Why the UG is an Attractive Legal Form for Founders – The Dream of Your Own Company
The entrepreneurial company (UG), also known as "mini GmbH," has experienced a boom in recent years and has established itself as a popular legal form for startups in Germany. But what makes the UG so attractive, and how does it differ from other company forms?
- Low Capital Requirements: Unlike the classic GmbH, which requires a minimum share capital of €25,000, you can establish a UG with just €1. This significantly lowers the entry barrier for founders with limited budgets, allowing them to realize their business ideas without substantial financial burden. This low capital requirement makes the UG particularly appealing for young founders, startups, and small businesses.
- Limited Liability: Similar to the GmbH, the UG limits liability to the company’s assets. Your personal assets remain untouched, providing a high level of security and minimizing financial risk. This means that in the event of insolvency or legal disputes, you are not personally liable with your private wealth. This safety net is a crucial factor for many founders when choosing a legal form.
- Flexibility: The UG offers high flexibility in structuring the articles of association and the company. You can largely design the UG according to your individual needs and preferences, allowing you to tailor it to your specific business activities.
- Image and Growth Potential: Despite the lower minimum share capital, the UG enjoys a reputable image as a capital company among clients and business partners. It is often perceived as the "little brother" of the GmbH, exuding professionalism and trustworthiness. Additionally, the UG can later be converted into a GmbH as the company grows and more capital becomes available, allowing for gradual expansion and adaptation of the legal form to meet evolving needs.
- Tax Advantages: Under certain conditions, the UG may be exempt from trade tax, significantly reducing the tax burden and increasing the company’s profitability. This is particularly beneficial for young companies in the startup phase, as they can reinvest their profits into business growth rather than paying taxes.
Now that you understand the advantages of the UG as a legal form, let’s take a look at the concrete formation process. Don’t worry; we will guide you through every step and make the bureaucratic jungle manageable.
- If you want to learn more about how to form a UG, you might find this article interesting: UG Formation Checklist.
- Another interesting topic could be: When It Is Worth Forming a UG.
The UG Formation: A Step-by-Step Guide Through the Bureaucratic Jungle
While establishing a UG requires navigating some bureaucratic hurdles, it can be successfully managed with the right guidance. We will take you by the hand and guide you step by step through the entire formation process:
- Create a Business Plan: A well-thought-out business plan is the foundation for a successful company formation. It helps you clarify your business idea, define your target audience, develop your marketing strategy, and create your financial plan. The business plan is not only an important tool for you but also significant for potential investors and lenders. You should detail the following points in your business plan:
- Drafting the Articles of Association
- The articles of association are the heart of your UG. This contract outlines all important aspects of your UG, such as:Company name,Registered office,Business purpose,Share capital and shareholder contributions,Rules for decision-making,Rights and obligations of shareholders,Distribution of profits.You can either use a template or seek individual advice from a lawyer to create articles of association tailored to your needs. For more complex business models or if there are multiple shareholders, individual consultation with a lawyer is recommended.
- Notarization: The articles of association must be notarized by a notary. The notary checks the contract for legality and advises you on all legal questions. They are also responsible for registering your UG with the commercial register. Notarization is legally required and serves to protect all parties involved.
- Open a Business Account & Deposit Share Capital: Open a business account for your UG and deposit the share capital. Even though the minimum share capital is only €1, you should plan for a realistic startup capital to finance your company’s initial phase.
- Commercial Register Registration: The notary will register your UG with the commercial register. After registration, you will receive a commercial register number, which must be included on all business documents. The registration is the official step to establish your UG as a legal entity. This process can be conducted online with us via this link: Online Certification of Commercial Register Registrations.
- Apply for a Tax Number: Register your business with the tax office and apply for a tax number. You will need this to collect VAT and issue invoices. The registration is typically informal and can be done in person, by mail, or online.
- Additional Formalities: Depending on your industry and business model, further registrations or permits may be required, such as registration in the trade register or obtaining a restaurant license. Make sure to inform yourself in advance with the relevant authorities about any additional steps necessary for your business.
UG Formation Costs: A Detailed Overview – From Notary to Marketing
The formation costs of a UG consist of various components. It is important to realistically assess and budget these costs in advance to avoid financial surprises.
One-Time Formation Costs:
- Notary Fees: The notary fees are legally regulated and depend on the Courts and Notaries Cost Act (GNotKG). They vary based on the amount of share capital and the complexity of the articles of association. For a UG with minimal share capital, they typically range from €200 to €500. However, costs can be higher for more complex articles or a larger share capital.
- Court Fees: Court fees for registration in the commercial register are defined in the Justice Administration Cost Act (JVKostG). For a UG, these usually amount to around €150.
- Consultation Fees: Legal and tax consultation is not mandatory but can be very helpful in avoiding mistakes and accelerating the formation process. Costs vary depending on the extent of the consultation and the experience of the advisor.
- Other Costs: These include costs for opening a business account (potential account management fees), business registration with the municipality (approximately €20-60), and any licenses and permits that may be required based on the industry and business model. For example, specific activities, such as operating a restaurant or a craft business, may require additional permits.
Ongoing Costs:
- Rent: Costs for office or business premises vary greatly depending on location, size, and facilities. In large cities, rents are generally higher than in rural areas. The location of the property (e.g., city center or industrial area) also plays a role.
- Personnel Costs: If you employ staff, you need to consider salaries, wages, social security contributions, and potentially other personnel-related costs. Personnel costs are one of the largest cost factors for many companies.
- Insurance: Various insurances are important for a UG, such as business liability insurance, professional liability insurance, content insurance, etc. The costs depend on the industry and individual risk. A careful risk analysis can help select the right insurances and avoid unnecessary costs.
Let’s Take a Concrete Example for a UG Formation with a Share Capital of €6,000
Here is a detailed cost breakdown for establishing a UG (limited liability) in Munich with a share capital of €6,000 and three shareholders, excluding share capital costs:
1. Notary Fees
The notary fees vary depending on the share capital and the number of shareholders. For a share capital of €6,000 and three shareholders, the notary fees can be estimated as follows:
- Notarization of the articles of association: approx. €300
- Registration in the commercial register: approx. €70
- Certification of the shareholder list: approx. €30
2. Commercial Register
- Registration fee: approx. €150
- Publication costs: approx. €50
3. Business Registration
- Business registration in Munich: approx. €50
4. Additional Fees
- IHK membership: The first annual fee is often free or low, approx. €50
- Tax advisor costs: Depending on need and complexity of accounting. Initial consultation and first annual statements could cost between €500 and €1,500. For a UG of this size, approximately €1,200.
5.Other Costs
- Bank account opening: Some banks charge fees for business accounts. Monthly costs can be about €10-30. Assuming around €20 monthly, that’s €240 annually.
- Office supplies and equipment: These costs vary greatly depending on need and are not included here.
- Insurance: Liability insurance, professional liability insurance, etc., vary significantly by industry and are not included here.
UG Formation Costs: Summary of Costs (Example Calculation Without Share Capital)
- Notary Fees: approx. €400 (300 + 70 + 30)
- Commercial Register: approx. €200 (150 + 50)
- Business Registration: approx. €50
- Additional Fees (IHK): approx. €50
- Tax Advisor Costs: approx. €1,200 (for the first year)
- Bank Account Opening: approx. €240 (annually)
Total Costs (Example): approx. €2,140. This calculation serves as a rough estimate and can vary based on individual circumstances and regional differences.
New: We support you throughout the entire process of forming your UG: Start easily here.
Cost-Saving Tips for Founders: Save Money When Forming a UG
Forming a UG can be costly, but there are several ways to reduce expenses:
- Model Protocol: Use a model protocol for the articles of association to save on notary fees. Many free templates are available online that you can adapt to your needs. Ensure that the model protocol meets your individual requirements and covers all important points. When in doubt, consult a lawyer.
- Virtual Office: If you do not need a physical office, you can save on rental costs with a virtual office. A virtual office provides you with a business address, phone service, and mail handling without the need to rent physical premises.
- Founder Grant: Check if you are eligible for the startup grant from the Employment Agency. This grant can help cover your ongoing costs in the first months after formation.
- Tax Advice: Consult a tax advisor to optimize tax benefits and avoid mistakes in your tax return. A tax advisor can also help you organize your accounting efficiently and save costs.
- Free Resources: Utilize free resources such as online tools, templates, and guides to reduce your costs. Many helpful offers are available online to assist you in forming and running your UG.
- Self-Service: Take on tasks that you can complete without special knowledge or qualifications, such as creating a website or marketing.
- Comparisons: Compare prices for office supplies, insurance, software, etc., to find the best deal.
- Network: Use your network to get recommendations for affordable service providers or to seek tips and advice from other founders.
With these cost-saving tips, you can significantly reduce your formation costs and successfully launch your UG. However, in addition to the financial aspects, it is also important to be aware of the legal foundations.
Legal Foundations: The GmbH Act (§ 5a GmbHG) – The Basis of Your UG
The UG (limited liability) is a special form of GmbH and is subject to the regulations of the GmbH Act (GmbHG), particularly § 5a GmbHG. Here are the key points:
- Minimum Share Capital: €1. This is a significant advantage compared to the GmbH, which requires a minimum share capital of €25,000.
- Articles of Association: Must be notarized. The articles of association are the central document of the UG and regulate all important aspects of the company formation.
- Managing Director: At least one managing director, who does not necessarily have to be a shareholder. The managing director represents the UG externally and manages the business.
- Reserve Formation: The UG must allocate 25% of its annual surplus to a reserve until the share capital of a GmbH (€25,000) is reached. This reserve strengthens the equity base and can later be used for investments or for conversion into a GmbH.
- Liability: The liability of shareholders is limited to their contributions. This means that in the event of insolvency or legal disputes, they only have to bear liability up to the amount of their contributions.
- Company Name: The name must include "Unternehmergesellschaft (haftungsbeschränkt)" or "UG (haftungsbeschränkt)." This ensures clarity and transparency for customers and business partners.
UG vs. GmbH: Advantages and Disadvantages in Comparison – Which Legal Form Is Right for You?
The choice of the right legal form depends on your individual needs and goals. If you want to start with little capital and desire limited liability, the UG is a good option. However, if you are planning a larger business and need higher creditworthiness, the GmbH might be the better choice. Learn more about the online formation of a GmbH.
Form a UG with beglaubigt.de: Your Partner for a Smooth Start
At beglaubigt.de, we support you at every step of your UG formation. From drafting the articles of association to notarization and registration in the commercial register, we offer you comprehensive services that save you time and hassle. Our goal is to make the formation process as simple and stress-free as possible, allowing you to focus on what matters most: building your successful business.
Our Services Include:
- Free Consultation: We provide free and non-binding advice on all questions related to UG formation.
- Customized Contract Design: We create a tailored articles of association that meets your individual needs.
- Notary Appointment: We connect you with a competent notary in your area and accompany you to the appointment.
- Commercial Register Registration: We handle the registration of your UG with the commercial register and take care of all formalities.
- Additional Services: We also offer support for opening a business account, applying for a tax number, and all other steps necessary for forming your UG.
Start your UG with beglaubigt.de here.
Deciding for the UG: Your Path to Self-Employment with beglaubigt.de
The decision to establish a UG should be based on a careful analysis of your business model, financial expectations, and long-term goals. Thorough planning and calculation of UG formation costs, as well as the potential benefits and limitations of this legal form, are crucial for laying the foundation for a successful venture.
If you want to handle as much of your UG formation online as possible, we can provide you with a suitable notary near you who offers online appointments.
Conclusion
Establishing an entrepreneurial company (UG) offers an attractive opportunity for entrepreneurs to implement their business idea with minimal financial investment and limited liability. Thanks to the minimum share capital of only one euro specified in § 5a GmbHG, the entry barrier is significantly lower than for other capital companies. However, the decision to form a UG should not be taken lightly. The initial and ongoing costs associated with this business form require careful planning and calculation.
The formation costs of a UG include notary fees, fees for registration in the commercial register, costs for drafting the articles of association, and potential advisory fees. After formation, monthly costs arise, ranging from fixed operating costs to variable expenses. These must be carefully weighed against potential revenues to ensure liquidity and success.
The amount of startup capital plays a crucial role and should exceed the legal minimum to bridge the startup phase of the business. The UG also offers the opportunity to strengthen equity by creating a legal reserve and preparing the business for future growth.
The decision to establish a UG should be based on a comprehensive analysis of the business model, financial planning, and long-term company goals. Modern services like beglaubigt.de can support the formation process by simplifying necessary appointments with notaries, contributing to efficiency and cost transparency.
In summary, despite its low entry barriers and flexible structure, the UG presents both opportunities and challenges. Thorough preparation and ongoing monitoring of business finances are essential to fully exploit the potential of this business form and ensure sustainable business development.