Basically you have two options and the choice is fairly simple: If you have 25,000€ that you want to put into the company right now, create a Gmbh
If you don’t have 25,000€ burning a hole in your pocket, go with the cheaper and simplified version: the UG (mini-GmbH), which only requires 350€ in capital (actually 1€, the rest are fees). The only downside to the UG (haftungsbeschränkt) is its name. “haftungsbeschränkt” means limited liability
And don’t worry, you can always upgrade to a GmbH later when the company’s earning revenue. 💸
Gmbh in a nutshell 👩🏻🦲
- A GmbH is a legal entity, in case of a lawsuit, the GmbH can be sued - but not the owners or investors.
- Share capital of 25,000€ necessary!
- Liability is limited to company assets, but the entire company assets, not just the share capital. Provides protection against claims, especially by customers or third parties.
- Obligation to publish: The company must publish annual financial statements in the German Federal Gazette (Bundesanzeiger).
A GmbH is always recommended if a business involves liability risks
- Subsidiaries limit entrepreneurial risk (e.g. tuning company as a subsidiary of car workshop)
UG (haftungsbeschränkt) in a nutshell 👶🏻
- Share capital of 1€ is already enough (but only cash counts, e.g. no real estate)
- “Formation of reserves”: Obligation to retain 25% of annual profit as a reserve, until the starting capital if a GmbH is reached
- No obligation to generate a profit
- Also limits liability to company assets
- Considered less trustworthy
If you actually want to go through - watch this great video by Streiff!
🏁 It all starts with the articles of association
They are the Constitution for the company, they are public, and they are mandatory - and there is a great example here: ✍🏽
