In the UK, you can form a company that limits your personal liability with just 1 Pound sterling of share capital. The German UG (also known as a mini-GmbH) is based on this concept.
If you don’t have a cool 25,000 EUR lying about to start a GmbH, you can still start a limited liability company in Germany with one Euro or more of share capital. It’s known as an Unternehmensgesellschaft (haftungsbeschränkt) – an entrepreneurial company (limited liability). People also call it a 1-Euro-GmbH because of the minimum share capital requirement.
You can use a template for the articles of association if you’re looking to set up a simple UG, and this will reduce your setup costs. If you plan on a regular calendar year as your fiscal year and you don’t need more than 3 shareholders and one CEO, there is a standard template you can use. Here’s a link to the template for a one-person UG.
You must put aside 25% of the profit each year as a reserve so that the company can eventually become a GmbH. You don’t have to form a GmbH eventually, but you do have to put aside 25% of the profits as a reserve until you reach 25,000 EUR.
Limited liability is attractive but running a UG does have a few disadvantages: double bookkeeping is mandatory, you’ll need a few things notarized, you have to pay trade tax, and the managing director can still be subject to criminal or civil liability if they breach their duties.
How to form a UG
To form a UG, you’ll need to decide:
- What to call your company: check here to see if the name has already been taken
- Whom to appoint as managing director/s and shareholder/s
- How much to nominate as share capital
- The objective of your company – write a good description that encompasses all possible business activities
Then, you’ll need to do the following:
- Write your aticles of association. You can use a template, hire a company to create them, get a lawyer to customise them for you, or customise them yourself.
- Apply for registration in the commercial register
For this, you’ll need an appointment with a notary. Bring your ID (European Ausweis or passport and address registration) and the articles of association with you. You’ll also need to bring an interpreter if you don’t speak English.
- Open a bank account in your company’s name and pay in the share capital
- Register with the trade department (Gewerbeamt) – you can usually do this online
- Register with the tax authority – you’ll get a questionnaire automatically once commercial registration has happened
- Register with the IHK (Chamber of Commerce) or HWK (Chamber of Crafts) in your city – they will contact you automatically
- Register with the appropriate trade association (Berufsgenossenschaft)
- Optional: Register with the Agentur für Arbeit and get a Betriebsnummer if you wish to hire staff
There are a few companies out there who will take care of all these things for you for a few hundred Euros.
What to expect at the notary’s office
The notary will read through and notarise your articles of association and your application for commercial registration (Handelsregisteranmeldung). If you don’t speak German, an interpreter will interpret these documents into English consecutively. Everyone signs, then the notary gives you some important paperwork to take to the bank. Once you prove that you’ve deposited the share capital, the notary takes care of the registration in the commercial register on your behalf. This might take a few weeks. If you choose to do business before your company has been officially registered, you will still be personally liable during this time.
Tips on founding a UG from notaries
I’ve been to quite a few of these appointments as an interpreter and the notaries tend to offer the same pearls of wisdom:
- Make sure the company name is visible on the mailbox at the address at which you’ve registered the company, as soon as you get back from the notary appointment
- Watch out for a whole bunch of fake invoices from people who like to prey on newly-registered companies. The bill you definitely DO have to pay comes from the Registergericht (registration court), and that’s the fee you have to pay for registering your company. If you are not sure whether the bill is genuine, paying the money in cash in person at the Registergericht is a safe bet, as is calling the Registergericht in your district and verifying the details on the invoice.
- Since you can’t open a bank account in your UG’s name until your UG’s commercial registration application and articles of association have been notarised by the notary, you can’t sign anything at the notary’s office saying that you’ve already paid the share capital. Instead, the notary gives you a confirmation that the deeds have been notarized, and you use this to open a bank account. Then, you e-mail the notary proof that you’ve paid in the funds, and the notary then completes your registration.
- Even though you CAN use just one Euro of share capital, that doesn’t mean you should. Take into consideration the costs associated with starting the company in the first place. If your chosen share capital is too low, it doesn’t take much to become insolvent quickly.
- Become a GmbH as soon as you can to be taken more seriously (do what you wish with this last piece of advice!)
I need an interpreter to help me form a UG
Once you’ve got an appointment with the notary, they will send the two deeds that will be read out on the day. These are:
1. Your articles of association
2. Commercial registry application
Send these two documents to me with a few business days’ notice (3 days before the appointment, if possible!) and I’ll get you a quote. It’ll be somewhere between 250-400 EUR including VAT.
We can also book an appointment at a notary’s office of your choice on your behalf or choose a notary’s office with availability that suits you. Click here to Book a Translator and leave us special instructions to book you an appointment at a notary’s office to found a UG.