In Germany there is a similar thing where you need to deposit at least 25,000 € as collateral to be able to create a GmbH (similar to an LLC). This is meant to pay for debts in case the GmbH goes bankrupt.
But the government recognized that this was a problem so the "UG (haftungsbeschränkt)" was made possible where you are only required to deposit 1 € initially and than can deposit more each year until you can convert to a GmbH. The UG obviously has to pay more interest on loans if it gets any at all but you are not required to be wealthy to be able to protect yourself from bankruptcy.
> This is meant to pay for debts in case the GmbH goes bankrupt.
This is only partially correct. It is to ensure that you can pay your first bills without going bankrupt after the first week or so. You can actually use the money right away to pay for bills. Also, if you pay in cash, you only have to deposit 12,500€.
That's really interesting. Here in the UK you can set up a limited company (i.e. if the company goes out of business, you are not personally liable for any debts) in about a day and there's no collateral requirement at all.
a lot of people overlook the UK - in terms of the simplicity of doing business. from favourable taxes etc. however the biggest con in the uk, is unmotivated people.
In what sense? I've worked with people around the world from a base in the UK and to be honest, don't find staff in other countries are much different. Certainly the quality of output doesn't seem any better.
You need to only deposit 12,500 € in the bank account of the GmbH you want to create as capital (Stammkapital). The founder (Gesellschafter) have then an obligation to pay the GmbH the other 12,500 € at a later date. The CEO (Geschäftsführer) can request that the Gesellschafter pay the rest of the capital.
The CEO can use the capital to establish the business. It can be used to pay wages, buy hardware etc.
Of course there are obligations for the CEO to not let the GmbH go bancrupt.
And: In order to keep the spirit of protecting the creditors of GmbH/UG - while having only to deposit 1 EUR to the UG (haftungsbeschränkt), the UG has to "warn" all potential business partners by carrying the "(haftungsbeschränkt)" (limited liability) suffix as part part of the company name in all written communication (roughly).
Yes, because Germany already has a “LLC”, its GmbH. but if you have less than 25k you have to call yourself “UG (haftungsbeschränkt)”, which, in the end, has the same meaning, only spelled out…
Exactly, it's like the government decided to mark all low-/entry-level entrepreneurship as potentially fraudulent - or urge towards that 25K deposit.
In practice it becomes an invisible glass ceiling, you just work/pay your way through it when it's time, otherwise keep playing in the shallow end for as long as you want.
it's more like a glass bottom, and for good reason because corporations in Germany (also in the Nordics) have a stabilizing social function. Firms exist to consolidate towards higher productivity. The idea is to avoid an army of one-man businesses without healthcare or insurance or any significant output.
I don't think that there is a difference in terms of liability: Both UG and GmbH are limited liability companies. However, my understanding is that an UG is obligated to retain a quarter of its annual profits as reserves until it has reached the capital requirements of a GmbH, at which point it can be converted.
IMHO, UG are a fudge. They recognised that the barriers to GmbH formation are high but at the same time did not want to drop them so they created something new that allows people to start a company before being able to afford a GmbH.
This contrasts to, for instance, the UK where limited companies (Ltd) are extremely easy and cheap to create and maintain (£1 capital and about £15 cost) so that there is no need for multiple types.
Aren't the 25k euros only capital requirements? (i.e. you have to bring them into the company as capital but then they don't have to remain in the company's bank account).
It is also not strictly "capital" requirement. You can bring in non-capital value (like buildings, machines, etc.) into the company, but AFAIK this is much harder and hardly worth the extra hassle.
isnt it pretty common for people to pay their expenses with their LLC bank # because it doesnt matter what you spend it on if x amount of dollars goes through the account it allows you privilege of credit
I always thought it was the case that the UG was riskier from a liability perspective but quickly reading over it, it's not entirely clear that's the case.
But the government recognized that this was a problem so the "UG (haftungsbeschränkt)" was made possible where you are only required to deposit 1 € initially and than can deposit more each year until you can convert to a GmbH. The UG obviously has to pay more interest on loans if it gets any at all but you are not required to be wealthy to be able to protect yourself from bankruptcy.