It depends. For any kind of Limited Liability Company, it cannot be done online, you need to see a notary. Costs and process differ depending on what exactly you want:
* Forming a full GmbH will cost around 1000-2000 EUR for lawyer,notary,tax accountant. You strictly speaking don't need lawyer nor tax accountant, but unless you are very familiar with the process, I'd recommend you enlist their services. It will make your life substantially easier. You will also need at least 12500 EUR in cash that will be the founding capital for the GmbH - you'll need to underwrite a security for another 12500 EUR for the rest of the founding capital or just pay a total of 25000 EUR for the founding capital. You can have the new company pay all fees from that founding capital. It's there to be used, you can pay yourself a (reasonable) wage from day one, if you choose to.
* Forming a UG is substantially cheaper: Founding capital is at least 1 EUR (though you should have more or you'll bankrupt the new company when it needs to send the first letter), there's form contracts that cover trivial cases (up to 3 shareholders, even distribution of shares, ...) and in the simple cases, all fees and notary costs should be in the low 3 digits. Keep in mind that moving money in to and out of limited liability companies is not trivial, so you should have sufficient founding capital to cover the initial expected expenses.
If you don't need the protection of a limited liability company, you can always opt for just freelance status - that's a simple registration at the tax office or, if you're multiple people, form a GbR (either by contract or implicitly, but I would really recommend a written contract). You can then register the business online.
> Keep in mind that moving money in to and out of limited liability companies is not trivial, so you should have sufficient founding capital to cover the initial expected expenses.
Can you not, as an owner or director, loan money to the company to cover initial expenses? In the UK it's common to run a Directors Loan Account.
With the DLA you can lend money to the company to start things up, or pay for things personally and claim expense from the company if that's simpler at first (even company formation fees can be claimed like this) which can then sit in the DLA, or use it to borrow (a limited amount) from the company for a short time to smooth over salary/dividend payment planning.
You have to be careful to account for each transaction between personal and company, but if you understand that it seems not especially complicated, and certainly doesn't need founding capital. With my recent company the founding capital was £1.
You can loan money to your own company as shareholder. However, there are a few things to keep in mind:
* a shareholder loan is treated like capital - it’s the last loan to receive payment if the company folds. Probably not a problem in most single person LLCs, it important to keep in mind when it happens. If you pay your own loan and default on another, that’s a crime.
* you cannot in general make up arbitrary terms. The loan must be made with terms that a third party would agree to (“wie unter fremden Dritten”). That means you should - even for your own company - have a contract in place.
Borrowing from the company is possible, but if you give yourself too favorable terms, this could end up being treated as a hidden payment (verdeckte Gewinnentnahme) and that’s tax fraud. Tax litigation has the uncomfortable rule that the burden of proof is reversed- you need to prove your books are in order. If you can’t, tax authorities win the money.
Same if you start paying yourself a salary, but end up not paying on a regular basis. It’s ok if it happens a few times, but a salary should be somewhat regular.
I’d say it’s generally easier to pony up a little cash to cover the initial expenses if you can. I don’t see too much benefit in not having at least some founding capital. You’ll have to come up with the money anyways and it’s not going to sit in the bank account unused.
It’s better to find other ways to make things smooth. For example you can be managing director without drawing a salary.
Just some data points from the UK, not disagreeing with the parent comment.
Lending to the company is useful as an alternative to posting a large amount of _initial_ share capital, which you might simply not have, or not want to declare at first. For example, if you have a main job, and you are starting a company for a side project (to give it clearer legal structure or other benefits of incorporation), and don't have savings to put in. Rather than wait until you've saved up, you might start the company with minimal share capital, then add project funding over time from your main job salary by way of directors loan rather than issuing more shares and all the complications that go with that.
In the UK it's simpler, especially for small, short term director loans:
- When lending to the company, the terms don't have to be those a third party would agree to. It's ok to be interest-free, or to charge interest. If charging it's personal income for the director and personally taxable as interest, and a taxable business expense to the company For a one-person, 100% owned company it will generally be favourable to not charge interest, as well as simpler to document. A drawn up contract is of course advisable, especially for loans with interest, to document what's going on especially for authorities, but it can be a simple one.
In one-person companies it's common to lend to the company as a side effect of other things, for example deferring an agreed salary payment, dividend, or sale of property into the company posted to the loan account instead of paid as cash.
- When borrowing from the company, below £10k and for a strictly limited timing relative to the company accounting year, a director can borrow interest-free without involving taxes (as long as it doesn't follow a pattern that would be deemed an advance on salary instead, then there would be tax/NI implications).
- Otherwise, if insufficient interest "hidden payment" can occur, which we call "benefit in kind", and it's dealt with legally by paying tax on an amount you or your accountant can calculate. Helpfully, an agreeable interest rate is formally specified by the tax authorities; if it's paid there's no benefit in kind to worry about anyway. There is no need to evaluate and document what a third party might agree to.
In practice, the smaller type is not uncommon, and can even occur by accident, for example if a director mistakenly pays for something personal on a company card, that's recorded as DLA until it's paid back or covered by something else.
