Founding a UG: steps, advantages, tips

Content

Who can set up a UG?
What does it cost to set up a UG?
What is the difference between GmbH and UG?
When does it make sense to set up a UG?
Advantages and disadvantages of a basement
Advantages of a basement
Disadvantages of a basement
How can I set up a UG (limited liability)?
Draw up a business plan
Put together your founding team
Define the most important key data
Determine the amount of your initial contribution
Take care of the necessary permits
Use a sample protocol / draw up a partnership agreement
Appoint a manager
Open a business account with a bank
Enter the UG in the commercial register
Register the basement at the trade office
Register the UG with the tax office
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No money, but still the desire to start your own business? Then you could set up a UG. UG (limited liability) stands for "entrepreneurial company (limited liability)". Theoretically, you only need one euro and one partner - the process for establishing a UG does not differ significantly from that of establishing a GmbH (limited liability company). At the same time, young founders bear lower risks thanks to the simplified legal form. That and the low share capital of one euro are just two of several good reasons to opt for a UG as a form of company. Here you can find out how you can set up a UG, what advantages and disadvantages are associated with it and what costs you will have to face ...

Who can set up a UG?

In principle, anyone can found a UG. There is no prescribed maximum number of shareholders. The founder is then also a partner or managing director at the same time, provided he or she founds alone. In addition to natural persons (residents and foreigners), legal entities - for example in the form of another corporation - can set up a UG. According to Sections 1, 5a of the Law on Limited Liability Companies (GmbHG), a UG can be established for any legally permissible purpose.

It is therefore not only suitable for tradespeople, but you can also set up a UG for non-material or sporting purposes. However, the trade regulations require a permit for certain activities, for example for gambling or insurance brokers. Freelancers such as lawyers and doctors are also subject to certain regulations. These can vary depending on the federal state.

What does it cost to set up a UG?

You only need one euro of share capital if you want to set up a UG. That sounds tempting at first, but it's only half the story. If you don't want to go bankrupt shortly afterwards, you should have set aside some money beforehand. Various costs are associated with the establishment that cannot be avoided. For example, you need a notary. In addition to notary fees, you should also plan costs for other services, such as a tax advisor. To be on the safe side, plan up to 1,200 euros a year for this. There are also various fees for entry in the commercial register and business registration. Lump sums are difficult to name because the costs of a UG also depend on how many partners you set up a UG with: it is cheaper than a one-man company. You should expect a total of 500 to 1,000 euros, depending on the articles of association.

What is the difference between GmbH and UG?

The UG is a type of company that is counted among the corporations in Germany. The UG belongs to a group with the following types of company:

➠ AG (stock corporation)
➠ KGaA (partnership limited by shares)
➠ GmbH (limited liability company)

The UG is often referred to as a small version of the GmbH ("Mini-GmbH"). In fact, it is a sub-form of the GmbH, which is not viewed as an independent legal form. Thus, the legal basis can also be found in the law on limited liability companies (GmbHG). The UG was created as a German alternative to the English "Limited" (Ltd.).

What the UG and the GmbH have in common is the limitation of liability: In an entrepreneurial company, shareholders do not have to be liable with their private assets, liability is limited to the assets of the UG - your own account remains unaffected, even if the entrepreneurial company should go bankrupt and bills are no longer paid can. At the same time, there is a big difference when you want to set up a UG: At the beginning you only need one euro, which you have to pay in as share capital. If you want to set up a GmbH, however, you need 25,000 euros, of which 12,500 euros must be paid immediately as a deposit.

When does it make sense to set up a UG?

A UG is particularly suitable for young founders who usually cannot raise large start-up capital. Establishing a UG is particularly suitable if you value limitation of liability. This at least minimizes the risk of personal bankruptcy due to failed self-employment. Establishing a UG also makes sense if you can use the sample protocol above. This minimizes the otherwise typical bureaucratic effort of setting up a company. The significantly shorter start-up phase makes it possible to be able to act and do business as quickly as possible.

Advantages and disadvantages of a basement

Choosing a corporate form should be well thought out.Do you want to set up a UG, but would you prefer a GmbH or does another legal form suit your individual situation and the intended project better? In order to be able to commit yourself, you should know the advantages and disadvantages of an entrepreneurial company (limited liability). This is how you can find out for yourself whether the UG is suitable:

Advantages of a basement

Your private assets are protected and you are only liable with the capital of the entrepreneurial company. The only exception: You have violated applicable laws and regulations, such as the obligation to file for bankruptcy.
You can set up a UG with just one euro and require significantly less start-up capital. This can mean that you do not have to take out a loan to set up an entrepreneurial company in order to be able to make the capital contribution.
The corporate form of the UG is suitable for various forms of activities, services and trades.
The UG can later be converted into a GmbH. Since this is a sub-form of this legal form, a later change is possible if sufficient reserves have been formed.

Disadvantages of a basement

In a UG, the profits cannot be distributed in full. It is a legal requirement that you have to flow 25 percent of the annual surplus as a reserve into the entrepreneurial company. This saving obligation exists until a revenue reserve of 25,000 euros is reached.
You cannot make any contributions in kind in a UG, regardless of the amount of the initial starting capital, this must always be paid in full in cash.
As a corporation, the UG is taxed in the same way as a stock corporation or GmbH. There are 15 percent corporate income tax (5.5 percent of corporate income tax also as a solidarity surcharge), trade tax depending on the location of the company's headquarters, 19 percent sales tax and 25 percent capital gains tax on profit distributions.
With a very low share capital, bankruptcy threatens, especially at the beginning, when investments have to be made or first bills have to be paid for which there is simply not enough money in the basement.
A UG (limited liability) must always state the full name including the addition for the limitation of liability. Abbreviations or omitting the addition is not permitted. So everyone can draw conclusions about the possibly low capital contribution, which can damage the reputation and creditworthiness.

How can I set up a UG (limited liability)?

How does the establishment of an entrepreneurial company (limited liability) actually work? To help you along the way, we will introduce you to the most important steps below and explain what you have to pay attention to if you want to set up a UG:

Draw up a business plan

Before you plan further steps to set up a UG, you should draw up a business plan in advance. In it you not only set out the company goals, but also explain how you intend to achieve them. The financial plan is a critical part of this: the better you deal with your financial needs and reserves, the more likely your plan will work.

Put together your founding team

Before you found a UG, you should first consider whether you want to set up your own company on your own or whether you want to do this together with a founding team. If you found the UG on your own, full responsibility and all the work remains with you - but also all shares in the business. In the team, competencies can be better distributed and more people get involved at the beginning, but the profit must also be shared.

Define the most important key data

For example, you have to decide on a name that you want to give the company. Make sure that it is serious enough (also for a possible conversion as a GmbH) and not already protected. It must also be determined where the company is based. This is important for the business tax, which varies depending on the municipality.

Determine the amount of your initial contribution

Establishing a UG with a share capital of only one euro is not the best idea. If the share capital is too small, you run the risk that the new company will soon run out of financial resources. You can also opt for a significantly higher deposit - 1,000 euros, 10,000 euros or 20,000 euros. A larger deposit brings greater security if you can afford the cost. The upper limit is 24,999 euros - after that you can register a GmbH immediately.

Take care of the necessary permits

Some companies can get up and running almost immediately, while others need permits to get started. Depending on the industry, these can come from the Chamber of Crafts or an office - such as the health department. Before you begin, do your research and get any necessary permits.

Use a sample protocol / draw up a partnership agreement

The actual establishment of the entrepreneurial company can take place in two ways, but in any case requires the personal appearance at a notary. You can either draw up a articles of association and include all the important formalities such as the name, seat, object of the company as well as names and information about shareholders and managing directors. Or you can use the legal sample protocol above. In this way, the establishment of a UG can be made even easier, as the sample protocol combines several documents at the same time: It functions as a articles of association, a list of shareholders and an appointment for the managing director.

Appoint a manager

If you found a UG on your own, you are accordingly also the managing director. If there are several founders, it must be determined who will be made the managing director or whether there should be several managing directors. If you use the sample protocol mentioned above, the managing director is also determined, otherwise a managing director can be appointed by a shareholders' resolution - this is also done at the notary.

Open a business account with a bank

With the articles of association or the sample protocol in your pocket, you can open a business account. As with the notary, all shareholders should appear together to open an account so that all signatures are available. With the opening of the business account, all shareholders can then pay in the agreed share capital of the entrepreneurial company.

Enter the UG in the commercial register

You don't necessarily need to do this yourself. Since you have already been to the notary to set up the UG, the notary can also do the entry in the commercial register for you. This is possible after the initial deposit has been paid into the business account. Then the notary can transmit all data to the local court and the entry in the commercial register is made.

Register the basement at the trade office

In addition, the newly founded UG (limited liability) must be registered with the responsible trade office. You can often download documents for this online, but to register yourself, you usually need to visit the trade office in person. By registering with the trade office, the information and data about the entrepreneurial company are simultaneously transmitted to the IHK or Chamber of Crafts, the Federal Employment Agency and the employers' liability insurance association.

Register the UG with the tax office

Finally, you must register the UG (limited liability) with the tax office. Remember that this must be done no later than one month after signing the articles of association or the model protocol. To register with the tax office, you must fill out a questionnaire on tax registration. It normally takes about a week before you receive your tax number after you have sent in the questionnaire. You need this for invoices to customers and clients as well as for the accounting of your tax duties.