Overview: What is a UG?
The entrepreneurial company (UG) is a special form of German limited liability company (GmbH) that was designed specifically for start-ups and smaller businesses.
This legal construct was introduced by the Act to Modernize GmbH Law and Combat Abuse (MoMiG) in 2008.
The UG makes it possible to establish a limited liability company with a share capital of just one euro, which is significantly less than the 25,000 euros otherwise required for a traditional GmbH.
However, a UG is not only attractive because of its low share capital. It also offers a range of legal protections for the personal assets of its shareholders, similar to a GmbH.
However, according to Section 5a of the German Limited Liability Companies Act (GmbHG), a UG must set aside part of its profits in order to gradually increase its share capital to the minimum amount required for a regular GmbH—a mechanism designed to ensure the soundness of the company's financing.
The decision to establish a UG (limited liability company) brings with it not only low entry barriers but also specific requirements, such as the obligation to set aside 25% of the annual surplus as reserves until the share capital of a normal GmbH (limited liability company) is reached. These and other legal regulations are laid down in the GmbH Act and play a central role in the planning and operation of a UG.
The UG formation offers the following advantages:
- Low initial capital required, making it easier to start a business.
- Limited liability protects the private assets of the shareholders.
- Flexible handling of the corporate structure, enabling rapid adaptation to changing market conditions.
Disadvantages of a UG may include:
- The obligation to accumulate reserves can restrict the company's liquidity.
- The image of a "mini-GmbH" could deter potential business partners or investors.
- Higher accounting requirements compared to other types of companies, such as sole proprietorships.
If you are still unsure whether a UG is the right legal form for your company, the following article may be helpful: When is it worthwhile to establish a UG?
Starting a UG – Follow these 8 steps
Preparing to establish a start-up company (UG) is a comprehensive process that requires detailed planning and an understanding of the legal framework. In order to lay the foundation for a successful venture, founders must go through several critical steps.
Step 1: Develop a detailed business plan
A comprehensive business plan is essential for planning and subsequently implementing your business idea. It not only serves as a guide for strategic orientation and operational planning, but is also crucial for attracting investors and other sources of financing. The business plan should include the following elements:
- Summary of the business idea: A clear and concise description of what your company does and what problem it solves.
- Market analysis: Insights into the target market, information about target customers, an assessment of the competition, and potential risks.
- Products and services: A detailed description of your company's offerings, with a particular focus on unique selling points.
- Marketing and sales strategy: Strategies for reaching your customers, including advertising measures and sales channels.
- Organizational structure and management: Structure of corporate management and organizational structure.
- Financial planning: Detailed forecasts of income and expenditure, break-even analysis, and financing requirements.
Step 2: Selecting and verifying the company name
Choosing a suitable and legally compliant name for your UG is another crucial step. The name must not only meet legal requirements, but also strengthen your brand image and be recognizable. The following aspects should be taken into account:
- Uniqueness: The chosen name must not already exist in the commercial register and must not infringe any existing trademark rights.
- Legal compliance: According to Section 18 (2) of the German Commercial Code (HGB), the name must be appropriate and must not contain any misleading information about the business circumstances.
- Verification: Comprehensive research in the commercial register and trademark register is necessary to ensure that the name is available and does not cause any legal conflicts.
Choosing the right name not only contributes to legal security, but also has a significant impact on the public image of the company and its acceptance by potential customers and business partners.
Step 3: Drafting the articles of association
The drafting of the articles of association is a critical legal step in the establishment of a UG. This document regulates the internal relations of the company and must clearly define the following points:
- Shareholders: Names and shares of the shareholders.
- Management: Rules governing the management and representation of the company.
- Share capital: The amount of capital contributed.
- Company headquarters: The official location of the company.
This key document must be certified by a notary to ensure its validity. The articles of association form the legal basis of the company and must therefore be precise and comprehensive.
By carefully following these steps, founders can lay the foundation for a successful and legally secure entrepreneurial company. Each of these steps helps to put the company on a solid footing and effectively manage future challenges.
Step 4: Registration with the commercial register
Once the articles of association have been notarized, the next important step is to register the UG with the commercial register. This process gives the UG legal existence and is essential for it to start doing business. The commercial register application must include the following documents:
- Notarized partnership agreement
- List of shareholders
- Application for entry in the commercial register (signed by all managing directors)
- Proof of share capital payment
Entry in the commercial register is not only a formal obligation, but also protects the rights of shareholders and ensures transparency vis-à-vis third parties. More on this topic: Commercial register registration Shareholder list
You can also take care of many notarial matters online. beglaubigt.de can help you with this and arrange an online appointment for you with a notary in your area:
Step 5: Opening a business account
Once the UG has been entered in the commercial register, a business account must be opened. This account is essential for all financial transactions of the company and helps to keep business and private finances separate. To open an account, you will need:
- commercial register extract
- articles of association
- Identity cards of the managing directors
Banks may request additional documentation, so it is advisable to find out about the specific requirements in advance.
Step 6: Payment of share capital
The share capital, which has already been specified in the articles of association, must now be paid into the newly opened business account. A minimum capital of one euro is required for a UG, but a higher capital can improve the creditworthiness and reputation of the company. After the deposit has been made, confirmation should be obtained from the bank, which is to be submitted when registering with the commercial register.
Step 7: Register with the tax office and trade office
After registering the UG, you must register the company with the tax office and trade office:
- Tax office: Here you will receive a tax number, which is required for all business tax matters.
- Trade Licensing Office: Registration with the Trade Licensing Office is necessary in order to obtain a trade license.
These registrations are crucial in order to be able to operate the UG to its full extent and to fulfill all tax obligations.
Step 8: Compliance with other legal requirements
Depending on the UG's field of business, further legal requirements may be relevant. These include data protection regulations, which have been strictly enforced since the introduction of the General Data Protection Regulation (GDPR). Specific industry-dependent licenses or permits may also be necessary. The following should be noted, for example:
- Data protection: Implementation of appropriate measures to protect personal data.
- Industry-specific licenses: Obtaining the necessary licenses to ensure legal compliance.
These steps are an integral part of the formation process and should be thoroughly planned and implemented in order to minimize legal risks and ensure the operational functioning of the UG.
To ensure that you don't forget anything when founding your UG, please also read the following article: UG founding checklist
How much does it cost to set up a UG and how much start-up capital do you need?
The costs of establishing a start-up company (UG) vary depending on various factors such as notary fees, commercial register fees, and any consulting costs. It is crucial to plan these costs carefully in advance to avoid financial surprises during the start-up process.
Notary fees - The notarization of the articles of association by a notary is mandatory. The costs for this depend on the company's capital and other services provided by the notary, such as consulting and registering the company in the commercial register. In general, notary fees for founding a UG can range from 100 to 300 euros if a standard agreement is used and the share capital is minimal.
Commercial register fees - Registering the UG with the commercial register also incurs costs. These fees are standard throughout Germany and cover entry in the commercial register and publication of the entry. The costs for this are usually around 150 euros.
Consulting costs - It may also be advisable to seek legal or tax advice, especially when dealing with more complex business models or international issues. The costs for this vary greatly depending on the scope and necessity of the consultation.
Bank fees - There may also be costs associated with opening and managing a business account. Many banks offer special accounts for start-ups, which are discounted or free of charge for the first few months, but later incur standard account maintenance fees.
Share capital - The minimum share capital required by law for a UG is only one euro. However, it is advisable to contribute a higher amount of share capital in order to improve the creditworthiness and reputation of the company.
Start-up capital - Even though only a small amount of share capital is required to establish a UG, you should plan for a higher amount for your total start-up capital. The exact amount of start-up capital should be based on realistic financial planning and should be sufficient to cover start-up costs and the first few months of operation without external financing.
The total costs for founding a UG are therefore often between €250 and €450, depending on the services selected and the share capital contributed. However, sufficient start-up capital should also be taken into account, which can vary depending on the type of company.
This investment enables entrepreneurs to run a limited liability company and provides a flexible platform for business growth. Through careful budget planning and consideration of all possible costs, founders can ensure that their UG starts successfully and without financial bottlenecks.
You can find more detailed information about the costs of founding a UG in this article: Founding a UG: Costs
How many founders does a UG need?
The number of founders required to establish an entrepreneurial company (UG) can vary and depends on the specific requirements and objectives of the company. The law stipulates that a single person can establish a UG. This flexibility makes the UG particularly attractive for sole traders who are looking for a limited liability company form.
individual establishment
The possibility of founding a UG alone is enshrined in Section 5a of the Limited Liability Companies Act (GmbHG). This provision makes it considerably easier for individuals to implement their business ideas without having to look for additional partners.
There are several advantages to setting up a sole proprietorship:
- Freedom of decision: The sole founder has full control over the management and strategic direction of the company.
- Simplicity: The founding process and corporate governance are often less complex, as there is no need to coordinate with other shareholders.
multi-person formation
Of course, founders are free to establish a UG with several people. This can be particularly advantageous if different skills and resources are to be pooled. However, the following points should be considered when establishing a multi-person company:
- Articles of association: These must clearly define the shares, rights, and obligations of each founder.
- Management: Decision-making can be more complex, as it often requires the approval of several shareholders.
Regardless of the number of founders, all shareholders must be listed in the articles of association, and their identities and contributions must be clearly documented. This not only serves to provide legal clarity, but also to ensure that all legal requirements are met.
The flexibility in the number of founders makes the UG an accessible option for many entrepreneurs, regardless of whether they start alone or as a team. Each constellation offers specific advantages and disadvantages that should be carefully weighed when starting a business. The choice of the number of founders should therefore be strategically planned to ensure the long-term success of the company.
Whether you want to set up your UG alone or with one or more partners, online notary appointments are a practical way to save time and make the process easier. beglaubigt.de will arrange an appointment for you with a notary in your area. Interested? Then send us a request! Do you have any questions? Feel free to contact our team!
Can you set up a UG online?
The establishment of an entrepreneurial company (UG) online is becoming increasingly simplified thanks to the German government's ongoing digitization efforts. Since the introduction of the Act Implementing the Digitization Directive (DiRUG) in August 2022, important steps have been taken to enable the online establishment of corporations, including UGs.
online start-up process
The online establishment of a UG involves several steps that can be completed digitally, which speeds up and simplifies the establishment process:
- Digital articles of association: It is now possible to create articles of association in digital form and have them signed by all shareholders using a qualified electronic signature.
- Online notary visit: Notarization, previously a mandatory step that required physical presence, can now also be carried out online by connecting with the notary via a secure video conference.
- Registration with the commercial register: The UG can also be registered with the commercial register online via the central electronic commercial register portal. This service allows all necessary documents to be submitted digitally and the registration to be managed efficiently. The following documents are typically required:
- Signed partnership agreement
- List of shareholders
- Proof of payment of the share capital
- Statements by the managing directors
Advantages and disadvantages of online start-ups
The online establishment of a UG offers numerous advantages that are particularly appealing in today's digital world:
- Time savings: There is no need for physical appointments with notaries and other authorities, which significantly speeds up the process.
- Cost efficiency: Costs can be saved by reducing physical documents and travel.
- Flexibility: Founders can complete all steps from anywhere, as long as they have an internet connection.
Despite the advantages, there are also challenges and potential disadvantages that must be taken into account:
- Technical requirements: Appropriate technical equipment and access to secure digital signatures are required.
- Security concerns: The security of personal data and protection against fraud must be guaranteed, especially with regard to the confidentiality of information in a digital space.
Although the option to establish a UG online offers considerable advantages and modernizes the establishment process, it is crucial to carefully weigh up the technical possibilities and potential risks. This step toward the digital transformation of the company register represents a significant advance in simplifying company formation in Germany.
beglaubigt.de helps you to handle all notarial matters for the establishment of your UG online. If you have any questions about the process, please read the following article: Establishing a UG Online Notary
final assessment
The establishment of an entrepreneurial company (UG) offers an accessible and flexible option for entrepreneurs who want to start a limited liability company with minimal initial capital.
The provisions laid down in the Limited Liability Companies Act (Section 5a GmbHG) make it possible to establish a UG with a share capital of just one euro, thereby significantly lowering the financial barrier to entry. This promotes entrepreneurial activity and enables broader participation in economic life.
However, the UG is not just a simple solution, but also entails specific obligations, such as the need to build up reserves in order to raise the capital to the minimum amount required for a regular GmbH. This requirement can affect the company's liquidity and requires careful financial planning and management.
Advantages of establishing a UG:
- Low barriers to entry: Enables entrepreneurs to start with little capital.
- Limitation of liability: Protects the private assets of shareholders from business debts.
- Flexibility in corporate management: Enables rapid adaptation to market changes.
Challenges in establishing a UG:
- Reserve requirement: Forces the company to reinvest part of its profits.
- Image problems: As a "mini-GmbH," it may be more difficult to gain the trust of large investors and business partners.
- Complex start-up and administrative procedures: Requires detailed knowledge of legal provisions and careful accounting.
The decision to establish a UG should therefore be based on a thorough analysis of business objectives and financial capabilities. With current advances in digitalization, such as the option to establish a company online, the process of starting a business is becoming increasingly simplified and accelerated, further enhancing the appeal of this type of company.
Overall, the UG offers an excellent platform for entrepreneurs who are willing to start with a small budget but still seek the protection of limited liability. With the right planning and strategy, the UG can be an effective springboard for future growth and success.
