Formation of a German Entrepreneurial Company with Limited Liability (Mini-GmbH (Unternehmergesellschaft UG))
An entrepreneurial company with limited liability (UG, or mini-GmbH) is the most common form of business enterprise in Germany, with a simple structure designed for private companies, and a minimum share capital requirement of only €1.
FACTS & INFO
Legal forms of companies are regulated primarily by German company law (Gesellschaftsrecht) which is an influential legal regime in the Federal Republic of Germany. Under German law it is possible to set up several different forms of business companies: a limited liability company (GmbH), a limited liability entrepreneurial company (UG), a stock corporation (AG), a partnership limited by shares (KGaA) and a limited liability partnership (GmbH & Co. KG). The limited liability company (GmbH) is the most common form of incorporation in Germany.
The mini-GmbH (Unternehmergesellschaft UG, haftungsbeschränkt) is not a separate legal form of company, but a GmbH which has a minimum capital of less than €25,000 and where cash subscription is required. This means that it is possible to set up a company with limited liability in Germany with capital of only €1. In order to compensate the initial absence of capital the company has to retain a quarter of its annual profit until it has accumulated the minimum share capital of an ordinary GmbH (which is €25,000). The accumulated capital can then be converted into share capital and the mini-GmbH altered into a standard GmbH.
There are no restrictions on the name given to a GmbH, provided that the name: (1) clearly distinguishes the GmbH from other businesses in the same location; (2) is not misleading; and (3) contains a reference to its limited liability. The name must be authorized by the Chamber of Industry and Commerce, and must end in "GmbH".
MEMORANDUM AND ARTICLES OF ASSOCIATION
It is necessary to adopt articles of association when founding a GmbH company, and it is a requirement that the establishment of the articles of association be made before a German notary. The notarization and the appointment of the first director (Geschäftsführer) are recorded in a memorandum of incorporation, to which the articles of association are attached. An application for registration of the company in the commercial register (Handelsregister) must be made to the local court (Amtsgericht) where the company’s registered office is located. It is important to note that during the period between application for registration in the commercial register and the notarial formation, the proposed company’s business activities may be carried out. However, during that that period, those acting in the name of the proposed company will bear personal responsibility.
There is a minimum of one shareholder in a GmbH company. The shareholder(s) may be of any nationality and may or may not be corporate entities. Shareholder names are filed in the public register; however, anonymity can be safeguarded by using nominees. A notarized agreement must be drawn up between shareholders.
The share capital for the formation of an entrepreneurial company with limited liability should be to at least €1. Only cash contributions are admissible; contributions in kind are excluded. Furthermore, the minimum share capital must be paid in full prior to the application for entry in the commercial register.
Profits made by an entrepreneurial company with limited liability after the formation may be distributed only to a limited extent. 25% of the profits have to be transferred to a statutory reserve until the minimum share capital of €25,000 has been accumulated. There is no time limit for this. If no profit is made after formation, no funds have to be transferred to the statutory reserve.
DIRECTORS AND COMPANY SECRETARY
A GmbH is managed and legally represented by its managing directors. There must be at least one managing director (who does not have to be a shareholder or a German resident); however, it does have to be an individual. Legal entities are not admissible as managing directors. It is not important whether the person lives abroad permanently, or whether he/she is a resident or a foreigner. The shareholders may exercise direct influence on the management of the GmbH by issuing binding instructions or directions to the managing directors (the supreme body of the company). Each executive director represents the company independently, unless the memorandum of association stipulates otherwise. All managing directors (Geschäftsführer) must sign the commercial register application in person in the presence of a notary.
There is no requirement for a GmbH company to have a company secretary.
*Please contact us if you are interested in our non-resident nominee director services.
REGISTERED OFFICE AND SECRETARY
All GmbH companies must have their statutory registered office in Germany. The administrative registered office may be located outside Germany (at least in another EU country or the US; in other countries this may depend on that jurisdiction's respective corporate laws).
TRADE LICENCES AND REPRESENTATION
Certain businesses (e.g., restaurants and brokers) must apply for a trading permit (gewerbeerlaubnis). However, the permit does not have to be presented at the time of the registration of the GmbH at the commercial register. If no such permit is required, companies must simply notify the local trade office, which issues a trading license (gewerbeschein). This notification procedure also covers registration formalities with the Central Statistical Office, the relevant Chamber of Industry and Commerce, the local Labour Office, Social Security, and the Federal Health Insurance Office. The GmbH must then be registered at the local trade office (Gewerbe-oder Ordnungsamt).
Company meetings need not be held in Germany.
The incorporation of a new company usually takes two to three weeks. Please note that the company will not be ready for trading until a bank account is established and the share capital is paid up.
RECURRING MAINTENANCE FEES
As from the second year, there are recurring maintenance fees of $4,500. These include:
- Provision of registered office.
All profits deriving from German legal entities, irrespective of form, are subject to a corporate income tax of 15% and a solidarity surcharge at a rate of 5.5% of the corporate income tax that is levied by the federal government, and also to the trade tax which is imposed by municipalities. Other forms of taxation that a German legal entity may be subject to are the value added tax (VAT), and the tax on wages.
In Germany, a limited liability company may be subject to payroll taxes as an employer. German accounting rules apply to legal entities with business activities in Germany, and are subject to the German Commercial Code (Handelsgesetzbuch – HGB) – a code law system. Assets and income shall not be overstated and liabilities and charges must not be understated. A turnover tax ranging from 7% to 19% may be applied and trade taxes vary according to municipality.
AUDIT AND ACCOUNTING
Legal regulations regarding accounting and audit in the Federal Republic of Germany are in compliance with the legislation of the European Community. All legal entities are required to prepare annual financial statements and file these with the German Federal Gazette. Full financial statements are comprised of a balance sheet, an income statement and explanatory notes to the financial statements.
Medium and large-sized corporations and LLPs are also required to prepare and file a management report. Certain small and medium sized companies/LLPs have an option to file abbreviated financial statements with the Federal Gazette. Abbreviated financial statements provide for some reduced disclosure, e.g. a condensed balance sheet and less notes disclosures.
Limited liability corporations in Germany, subject to any other requirements which may indicate otherwise, are under the obligation to prepare their financial statements in accordance with accounting principles promulgated by the German Commercial Code (Handelsgesetzbuch). For filing purposes, a GmbH may also prepare additional IFRS financial statements. However these IFRS financial statements can only be used for filing purposes and do not replace the statutory financial statements prepared under the Handelsgesetzbuch that are still the sole legal basis for determining distributions to shareholders.
Irrespective of size, all legal entities must submit to audit on their statutory financial statements, which also applies to listed companies. In addition to the audit of separate statutory financial statements of certain parent companies, any group financial statements are also subject to an audit, if preparation is required by law.
A small LLP corporation may qualify for an audit exemption provided it meets two out of the following three criteria on two consecutive reporting dates:
- has an annual turnover of no more than €9.68m
- has assets worth no more than €4.84m
- has no more than 50 employees
Our Services and Requirements
OUR SERVICES INCLUDE:
- Name check and approval
- Provision of registered address in Dusseldorf or Hamburg for one year
- Provision of a bank account for forwarding of a share capital
- Notary public fee
- Trade register fee
- A standard set of apostilled original corporate documents in the German language:
- Rubber stamp
- Articles of association
- Extract from register
Please provide the following documents for all directors, shareholders, beneficial owners, and authorised signatories:
- Notarized copy of valid passport.
- Original or Certified copy of utility bill / bank statement (as verification of residential address, dated within three months).
- Original or certified copy of Banker’s reference letter (dated within three months).
- In cases where shareholders and/or directors are corporate bodies, full apostilled set of corporate documents and certificate of good standing (for companies registered more than one year).
IMPORTANT NOTE: LICENSABLE BUSINESS ACTIVITIES
If you conduct any activity without the required license or authorisation granted by a relevant authority in any jurisdiction, Starting Business will not be able to assist you with the company formation or bank account opening related to such unlicensed activity.
Licensable activities include, but are not limited to: provision of financial services involving trading/brokerage in foreign exchange, financial and commodity-based derivative instruments and other securities; offering investment advice to public; insurance and banking; operation and administration of collective investment schemes and mutual funds; payment processing services; money exchange, money transmission or money brokering; asset management; safe custody services; gaming, gambling and lotteries.
Please contact us if you need assistance in the licensing of your financial, Forex brokerage or gambling company.
Shipping of corporate documents or banking kits to your destination requires an extra charge and will be automatically added to your order during checkout. Shipping costs for international courier services are set automatically depending on geographic zones.