Germany: A founders‘ paradise! Here it’s possible to incorporate a company with just one euro of Stammkapital (share capital in English) and still enjoy limitation of liability.
In contrast to the English limited (ltd.), German law applies exclusively to the Unternehmergesellschaft (UG). The UG (haftungsbeschränkt) – the real name for the „1-Euro-GmbH“ – can be formed with a share capital of just one euro. A dream for any new founder with a good idea but without the required share capital – or Stammkapital in German.
In this article, we explain to you what you must pay attention when it comes to the UG share capital (Stammkapital).
Anyone who wants to set up a business but does not have much start-up capital can set up the so-called UG (lhaftungsbeschränkt). It has only been possible to establish this form of business in Germany since 2008. As a special form of the GmbH, the UG benefits from many advantages of the GmbH such as the limitation of liability.
The formation of a UG requires a share capital of only €1. That’s why the UG (haftungsbeschränkt) is also known colloquially as a ‘Mini-GmbH’ (article is in German).
Nevertheless, entrepreneurs should remember that the €1 of share capital is not the same as the start-up costs. You should also bear in mind that notary costs and fees for the commercial register (Handelsregister) and business registration also need to be factored in.
Things to consider when determining your UG’s Stammkapital
The share capital for your UG should be able to cover:
- Company formation costs
- Notary costs
- Handelsregister fees
- Other consultancy costs, e.g. for a lawyer and/or tax consultant
- Business registrations (i.e. Gewerbeanmeldung etc.)
- Start-up costs
- Capital reserves
Be careful if your share capital is too low
Even though the UG is an excellent legal form, especially for start-ups, many aren’t aware that even a single euro entails a certain risk. Inadequate security with sufficient share capital can always also involve the risk of insolvency.
Bear in mind that a CEO is generally obliged to file in good time in the event of insolvency. So give your UG sufficient share capital or think about doing a capital increase at some point. This enables you to plan for the long-term and avoid liquidity bottlenecks.
Build up reserves
The UG has is obligated to set aside reserves. This means that 25% of the annual profit must be retained as a reserve. This must be continued until the share capital of a GmbH, i.e. € 25,000, is reached. The UG can then be converted into a GmbH.
If you would like to increase your share capital, a visit to the notary is always necessary in order to carry out a capital increase.
A UG is therefore ideally suited as a starting legal form if you wish to establish a GmbH but do not have the necessary share capital. Because as soon as the €25,000 are reached, you can turn your UG into a GmbH.
What happens if no capital investments were made? In this case, the defaulting shareholder could be threatened with forfeiture proceedings (article is in German).
Set up your UG with our formation packages with less cost and less bureaucracy.
The information published on our site is all written and checked by experts with the greatest care. Nevertheless, we cannot guarantee the accuracy of this information, as laws and regulations are subject to constant change. Therefore, always consult an expert in a specific case – we would be happy to connect you with the right professional.
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