general, any credit is paid from company assets, with shareholders’ assets remaining largely unchanged. The law provides for a separate company and separate personal property. UG is therefore a very attractive form of business for entrepreneurs looking to limit their liability. However, it should be noted that UG still bears some risks, such as the possibility of insolvency. As such, UG should only be used by experienced entrepreneurs who are confident in their ability to manage these risks.
Number of People required to register a UG
UGs can be formed by a single individual, and do not require any minimum number of shareholders. However, UGs must have at least one managing director, who is responsible for the day-to-day operations of the company. UG share capital can be either cash or property, and UGs must file annual financial statements with the local court. UGs are a popular choice for small businesses in Germany, as they offer flexibility and limited liability protection.
Responsibilities after the registration
As soon as you register your UG (Unternehmergesellschaft haftungsbeschränkt), you will have a number of responsibilities and obligations. You will be required to maintain accurate books, file taxes such as corporate income tax, trade tax or sales tax. Failure to do so can result in heavy fines. In addition, you will be responsible for ensuring that your UG is compliant with all relevant laws and regulations.
This can be a daunting task, but it is essential to maintaining a successful business. Fortunately, there are a number of resources available to help UG owners meet their responsibilities. There are many specialized consultants who can assist you with compliance issues. By taking the time to understand your obligations and putting in place the necessary systems and controls, you can ensure that your UG remains compliant and successful.
UGs & German business taxes
UGs are subject to business taxes such as corporation tax, solidarity tax, trade tax and payroll tax when they employ staff. A payroll accounting must be prepared for all employees and additional notifications have to be made to the employment agency regarding their terminated employment contracts. It is also required to participate in regular Value Added Tax if the turnover limit of 22.000€ per year will be exceeded. The decision on whether or not to waive the VAT obligation could be made during the process of the registration at the German tax office (Finanzamt) and well be accepted by the tax office.
Can I convert a UG (Mini GmbH) into a GmbH in the future?
Yes you can do so at any time. UGs have a minimum share capital of 1.00€ and can be converted into a GmbH at any time once the share capital reaches 25,000€. UGs are well suited for small businesses that are just starting out and may not have the financial resources to meet the higher share capital requirements of a GmbH.
UG shareholders have the same limited liability as GmbH shareholders and enjoy many of the same benefits, such as the ability to issue shares and attract investment. However, UGs may not be suitable for businesses with ambitious growth plans. If you’re thinking of starting a small business in Germany, an UG may be the right legal structure for you.
Advantages of the UG
UGs, or Unternehmergesellschaft haftungsbeschränkt, are a type of German company that has several advantages over other types of businesses. One of the biggest benefits is that UGs have a very low minimum share capital requirement of only 1.00€, unlike GmbHs, which must have a minimum capital of EUR 25,000 €. This makes UGs much more affordable to set up and also allows for a more flexible ownership structure. Additionally, UGs tend to be more agile and efficient than larger businesses, making them ideal for entrepreneurs who want to get their business off the ground quickly. In addition, the forming costs such as notary and legal fees can be reduced with samples of the protocol.
While UGs do have some disadvantages, such as a lower level of confidence from customers and partners, they can be an excellent choice for businesses that are looking for a more fast-paced and cost-effective option.
Disadvantages of register the UG
There are several disadvantages to registering a UG, or Unternehmergesellschaft haftungsbeschränkt. When selecting the legal form of a UG, there are many important aspects to take into account. The first one of these is that UG shareholders are not allowed to contribute to all of the company’s profits as a maximum of 75 per cent of profits generated may be distributed to the shareholders. The other 25 per cent of the profit is transferred to a revenue reserve (Gewinnrücklage). This means that if the business is successful, the shareholders will see limited financial benefits. Finally, UG businesses are subject to more extensive formalities and reporting requirements than other types of businesses. This can be costly and time-consuming, particularly for small businesses. Consequently, UG may not be the best option for all businesses. Comparing UG to GmbH, UGs may have a harder time getting investments because potential investors may see it as riskier than a GmbH.
Fully qualified tax accountant under German law and specialist advisor for international tax law. More than 15 years of professional tax experience.