> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state collects before it will let me try. And the cheap door has a price of its own: to some clients, “UG” reads as “not serious,” and they would rather deal with a GmbH. The structure built to let me in quietly marks me for using it.
The 25,000 is there to make sure you can cover some liability. If you really wanted "your company and your risk", you could have used the "simplest setup", where you are liable with your own money, but if you think about it that way, it doesn't sound so appealing, does it? So of course the UG which does not (yet) have 25,000 in the bank sounds less serious than the GmbH that has 25,000 in the bank. A company that starts with nothing wouldn't be a GmbH (limited liability company), it would be a GoH (company without liability), and there's a good reason why those don't exist...
> A company that starts with nothing wouldn't be a GmbH (limited liability company), it would be a GoH (company without liability), and there's a good reason why those don't exist...
Those do exist in other countries. An LLC in the USA does not generally need to have a certain amount of assets. Such a company is more or less without liability until it has some assets; the worst case for its owners when it comes to a routine business debt is shutting down the company. Exceptions are possible in case of serious misconduct of course.
Of course a company like that will find it difficult to borrow money, but it's not rare for its last bills to go unpaid when it goes out of business.
Whether those should exist or not doesn't have a clear answer. Culturally, Germans tend to be pretty uncomfortable with "sometimes shit happens and debts go unpaid", while Americans tend to find a moderate rate of that sort of thing tolerable, especially if it makes starting a new business viable for a greater fraction of the population.
What’s wild is that this is pre-debt. The banks will have their own risk math for you so it’ll be a completely separate set of hoops before you get to be in debt as a company. Most will not even talk to you if you have 0€ in the business account. I don’t feel like a company with no assets or income can do that much damage to their societies.
Also as a small company in the EU I have to have liability insurance for the company for any major clients so the insurance company also will make you jump through further hoops.
Not quite. In the US this condition is handled at the back end. Running a corporation or LLC without sufficient capitalization can be grounds for piercing the liability shield in a lawsuit.
This is not an argument that founders should seed 25k EUR to cover liability, it's an argument that GmbH bank account amounts should be visible publicly. If I want to put in a catering order, the catering business does not need 25k EUR to cover liability. If I want to build a data center, 25k EUR is not nearly enough.
They are jealous of the US system where you can create an LLC in one hour for $200, and by the next day be doing business with all your personal assets isolated.
The US system is built to support entrepreneurship while the EU system broadly is to support the consumer and employee. The US will never be able to match the EU's consumer and employee protections and the EU will never be able to match the US's ease of doing business, because to have one you have to fundamentally give in on the other.
Depending on who you ask, one system is wildly better than the other, but at the end of they day they are just different systems with different tradeoffs.
The issue in question is a Germanic system, not an EU one. Outside of Germany, Austria, Luxembourg, most EU countries are far more sensible with capitalization requirements.
I get that this gives you less liquidity personally, but (a) you're only required to pay in half, i.e., 6,250 EUR each, and (b) this money isn't gone, and you don't lose the ability to recover it should you decide to liquidate the company later. As others have pointed out, you can use that money to pay costs associated with the founding (e.g., the notary) and also expenses required to maintain the company (IHK dues, bookkeeping, etc.).
HN commenters are acid, but from one author to another don't let them get to you because they'll shun you for losing your temper even if it's totally justified.
The author can surely understand it. And this system is what is keeping Germany and many European countries from propelling their economies forward by reducing market dynamism. Its not a coincidence that China, US and many other countries, which have more dynamic markets and large GDP growth let you set up a company in a day.
The trust in a company should still be left to the criteria of suppliers, customer, etc. Not the random number that a bureaucrat pulled out of his arse.
You call €25k liability? I just decided I won't work with a company that can't cover €25M in liability. Should the state force you to block that in your bank account just in case you want to work with me?
When I co-founded a company in the UK in 1995 there were two £1 shares - one for each founder. Mind you it was an off the shelf company - but the process couldn't really be much simpler back then - and its probably a lot simpler now.
For a limited company in the UK, you need a number of pieces of legal paperwork which I think you can technically write yourself but may prefer a solicitor to draft them correctly for you, and then you pay £100 to register the company, and you (and any other directors, shareholders or guarantors) capitalise the company yourself.
You are now limited in liability for what the company does, to no more than the capital you put into it.
You then have to supply yearly accounts, may have to register for corporation tax, VAT, register as an employer for paying national insurance, you'll probably need business insurance, etc.
If you buy and off the shelf company then you don't need any of that - they supply a pile of stuff (e.g. articles of association) and you don't need a solicitor to be involved.
Edit: And these days you don't even need two people - used to be that you needed two directors or director and company secretary.
You don't need to use a lawyer to draw up the docs unless you have special requirements: you can use the proforma memorandum (it's auto-filled if you apply online) and adopt the model articles of association.
You can open an Estonian company with 0.01 € capital. It will look ridiculous in the registry, and you will still be liable for the remaining 2499.99 € personally anyway, but it is possible. I’ve seen a couple 100 € companies, which is more reasonable I guess.
You can also declare that you’ve paid the capital in, without any proof required for small amounts (up to 50k € IIRC). If you lie about it, I suppose you’ll be personally liable for everything, so definitely not worth risking it. Just put in like 500 €, set it aside on the business account, and don’t touch it.
You could put in 2500 € in capital – then your personal exposure will be zero. In practice, I don’t think it’s a meaningful difference, you will just have to keep the whole 2500 € on the company balance by the end of each FY. (Unless you wanna deal with non-monetary contributions!)
If you put in 500 €, you’re liable for 2000 € personally, but you don’t have to keep them for your annual report. (It also means your company looks a bit riskier, since you might not have the 2000 € personally, so you might have trouble getting credit or whatever, but otherwise I don’t think it’s a big deal.)
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Edit: to the author: you should really look into Estonia (or any other sane jurisdiction mentioned elsewhere in the thread). You can still set up a KG (or a sole proprietorship), then put an Estonian OÜ in front of it. Costs something like 300 €, can be done online (you’ll probably need an e-residency card, an Estonian e-signature thing for foreigners, which is another ~150 €). Annual reports are fairly easy if you keep your books properly. And you’ll need an address in Estonea which is also like 125 €/yr. No additional taxes most likely (but check with a real accountant).
Still a limited-liability company. "You might be personally liable for up to €2,499.99" is not anything like the same as "your personal assets are exposed to all company debts".
You are right, of course, but in most jurisdictions the limit is lower than 25k EUR (e.g. in PL it's 5k PLN ~ 1.2k EUR; I believe in the UK it's even less), and you can trivially look up the capital of any business in the business registry online --> you can decide if you are dealing with a multi-million behemoth or a mom-and-pop shop.
> A company that starts with nothing wouldn't be a GmbH (limited liability company), it would be a GoH (company without liability), and there's a good reason why those don't exist...
What's the good reason? In the UK I can started a Ltd with £1 of share capital, about £100 of fees, and filling out a form online. I will be shielded from personal liability if it goes tits up unless I've broken the law, knowingly traded insolvent, or otherwise been an idiot.
The wider thread appears to be Germans commenting that it's unthinkable that such a thing could exist, and thus it's all the author's fault.
what you probably mean is an OHG, an Offene Handelsgesellschaft
It is one of the simplest form a group of people can found. All members are liable with their personal assets if the OHG files for bankruptcy or is unable to meet its obligations.
- There is no double taxation if you just pay yourself a salary (since it’s a normal business expense). If you want to take money out of the company flexibly, a GmbH is the wrong structure.
- I’ve never heard of anybody doing an UG/GmbH + KG to get started. This is highly unusual. Most people either do just a simple UG or maybe they set up a holding structure with two separate GmbH / UG entities.
- Related to the above: if you go with a simple, standard structure you will incur minimal legal fees. You don’t need a lawyer, you just directly task a notary and tell them you want a standard setup.
- If you don’t want the complexity of a limited liability company, the standard way to reduce liability risk is to get liability insurance. Many, many people do this instead of having a GmbH.
The valid criticism is the a) lack of digital processes and b) sequential processing of steps that could happen in parallel. For example, I sped up my own GmbH process by driving to the register court and paying in cash on-site. For whatever reason that’s much faster and saves about a week.
> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state collects before it will let me try.
> And the cheap door has a price of its own: to some clients, “UG” reads as “not serious,” and they would rather deal with a GmbH
The post itself explains exactly why the first complaint is a fallacy and the second one is true:
> The simplest setup is a sole proprietorship [...] also makes me personally liable for everything. A client sues? They are not suing a company. They are suing me. My savings, my apartment, my name.
> So I wanted real limited liability, which means a company.
The liabilities of a limited-liability company aren't your risk.
The people who stand to lose out if your company folds are not you but your customers, creditors and anyone else with a claim to more than the company can repay.
The more capital it has, the less likely it is to collapse while having more liabilities than assets.
Also, you can found a GmbH and only pay in 50% of the €25k. My understanding is that you're still personally liable for the rest, but it lowers the hurdle to founding a GmbH at least somewhat.
Before Europe gets lumped in as one country, founding a company in Netherlands and Sweden, speaking from personal experience, is a breeze.
Although Sweden is a bit strange in the fact that banks have as much equal say as the government authority does in you starting a company, and if they don't want you as a customer, they can simply deny the right for your company to start!
I've also done it both in Sweden and the Netherlands. Sweden is a breeze if you have BankID, sure (and as you said, if the bank likes you). The Netherlands wasn't exactly a breeze — I had to book a face-to-face appointment with KVK and all the slots in Amsterdam were taken, so I took the train about an hour away.
I don't dislike that they at least want to see you in real life once tbh. I love ease of registration like anyone else, but with tax avoidance and all that, idk. Feels right to me to have at least seen yourself once.
Same in Poland. Almost 100% things regarding companies or personal things you can do online. Self employment company can be set even via bank app. Ltd a bit longer online (unless you need a custom ltd agreement).
Germany, France and Spain are some of the biggest offenders here.
Some years ago a case became quite famous in Spain. Someone wanted to turn a winery into a eco-tourism boutique hotel with a winery tour and experience. Should be simple in theory, in practice they were waiting for authorization to open for more than 4 years.
I’ve been involved with startups and small businesses for more than a decade, and I haven’t still heard of any of them doing things 100% by the book, because it’s just impossible.
People just start and hope the taxman doesn’t come.
That is refreshing to hear. Unfortunately I can't get out because of exit tax, an unrealized capital gains tax for the privilege of leaving the country. That is way worse than what I mention in this post and will get its own post soon.
You phrase this as if it’s absurd. Why should it be possible to offshore your future capital gains without paying an exit tax? You live in a country with a tax system that assumes people pay into it.
Unrealized capital gains taxes generally are a bit absurd, but I can see how the state would feel forced to do it if you're leaving. Seems like there should be some way to get a registered agent or something to keep the old company legally "in Germany" while you leave, but idk
Your question is more well formed if you challenge the premise that the tax you owe should scale linearly with the value of your assets. Obviously a business benefits from things the state provides, and the business should pay it's share to cover those costs. Maybe, honestly, even a little extra.
The challenge is if someone makes a software company, and a team of 20 workers on computers create a €10B business, does the state have a fair claim to €5B of it when the company at most with the most generous possible estimate (and then double it for good measure) used €50M of state services?
But I understand the admin has gone up significantly. Though I presume AI is pretty good at generating the boiler plate bureaucratic work (privacy policy, anti slavery statements, etc).
That won't get you a VAT ID, which is the key thing he says he needs to be able to bill people outside of Germany. It is significantly cheaper than 9k EUR and faster than 6 months to get in the UK, however.
For a small company with 0 assets and one owner which has ceased trading, I believe you can just abandon it, stop filing and wait for it to be wound up - but check this!
If you do business in Germany you are evading taxes just by the fact of doing business. Everything and anything you make belongs to the government. It is an unfortunate loophole in the law that temporarily permits you to steal some of your profit back from the government where it rightfully belongs.
Yeah, this is sarcasm, but not really. The practical reality is that it simply makes no sense to incorporate in Germany. For example, the OP missed six months of opportunity just to please the bureaucracy and it's not even the end of it.
This will most likely result in Permanent establishment (PE) in Germany (e.g due to fixed place of business).
That means Germany will tax the company anything which is attributable to the German guy.
I would say that depends of the company's legal form. If you have an "AG" or "GmbH" you get double taxed anyway, one time the company and than again your salary. So if you have an Estonian equevilant of a GmbH/AG your company will get taxed by Estonia and your salary by Germany. The Estonian E-Residency Website at least confirms my assumption but in case of Germany I could be very well wrong of course...
I think you misunderstood double taxation .
You probably understood it as taxation on corporate and personal level.
But in this context it means taxation in two jurisdiction (Estonia,Germany)
> Although Sweden is a bit strange in the fact that banks have as much equal say as the government authority does in you starting a company, and if they don't want you as a customer, they can simply deny the right for your company to start!
Wait, how does that work? Are you saying that if the bank doesn't like me, instead of just denying me a loan, they can convince other banks not to loan to me as well?
It's not about a loan. You have to put ~2,000 EUR in your company account in order to start it, and they might refuse opening an account for you. They're not going to talk with other banks, but if they have a good reason to think working with you is going to be difficult, chances are other banks will think so as well.
That's actually not the only option. You can also transfer property (apportegendom) to the company, such as vehicles, machines, patents/copyright/trademarks, real estate or pretty much anything of value, to use as your share capital.
You just have to specify it when registering the company, and have an accountant certify the value.
But obviously, it's more annoying and you have to keep track of depreciation.
They can't convince others, so I shopped around until I found a willing bank. This is due to introduced KYC requirements and the harsh penalties associated with them - so banks are preferring to err on the side of caution.
If I set up a US llc as a Belgian while residing in Belgium, Belgian tax authorities will claim the center of control is in Belgium and claim it is a Belgian company.
Of course not. They'll just claim your llc needs to pay local corporate income taxe, VAT, pay local social security, dividend withholding tax, ... on top of whatever needs to happen to keep US authorities happy.
To be fair, it's also much easier to start a company in Germany if you choose a simpler legal form. It's probably still easier in the Netherlands or Sweden, but the authors pain is at least partially self-inflicted.
Getting a little bit more annoying year-on-year for maintenance with stuff like identity checks and software requirements for eg tax information, but still trivial to initially create
Legally, the banks in Sweden have no right to deny anybody as a customer. This is explicit in the law as a requirement for the bank to be covered by government depositors insurance.
In practice banks will deny anybody to open an account, for no reason at all, because they are above the law in Sweden. The country has for a long time been owned by a few powerful banker families.
Edit: Down voters might first want to look at Wikipedia for the Wallenberg family. This is as much part of Swedish culture as IKEA or meatballs.
I challenge anybody to find a country in modern history which is more owned and controlled by bankers than Sweden.
The classic European trick: it's one strong union when you want to use counting stats or independence from America , but you can't lump in the duchy 3km away as the same when you want to pick and choose the metrics that make you look good.
I don't think it's that different from pointing out that registering and/or operating a company in e.g. Delaware or Texas is a very different experience from doing so in New York.
Germany is one of the worst countries when it comes to bureaucracy nothing is fast here if you go the legal path and stay within the law (which is mostly for small people big players have different ways) and as you see everything costs a lot so if you are founding a pure online business do yourself a favor and incorporate somewhere else and if you still live in Germany look into licensing or subcontracting yourself to your company in another country it's way more flexible and you probably have Easier access to grants etc.
Another part is taxation the tax office takes your money really fast but returns can be another slog where the tax office denies legal claims again and again untill you get a lawyer etc. and it generates costs again needlessly because it's really dependent on who works on your tax records and there mood apparently.
> I have yet to find the mythical efficiency everyone was talking about.
Comes down to a misrepresentation of history. Germans were never known to be efficient, they were known to be precise with everything, including bureaucracy. This happens to be handy with machinery, but not much else.
My experience with German colleagues is not efficiency; but they do have a remarkable ability (in my field) to read a 400 page regulator rulebook and overlay it on a 200 page design document and pinpoint the rulebook edge cases not covered by the design...
Germans a rule based and were really precise which came in handy like 50 years ago. The modern German is not flexible enough for the modern job market. German companies are also not flexible enough to compete. Germany goes downhill for a reason.
Don't incorporate somewhere else it will only lead to disaster.
The company will end up being German tax resident anyways due to management and control being in Germany as you live in Germany .
Then you have to be compliant in 2 jurisdictions (file forms/balance sheets in both countries etc..) and worst case you could become subject to double taxation (if there is no agreement).
What should the US LLC do ?
It will end up being treated like a GMBH in Germany (keyword : Typenvergleich ) and you will have to do all the bureaucracy in the us + Germany and end up paying the same taxes
I do not know an EU or Asian country that doesn’t have a similar paperwork misery; I had a company in DE and in many others; you won’t survive in Spain as SL if you are small and follow the rules either. So literally no one does. No different in DE. We never got fined or even reprimanded. Largest fine in DE we got was for charging the wrong VAT for some items and that was not really that bad compared to all the tax breaks we got.
In Romania it's so bad that there are companies who will handle everything for you, even if technically the chamber of commerce has a digital interface as well. Everything is handled online and you get digitally signed papers in a reasonable amount of time.
This is probably the solution, an EU-wide company that has local offshoots and can handle the bureaucracy for a fee.
As far as I know, incorporating a BV in the Netherlands can be done in 1-2 weeks, with a lot of less pain. Many services are integrated and available online.
Yes , but cfc rules are mostly targeted against passive income and exclude active companies.
They wouldn't matter in that case anyway as he would shift the tax residency to Germany by managing & controlling the company from Germany.
Not to defend German bureaucracy but if you are serious and want results this is not how you do it.
If you want a GmbH quickly there are specialized lawyers that maintain a pool of freshly founded GmbH's for you to buy. Everything is set up
for you to start. If you don't like certain things like the company name, you can always change it later.
That being said, I know plenty of people who founded their GmbH themselves and it went smoothly. It's not that it can't be done, it's more that OP chose an overly complicated and untypical scheme and was surprised about the complications.
That's your problem right there. If you live in Berlin, take the 2 hours and go to Hamburg or Leipzig before doing anything that needs a working bureaucracy.
I'm not 100% sure, but I believe there was an issue with the "place of effective management" or perhaps the company address not being in your federal state.
You probably would've needed to get an address there somehow, yes. There's services that do that for you, the non-shady ones being provided by lawyers and notaries.
[ed.: a tiny office in Leipzig is pretty cheap too, but you'd need to ensure mail doesn't pile up there unchecked.]
Unfortunately I'm not joking about this entire thing. Berlin's underfunded, overstressed bureaucracy is to be avoided like the plague.
[ed.2: to be clear, it'll still not be great. Just less bad.]
> It doesn't sound easy nor cheap to buy a company and change the company name.
Again this is very straightforward and routine in the UK: https://paramountformations.com/product-category/off-the-she... ; a similar experience to buying a domain and spinning up a website on it. In organizations like investment banks they will have shells ready to go in the way you would have kubernetes pods.
I don't think domestic invoices should be reissued once the VAT ID arrives.
So, the story is really that it takes a couple of weeks for a freshly founded company to be ready to invoice customers outside of Germany, which I agree, is a sad state.
> If you want a GmbH quickly there are specialized lawyers that maintain a pool of freshly founded GmbH's for you to buy.
That. It's possible to go even simpler if no limited liability is needed.
Just Gewerbeanmeldung costs maybe 30€ and takes less than a month normally. Large cities even have online forms for this.
Also the reporting duties are much simplified. ChatGPT and some accounting software are very helpful. Although a tax consultant and probably a liability insurance are recommended to avoid bad surprises.
Yes, my suspicion is that OP went to a lawyer and said: "I want to minimize my risk as much as possible, what do I do?"
And of course, lawyers being lawyers, answered you need to wear both a belt and suspenders. This is the answer you'd expect from a lawyer. It is your responsibility as a founder to do the risk assessment. The fact that almost no one wears both a belt and suspenders might have been a hint.
> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state collects before it will let me try.
But it was his call. As the author has already pointed out, he could have started a sole proprietorship, but he did not want to take on that risk. The 25'000 is because it's not his risk if he starts a GmbH, it's the GmbH's risk.
Also, the 25'000 are not a toll, it's the company's Stammkapital. The GmbH owns that money. And afaik, in Germany you only have to pay in half of the 25k.
Yes, can confirm. You can start a GmbH with exactly half of it (12.500€). And the money does NOT need to stay locked on the bank account. You can spend it for company purposes (but NOT for founder wages).
Yes, afaik you can pay out founder wages with Stammkapital.
However, it has to be actual wages, i.e., the founder has to do work in return for a salary, and the salary has to be reasonable. You can't just have the GmbH pay you back the money you put into the company. There are also other limitations (https://dejure.org/gesetze/GmbHG/30.html), but that's the main one.
I can't verify if the author's attempts are even real tbh. Sounds like they were creating problems for themselves just to see how much it would cost to get sort them out. For a GmbH you also want to get an accountant and just delegate the whole process to people who can guide you before you hurt yourself.
Yeah, this reads to me like "I made some weird decisions, and now I'm upset they resulted in a weird situation." My feeling is that starting a GmbH is relatively simple, quick, and cheap, so it's not worth trying to engineer some workaround to problems that most likely didn't exist in the first place.
As others commented already - the author does not seem to understand principal idea behind running a business - a company is not something "yours", because you can just simply sell your shares or be moved out from the company by other partners.
Company is a state's legal entity given to designated people to manage (the forming person/partners) and profit from doing it successfully. If those people fail they have to follow strict rules (liquidation) or they will be sued personally for misconduct. That entity gives much more possibilities because it is limited liability - part of which is held by the state, and part by the running founders.
If you want something yours, you go with the sole proprietorship.
I've run a tech business on three continents, and nothing comes close to the Kafkaesque labyrinth of the German world.
Everything is unbelievably complicated and over-engineered, and every layer is immune to change. Every rule was rational when it was added, and now everyone has a financial stake in continued complexity. The German notary is the highest-paid notary in the world, and the highest-earning professional in the country.
That said, I think a lot of the frustration comes from a mismatch of expectations. Germany wasn't designed for randos to start companies and thrust change on society. All the bureaucracy is a filter, and what it filters out is change itself.
You were never supposed to incorporate a company. You were supposed to get a job at Volkswagen.
For information: GmbH & Co. KG is one of the most complicated forms an company can be founded, the same goes if the inner company is an UG.
Many things have to be done twice.
The only good thing is that an investor or an owner are not liable with their private money.
> The only good thing is that an investor or an owner are not liable with their private money.
That’s incredibly important. More than a footnote. I would consider any other form to be non-viable if it doesn’t have such protections.
For comparison, starting an LLC in the United States is a trivial operation. I can’t even remember how long it took me to set mine up because it was a trivial event. Maybe a couple hours, mostly research? I also have to fill out an online form and pay a few dollars every year to renew the LLC.
Setting up a plain UG or GmbH gives the same advantage of not being liable with your private money, and is also a comparatively trivial process. Especially if you are the sole owner. Still slow compared to the US or UK, but not half a year slow
Starting out a company as a UG & Co KG is a tax optimization move, not a liability issue
> Starting out a company as a UG & Co KG is a tax optimization move, not a liability issue
Thanks for the clarification. However I’m still surprised that tax optimization is also considered a footnote in these conversations.
In the countries I’m familiar with (mostly the US, minor second-hand experience with friends in some other countries as they started their businesses) starting a limited liability business venture that has the tax structure of a business isn’t considered a heroic effort. Starting the business is basically the least of your concerns. Almost a formality.
When I first started my company I half assed it. The LLC was quick and the EIN took two weeks. I accidentally signed a contract with my name instead of the company and elected to be a sole proprietorship. These are all the worst ways tax-wise to do this.
By Nov that year I decided to look into the tax implications and they were unpleasant so I wrote the IRS asking to be considered an S corp from the beginning of the year and they sent me a letter saying it was so. I ran payroll in Dec to catch up.
When doing taxes likewise I added a cover letter explaining the mistake about which entity was to receive the money and then assigned the income to the S corp on the return and worked everything through and corrected it in the right way.
The return took months to process and I had a mistake in the taxes that I was fined for a couple thousand which was reasonable but they accepted all these natural errors that I fixed up.
That sequence of encounters with the US government blew my mind. The much maligned IRS was eminently reasonable.
You can get the same in Germany with the much simpler GmbH or UG. GmbH & Co. KG is much more complex and mostly used to save some taxes in some scenarios.
(However I absolutely agree that all of this is much too complicated and slow here in Germany)
The notary adds about a week to the process (2-3 hours of your time, plus the time to wait for the appointment), and about $1000 (depends on how much money you put in the company). And for "standard" setups you can skip the lawyer and simply use the templates and "free" legal advice from the notary (free as in "included in the notary fee you have to pay anyways")
Yes, it's more involved than an online form. But in the grand scheme of things, a notary is neither a huge expense (the tax advisor will likely cost you more) nor a big time sink
I did a GmbH with "Musterprotokolle" so virtually no lawyer fees and quick and easy to set up.
And a GmbH is limited liability. It's in the name. Gesellschaft mit beschränkter Haftung. GmbH.
The Geschäftsführer is liable for certain (avoidable) things in either case.
The difference is that that the Co KG can be taxed like a "Personengesellschaft". So you wanted to optimize taxes, which leads to a more complicated structure.
You are certainly allowed to choose such a more complicated setup if you think it's better for you. But then don't moan about it being complicated. It was your choice.
> But then don't moan about it being complicated. It was your choice.
I don’t understand why you’re deriding someone for explaining why establishing a common business structure is slow and complicated.
The fact that a less advantageous business structure is available faster, but with significant tradeoffs, does not diminish the problems with this business structure.
I am pointing out that his claims are, in fact, not true.
It is not this complicated to set up a limited liability company in Germany. It is this complicated to set up his choice of a two company setup. Which is, I repeat, his choice and much rarer than a GmbH, at around a 5-10% ratio. Because it is more complicated, not just to set up, but also to run. You have two companies, so two sets of books, two sets of audited returns etc.
Which is why most companies are not GmbH & Co KG. They are plain GmbH. A GmbH & Co KG is a much more complex setup and known to be a much more complex setup. Which he knowingly chose.
And his claim that this is somehow necessary for limited liability, which would be a legitimate "significant tradeoff" is simply not true at all. That's what the GmbH is for.
Now maybe he was badly advised by his lawyer, but then complain about the bad advice. Not about the consequences of choices you made.
GmbH & Co KG are not that common, in fact the overwhelming majorities are GmbH, UG or AG (public corporation). The only benefit you can get out of this shell structure is that you don‘t have to disclose investors publicly
It is one of the most complicated forms. A GmbH alone is good enough in 99.99% of cases, and its usually done really quick.
Also, if you believe in your product there usually isn't a reason to go for a GmbH this early. You can send invoices a lot earlier with just a eK or GbR. Its not an issue to adhere with your private money if your product isn't causing damages.
> Its not an issue to adhere with your private money if your product isn't causing damages.
Might happen really easily though. E.g. you install some package which has been compromised, infecting your software product and suddenly all your customer's systems are cryptolocked and you are on the hock for millions of €€€.
Or your db crashes in new and creative ways and your backups don't work for some reason and now your customer lost an expensive contract because critical data that was in your db is gone.
Of course, you can try to foresee every eventuality, but you will indubitably overlook something and probably never make it to market.
So basically you go for the legal stuff only really big companies use (instead of changing once its necessary) because you dont believe in your own product and dont want to be held liable, got it.
Depends. Given OP built yet another AI tool, yea, I want to hold them liable in case something goes wrong (not that I'd buy these tools in the first place).
He wanted to go all out and maximise "company form". Same as optimizing your website for hundred of thousands of visitors even if you have only like one hundred visitors...
OP wanted to set up a nested copmany structure. Instead of Person -> LLC it goes Person -> Limited Partnership --> LLC. The in between company is only for tax-efficiency and has nothing to do with limited liability.
You get one chance at getting your company form right. Any other new chance costs a ton of money in restructuring. Software is malleable, companies are less so.
You have to savour the lack of self-awareness in this one.
> Founder chooses the most complex legal structure that's readily-available... and is surprised that this complexity comes with laywer and notary fees.
> Founder decides to incorporate a company with the name of a popular brand of kitchen rolls... and is surprised that it's too generic.
> After "weeks of correspondence" (and, I suppose, extensive research), founder decides to incorporate a company that's named the same as a Swedish online marketing company instead. Very distinctive. No risk of confusion, ever.
Going from the scheduled notary appointment to having the first company registered comes out to 17 days in the timeline. 24 days if you add the time for getting the notary appointment. From experience, getting your tax id will take another four weeks or so, depending on your local tax authority. OP is still in that four week window, starting from the point where the paperwork was filed. So about 2 months total of processes you can't speed up.
But notably in OP's case, most of the time is actually spent with the lawyer and tax advisor, no the bureaucracy itself. The more complicated company structure (Ug & Co KG is basically one company (an UG) owning another (a KG), giving a very similar structure to an UG at a slight tax advantage), doesn't help, but it's really not where the majority of the time here is lost (it probably does account for about half of the money though)
The authors claim that he spent "9,600 euros to start a company" is misleading. Since he wants to reduce his liabiliy and therefore the risk of his customers as much as possible, he opted for a complex solution that involved founding two joined companies.
In addition, he counted 2,000 € of shared capital as an expense, which it isn't. He did not opt for a "cheap" UG which requires no up-front capital, because of its bad reputation.
He also includes a bill for accounting software of 426.97 € into his calculation. This has nothing to do with founding costs, but are operational expenses.
As the author states that he set up the company through a law firm, I wonder which of the figures includes the cost of this service. To be fair, this should be listed separately, as such costs can vary widely or be omitted entirely if the company is incorporated solely through a notary.
Also the information about the minimum deposit when founding a GmbH is incomplete. He states: "A GmbH wants 25,000 euros sitting in a bank account before it is allowed to exist." Fact is that you need only deposit half of it upfront into the GmbH; you only have to deposit the rest of the money if the company is in trouble. The company can also immediately lend the deposit back to the founder at market rates. If the company’s articles of association permit it to hold shares in other companies, the company may also use the contributions to purchase shares or similar financial investments. His law firm should actually have advised him on this matter.
The main differences between a standard GmbH and a GmbH & Co KG lie in their somewhat different tax arrangements.
So all in all, the author paid 7,227.74 € to found a rather complex company structure. Judging by his reasoning, presumably for the wrong reasons.
When I found a GmbH in 2019 without the help of a law firm, it cost me about 2,000 euros (if I recall it correctly).
it seems absurd that they would reject a plain and simple name? i imagined company names would be available on first come, first serve basis. why is that not the case?
Imagine 3 young Italians that would like to work together in a startup. Let's consider only the first year, imagine a B2B SaaS, they are incorporating but they'll work on the product and approach possible customers.
Zero revenue.
Well, if you followed the law, you probably would spend something between 23'000€ and 25'000€ in total. WITH NO REVENUE. This is because even if you work for free for your company, you still have to pay taxes for INPS, our pension system.
And if someone invests in your company, you can't live out of nothing and would like to pay a founder even the minimum salary, YOU HAVE TO PAY INPS AGAIN.
This is crazy, our country is a joke.
EDIT: Adding a bit more of scary context and nice sprites.
None of the common financial advisor you find in Italy have ever heard of funding ways or contract terms that are really well known globally.
Do you want to include drag along and tag along clauses in your company statute? You have to talk with really expert lawyers and notaries in Milan that will bill you thousands of € for something that in Delaware is a pretty much standard single line of text.
That sucks, my fellow Italian. I haven't looked into our country since I live abroad for a long time, but I'm also paying health insurance here which is not cheap at all, and haven't added it to the post since it's not necessarily a company spend.
"To some clients, 'UG' reads as 'not serious.'" -> more of a sales isssue
Consulting or dev work doesn't need deep capital. we're insured for X if Y happens. A UG is fine. The "not serious" label only sticks because founders keep caving to it.
Let the client adapt to your setup, not the reverse. If their compliance department doesn't get it, that's a gap to close, evry time you stand your ground, you normalize the UG for the next founder.
German system supports wealthy individuals who are planning to stay in Germany long-term, but is horrendous for anyone without cash in the bank willing just to try something out.
I grew up in Germany and Austria and did my first startups there, then went to New Zealand and built startups there and currently live in Portugal and built startups there. Europe is broken beyond believe. I moved everything back to New Zealand because the bureaucracy, the level of compliance, the insane inefficient here is killing me. if the EU is serious about wanting to build a meaningful startup scene then it has to listen to EUinc, drop its completely unfounded arrogance and learn from others. So looking forward to leaving again. I highly recommend founders in the EU to found in a sane county, if inside EU is a hard requirement, look at Estonia and Lithuania, skip the rest.
I founded a UG with 2 friends. 7.500 capital, 2.500 each. From that money, we paid the notary. We drafted with chatgpt on our own and presented it to an attorney for review, ~300€. Notary ~1.200€. All in all, we are 1.5 years in, we still have ~3.000 left from that 7.500 capital. Obviously you're doing something wrong
Been there too. Paying thousands of € for a notary just to read some text you wrote out loud to you is absurd.
The cherry on top is the exit tax:
> And no, I could not just leave instead. My first company, Freshflow, is valuable enough that walking out of Germany would trigger a massive six-figure exit tax, on gains I have not even realised, purely for the privilege of leaving.
This is ostensibly there to prevent large-scale tax fraud but has ridiculously low thresholds that make life difficult for anybody who is shareholder of even a small company.
Maybe I am missing the point, but what is the alternative? You found a company in Germany, dont realize your gains, therefore dont pay taxes, then leave the country, realize your gains, and still dont pay taxes? Why should Germany or any other country allow this?
The issue is liquidity. The tax comes due as soon as you leave, but you might not be able to liquidate your shares quickly enough to be able to pay those taxes. Depending on how your company gets valued these can be eye-watering numbers.
This is something you can solve with enough time, but if I get a job offer where I'm supposed to start in 2 months? Very inconvenient. (There are some ways to spread this out have this tax burden spread out over time, but it still represents significant friction)
You own a company so valuable that the tax on selling it shares puts you in serious trouble, but you still need to a start "a job"? A Job that requires you to change your nationality/tax residency to a non EU-state?
Edit: Maybe I should give an example:
Lets say you build up a company, your shares are worth ~100k, while you payed yourself a living salary of ~2k so you could pay rent and buy groceries but not much more, especially no savings.
Now you get on offer to work in the US for 180k/a, you sigh "finally" and just want to move, but the German wants 30k Taxes on your unrealized ~100k capital gain before your leave - Is this the kind of situation you are referring to?
Pretty much. I just have a symbolic 5% stake in the company and working there has certainly not made me rich. I'm still early in my career so I don't have a ton of savings. It wouldn't cause "serious trouble" but paying tens of thousands in taxes on top of the cost and hassle involved in moving overseas is still a significant burden and certainly a case of the regulation missing its mark.
The last paragraph is very important to the story. His setup is essentially a shell company which add complexity. Setting up a UG is very easy, needs little capital and is especially created for one-person-companies. Additionally he is able to send invoices, just not internationally. I have a feeling setting up this corporate structure and registering it internationally would also not be done instantly in other countries.
I am an electrician. Got my certification done with Handwerkskammer, went to the city hall, registered my company and filled online form rejecting the option with VAT number since all my clients are in greater Munich area. Same path could be chosen with VAT number. Ranting about choosing most complex business form and having no money for a consultant is not adequate in my eyes. Btw I am always liable as electrician (since it is dangerous) and can’t hide behind limited liability company in Germany.
> Btw I am always liable as electrician (since it is dangerous) and can’t hide behind limited liability company in Germany.
Under some circumstances you can be held liable through a GmbH, but not generally speaking.
> rejecting the option with VAT number
Means you are planning to run a small business (making less than minimum wage on a yearly basis), also you are opting out of Vorsteuerabzug. Anyone that wants to live off their business needs VAT. And that is given by Bundeszentralamt für Steuern and the wait times are often excruciating.
And you really don't have to. I just went to one a single meeting, signed a single piece of paper, paid 60€ (probably still <100€ these days) and was done with it. But as GP already alluded to: I didn't choose the structure that is very well known to be the complicated one.
When you choose that you need double layer of limited liability. Maybe having a consultant is extremely good idea. To understand exactly what you need to do at both layers. And maybe in such setup some slow down should be fully expected. As one layer is acting for the other in your stead...
To me things taking longer and being more complicated sounds entirely reasonable and natural in such setup...
But his clients aren't all the the greater Munich area so how is that even similar? Surely having a complex form is the issue as this is what fits his needs. Why does the form need to be complicated?
> My first company, Freshflow, is valuable enough that walking out of Germany would trigger a massive six-figure exit tax, on gains I have not even realised, purely for the privilege of leaving.
Without this "exit tax", every founder of a successful business would have a huge incentive to leave and to realize the gains elsewhere. It's not a tax for the privilige of leaving, but for the privilege of building a company. I can see only three alternatives to this:
- Abolish the capital gains tax entirely.
- Make defering it impossible. Force people to pay immidiately. No "exit tax", but people have to pay for unrealized gains.
- Tax people when they realize their gains in a foreign country.
It should be possible to move within Europe, then when the liquidity event happens tax me from the countries where I've lived, proportionally to the time I've lived there.
If you want to move out of Europe, you get the exit tax as before.
A fourth alternative is to leave, and a fifth is to not start a company at all.
Now you understand why the USA deploys 3-4x the amount of VC capital compared to the EU. And prior to the current administration, entrepreneurs mostly wanted to get to the US.
Are you aware that the US charges an exit tax if you choose to renounce your citizenship? And if you do not renounce it, they will tax you no matter where you live in the world?
I looked into GmbH (german) , BV (dutch) , and OU (estonian) . GmbH seems very unpleasant. BV and OU are easier to obtain. But BV requires your primary place of business to be the Netherlands, which isn't always practical when you're trying to extend your activities internationally. OU is supposed to be better for international operations, but -because it's a single country initiative- creates new and interesting tax problems.
At this time, the whole system seems to revolve around geographic location. As long as you stay put you're sort of fine, but if you move around within the EU, the law doesn't stay stable around you. This is impractical.
> But BV requires your primary place of business to be the Netherlands, which isn't always practical when you're trying to extend your activities internationally
You bill from the Netherlands and I think this is the only thing required. Uber in Europe charges your cards from Uber BV for example. And I think Uber is pretty international.
Especially as a solo entrepreneur, your llc would have to have substance in the Netherlands. Otherwise, it risks getting requalified as a country-where-you-reside llc.
Why would you otherwise voluntarily subject yourself to the extreme complexity of countries like Belgium or Germany if you could just set up a simple Bulgarian or Estonian llc?
As far as I'm aware , EU inc would be an opt in initiative meaning that it likely wont change anything in Germany. DE has a a very powerful notary lobby that will oppose this at all costs.
I read that as the founder being able to opt into choosing EU Inc, not that only some EU member countries would offer it.
edit: it's a regulation, not a directive, so it will be directly available in all countries, without each country creating its own laws to implement it. But it'll take until 2028 or so until it's actually be available.
I recently helped my friend (3rd country national) to open a new business in Czech Republic.
It took 3 months from registration to sending her first invoice. The longest wait was on the bank account: a very few places are willing to open company account if you don't have an EU residency. Without the bank account, she couldn't deposit founding capital (základní kapitál) which is required to complete the registration. It's even funnier cause the minimum amount to deposit is 1 CZK (5 cents).
Total cost to start business was under $8,000. The most expensive were legal services: writing down all contracts and customer agreements was around ~$5,000.
I feel like this is such an untapped market for getting digitilized. I was thinking to actually sit and vibe code it at some point but can't imagine doing this alone.
I seriously don't know what you people are doing. I've set up companies in Germany, the US, Brazil and Mexico.
The US was BY FAR, the most enjoyable experience. Won't say anything else. It was a breeze! But Germany wasn't as bad as people make it sometimes. Just don't go with a super complicated, overengineered setup and you are up and running almost instantly. Better won't mention Brazil, though.
If you have the resources, get some QUALIFIED lawyer/notary on board and it'll all be super chill and quick. And if you're just getting started, just do a sole proprietorship as you get started (and you can start working pretty much on the same day), and have the GmbH setup process run on the side.
Important note: The cost / delay he's talking about isn't registering a company; it's getting a VAT number. I've done both in the UK, and while getting a VAT number is significantly cheaper than 9k EUR and significantly faster than 6 months, it's not nearly as quick or cheap as simply registering the company, which is what many commenters (and even the author in TFA) are comparing it to.
Mh, seems to me about ranting as some things went wrong.
With all due respect, founding a company shouldn’t be that easy; otherwise investors wouldn’t give you money for it. “UG” reads as “not serious” – no, that was in the past. Times have changed.
I’m not here to defend a big country that clearly has to do better, of course.
Start a limited liability company in Latvia or Estonia. It will take you 1 business day, you can do it remotely, and, because of EU laws, you can do business everywhere in EU. Basically nothing you can do with Gmbh that you cannot do with Latvian or Estonian equivalent
We outsourced it for 2.5k (extra) and it was still painful, took almost 2 months and worst of all wasted so much time and focus.
The worst was sitting at the notary, and getting read out loud by her what we were about to sign (also paying for that).
If you think about starting a company, spend some time to think through what it would mean for you to be a Delaware C Corp or an Estoinian one. It will increase your chances of success as you can focus on what matters.
I don’t know the specifics but the OP chose a complicated setup. Why not just use a GmbH which is the equivalent to an Inc in the US? The capital requirement is 12500 in the bank not 25000 as stated. There are online services that run the whole process for you similar to Stripe Atlas.
Even setting up a UG (with 1 euro stating capital) is very easy but you have to upgrade to a GmbH once you receive investment (investors usually demand it).
For the whole process there are standard forms. You only need to pay lawyers if you want to personalize your setup.
Maybe OP was just not advised well which is surprising given the amount of information available online (startup guides for Germany)
Europe will suffocate under the weight of its own bureaucracy. The sad thing is that it is not new to me, I've heard so many stories like this one. This is the kind of friction that makes founders incorporate elsewhere.
Also, a founder spending months coordinating lawyers banks and tax advisors is not talking to customers or building the product. The opportunity cost here is huge.
Anyway, you are pretty close. One more push, don’t give up. :)
Germany is not EU though. Very different bureaucracy in different EU countries. Up to a point, EU doesn't add a single bit of bureaucracy to the stack. Only once you reach a certain limit you will have to enroll in an international VAT system, which is not too bad.
EDIT: Just re-read your message. I thought it said EU. But the point stands, Germany is not Europe either.
My friend bought an apartment. In February. Still in processing at the Amt (bureau). It's nightmare fuel. They are sending physical letters, and are hand-matching payments from banks. Apparently, they couldn't match a 53 EUR transfer last week, so a ~400k EUR payment is stalling.
The issue is, the people holding the stamps (and believe me, they ARE stamps, with ink and all) are in charge, and are VERY reluctant to give up that comfy job. Zero accountability, too, since once you are a government employee, it's incredibly hard to get fired. So they stall the process, forever, without any reprecussions.
I am all for having and caring about process and dealing with everyone equally. That's why I live in Germany and not in Eastern Europe where often some money under the table is the only oil in the machine. No such oil in the German machine, thankfully. But it's infuriatingly slow, because bureaucrats are in control and will never willing give up that control.
So for a UG it's a Kommanditeinlage. But it doesn't change the fact that you can spend this money for business purposes. You just can't wire it back to yourself or pay it to yourself as a wage. Feel free to buy office furniture or company devices with it.
It's a common misunderstanding that this money needs to be reserved somewhere for liability purposes. That's not correct. You can spend it, both in a GmbH as well as in a UG. Look it up youself (e.g. https://www.anwalt.de/rechtstipps/stammkapital-muss-ich-das-...)
it is very funny that most of the (presumably germans) in the comments are saying "it's not that bad and it's fine because you chose a complicated LLC structure"
Looks like he got hot milked by “advisors” who insisted in an overly complicated setup. Setting up a UG is fast and easy as long as you stick to the standard and you don’t need advisors or lawyers.
My understanding what is described is Limited Liability corporation hold inside Limited partnership. Not either of those alone. This setup allows some tax games. But also clearly is also much more complicated to setup as first you would need the limited partnership...
It's probably only funny because the commenting germans are aware that there is a much simpler "UG" (without the &co KG), which is pretty much a LLC, which you can open on your own, a bit faster, much cheaper. But apparently OP didn't do that for tax reasons (in a normal UG, if you want to pay yourself, you gotta pay income tax and all the other stuff)
If an american comes and says they founded a public company (with stocks and all), and complained about the fuzz involved, you would also tell them that it's their own fault, right?
That said, maybe the US/Delaware LLC has this component as well, I'm not a lawyer :D
This is what happens with complex organizations. People develop expertise in navigating the organization, feel pride in that expertise, and then snottily mock those who struggle. Even though they didn’t create it, don’t really like it, and have no stake in it.
But it is all arbitrary bureaucracy with little value beyond its own internal logic. Still gets fanboys somehow.
I gave up on trying to set up an company in Germany. Founding is the 1st side of the coin, but the other side of the coin are the complexities of closing your company (which takes at least a year as well) and exit tax (you might get taxed 6-7 figures when moving abroad even if you don't really make reasonable money).
I think most red tapes and bureaucracies have loop holes. For example, a different, simpler type of business type, then conversion to the actual desired type. At least, this has been my experience in a few countries I worked in.
Sometimes it will cost more up front, but if the end result is significantly faster, maybe it is worth it.
I am sorry he has to go through this just to start a business.
I've setup my own company in Poland in 2015, by submitting a web form, 30 minutes later I could issue a fully VAT compliant invoice. This was not an incorporation however - that was a sole proprietorship, but I could still hire people full time, issue invoices etc.
You can do the same in Germany. Costs 29 Euros with an online form. Once the sole proprietorship is setup you apply for your tax id and done. The whole process took 2 weeks in my city. Legally you can even start invoicing as soon as you registered your business.
The problem with OP is that he chose an overly complicated structure. Probably got milked by lawyers and advisors.
I was waiting for 3 months for my VAT ID to arrive. Then I just called my finanzamt and told them why I have no vat ID. I think they just forgot, finanzamt said over the phone that "they opened a ticket" and 2 weeks later exactly as promised in the beginning it was in my post.
I had already people wanting to work with me before even starting the company. Couldn't send them invoices. Most importantly: didn't speed up the process!
I founded my Estonian company within 3 days, that includes when the court rejected the name because a similar name already existed. Everything was online.
the real problems with administration dome starts after founding in many but not all European countries.
There is light at the end of the tunnel as an EU Inc. is proposed.
However the bureaucrats in probable but all countries will try to water it down to pointless to keep or extend their responsibility territory and duties.
When these threads show up it is always funny that Germans are shocked anyone expects anything else and everyone is shocked at Germany.
Luckily with how the current German economy is doing this is a problem that will solve itself. It's like the last half a dozen German governments look at the Morgenthau Plan plan and thought it was an amazing idea they must implement.
I really didn’t have the feeling that Germans are shocked about some of these inefficiencies at all. Typically they’re just a result of long processes thus difficult to change. I do agree that Germany and the EU as a whole should not make this process so cumbersome. It shouldn’t be easier to found a US foreign LLC from abroad than a company in one’s own country. The proposed EU LLC might solve some of those issues if it comes to fruition.
Regarding the economy though, Germany is still the third richest country on earth. I think this is talking point about their huge regression is mostly FUD.
Its always the caste lobbying for regulations "for the good of all" that break countries apart. My country's (Argentina) largest political party lives on by heavy corporativism, otherwise they would have been booted a long time ago.
Similar story in the UK\u2014registered a company online in about 24 hours and had a business bank account within the week. The gap between the best and worst EU jurisdictions for this is staggering.
This does bring its own share of problems. 1000s of companies are registered in the UK with literally no checks. No address checking so people just pick a random address to register from the phone book!
When it comes to tax issues etc. it turns out the company registration is meaningless. The sweet spot has to be somewhere in the middle. Starting a company shouldn't be something you expect to do in a day but it also shouldn't require you to sell a kidney or fill in pointless forms.
> When it comes to tax issues etc. it turns out the company registration is meaningless.
Taxes have nothing to do with the physical location of the company. You go after the owners, and I'm pretty sure you can't open a company in the UK anonymously.
There is an identity and address checks now in the UK.
Even banks are required to validate now, had my bank asking me to validate details even when i have my business for 6 years, same company, same address, and same bank account.
The EU is a single market, just form an entity in the quickest and easiest state to form it, open a bank account, payment processor and you’re off to the races, as long as you can accept Euros directly people are fine?
Who are these people that care
“Oh you don’t have a GmBH, oh your share capital is so low ohhh ho ho ho ho”
Wait until you want to convert the UG to a GmbH and realize that it's not simple or cheap at all.
It's not enough to have had properly filed tax returns every year, have a large enough profit-collection-line item in your books (25k EUR+) and then fill out a form.
No, if you want to use the profit your UG was required to accrue to raise your capital stock to 25k and rename it to a GmbH you need to get your annual accounts audited.
Or alternatively, you can pay in the difference between your current capital stock (e.g. 2k) and the 25k minimum for the UG and then rename the company and "just" have to pay for the notary, publishing to public records, court, ...
There's so many things that are plain wrong in the European ancient and bureaucratic commercial and corporate law.
It's insane that giving stock options (core to attract talent) or raising capital for equity is so difficult across Europe.
And don't get me started on how difficult it is to fire people that just don't work and only pretend to, spreading doing jackshit across the company.
Europe has the talent and even the capital, but the incentives are just not here, neither to attract talent nor serious investments.
The continent is old and politicians keep trying to band aid the system, consistently claim regional-national policies over common European rules, they will claim Europe makes it difficult to do business, just to reinvent their own commercial, import/export rules, tax rules non stop.
I don't want to say it's a disaster, but we really need some party that looks at commercial, trade and corporate law across Europe.
Yes. Can't just emigrate. No substance in the US meaning your llc would be liable for tax as if it were an llc in the country where you reside. You'd basicly double the liabilities and administration for no good reason.
I wonder what's the reason. Poland used to have horrible bureaucracy. You could argue this was due to lack of funds, or communist baggage. Yet, over the last decade digital administration has become a norm, rather than exception.
Germany doesn't have such excuses, yet there it is.
> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state collects before it will let me try. And the cheap door has a price of its own: to some clients, “UG” reads as “not serious,” and they would rather deal with a GmbH. The structure built to let me in quietly marks me for using it.
The 25,000 is there to make sure you can cover some liability. If you really wanted "your company and your risk", you could have used the "simplest setup", where you are liable with your own money, but if you think about it that way, it doesn't sound so appealing, does it? So of course the UG which does not (yet) have 25,000 in the bank sounds less serious than the GmbH that has 25,000 in the bank. A company that starts with nothing wouldn't be a GmbH (limited liability company), it would be a GoH (company without liability), and there's a good reason why those don't exist...
> A company that starts with nothing wouldn't be a GmbH (limited liability company), it would be a GoH (company without liability), and there's a good reason why those don't exist...
Those do exist in other countries. An LLC in the USA does not generally need to have a certain amount of assets. Such a company is more or less without liability until it has some assets; the worst case for its owners when it comes to a routine business debt is shutting down the company. Exceptions are possible in case of serious misconduct of course.
Of course a company like that will find it difficult to borrow money, but it's not rare for its last bills to go unpaid when it goes out of business.
Whether those should exist or not doesn't have a clear answer. Culturally, Germans tend to be pretty uncomfortable with "sometimes shit happens and debts go unpaid", while Americans tend to find a moderate rate of that sort of thing tolerable, especially if it makes starting a new business viable for a greater fraction of the population.
> sometimes shit happens and debts go unpaid
What’s wild is that this is pre-debt. The banks will have their own risk math for you so it’ll be a completely separate set of hoops before you get to be in debt as a company. Most will not even talk to you if you have 0€ in the business account. I don’t feel like a company with no assets or income can do that much damage to their societies.
Also as a small company in the EU I have to have liability insurance for the company for any major clients so the insurance company also will make you jump through further hoops.
Not quite. In the US this condition is handled at the back end. Running a corporation or LLC without sufficient capitalization can be grounds for piercing the liability shield in a lawsuit.
> The 25,000 is there to make sure you can cover some liability
I would suggest that this idea of a GmbH does not actually work the way you think it does. Maybe it once did, but not any more. For instance:
Much of the regulatory structures in Europe work this way, they assume that both good and bad guys will play by the same rules.Spoiler: the bad guys don't care about the rules!
This is not an argument that founders should seed 25k EUR to cover liability, it's an argument that GmbH bank account amounts should be visible publicly. If I want to put in a catering order, the catering business does not need 25k EUR to cover liability. If I want to build a data center, 25k EUR is not nearly enough.
The authors inability to understand this really makes wonder how much of the rest of their story is essentially self-inflicted.
They are jealous of the US system where you can create an LLC in one hour for $200, and by the next day be doing business with all your personal assets isolated.
The US system is built to support entrepreneurship while the EU system broadly is to support the consumer and employee. The US will never be able to match the EU's consumer and employee protections and the EU will never be able to match the US's ease of doing business, because to have one you have to fundamentally give in on the other.
Depending on who you ask, one system is wildly better than the other, but at the end of they day they are just different systems with different tradeoffs.
> The US system is built to support entrepreneurship while the EU system broadly is to support the consumer and employee
I disagree: the EU system broadly is there to support _the incumbants_
"Regulatory capture" is the less kind way to put it.
I think this is a false dichotomy. Consumer return policies, customer service, etc. tend to be much better in the US than in the EU.
I would characterize it rather that the US is pro-business and pro-consumer, but somewhat anti-average worker.
Except every two weeks when he gets a bigger paycheck than most senior UK government positions
> the EU system
The issue in question is a Germanic system, not an EU one. Outside of Germany, Austria, Luxembourg, most EU countries are far more sensible with capitalization requirements.
A lot of places in Europe are around the same.
In Finland forming a non listed stock company is 240€ in fees without any requirement for capital/assets.
I think Estonia is even cheaper.
UK's system is very similar too, as is Estonia's.
There are not quite as easy, but still ways easier types to choose from in Germany, OP just decided to go for one of the very complex ones.
Not if you want both limited liability and the ability to take your hard won profits out of the company
I have founded a UG and upgraded to a GmbH before.
It had got us "more credibility" with our clients, and 12,500EUR less in each other's bank accounts.
Thanks for your insults.
I get that this gives you less liquidity personally, but (a) you're only required to pay in half, i.e., 6,250 EUR each, and (b) this money isn't gone, and you don't lose the ability to recover it should you decide to liquidate the company later. As others have pointed out, you can use that money to pay costs associated with the founding (e.g., the notary) and also expenses required to maintain the company (IHK dues, bookkeeping, etc.).
> I have founded a UG and upgraded to a GmbH before.
So why not to the same here, instead of going with this more complicated setup?
HN commenters are acid, but from one author to another don't let them get to you because they'll shun you for losing your temper even if it's totally justified.
The author can surely understand it. And this system is what is keeping Germany and many European countries from propelling their economies forward by reducing market dynamism. Its not a coincidence that China, US and many other countries, which have more dynamic markets and large GDP growth let you set up a company in a day.
In america, we have liability insurance. Is this not a thing in germany?
The trust in a company should still be left to the criteria of suppliers, customer, etc. Not the random number that a bureaucrat pulled out of his arse.
High initial capital requirements have repeatedly proven to be more detrimental than beneficial (https://mariusring.github.io/web/BacherFagerengRingWold_Sele...).
Germany is not for broke college students turning their weekend project into a company.
Why not?
Depends on your product and expectations of your customers.
B2C: I don't care what company structure you are.
You call €25k liability? I just decided I won't work with a company that can't cover €25M in liability. Should the state force you to block that in your bank account just in case you want to work with me?
This is why insurance exists!
When I co-founded a company in the UK in 1995 there were two £1 shares - one for each founder. Mind you it was an off the shelf company - but the process couldn't really be much simpler back then - and its probably a lot simpler now.
For a limited company in the UK, you need a number of pieces of legal paperwork which I think you can technically write yourself but may prefer a solicitor to draft them correctly for you, and then you pay £100 to register the company, and you (and any other directors, shareholders or guarantors) capitalise the company yourself.
You are now limited in liability for what the company does, to no more than the capital you put into it.
You then have to supply yearly accounts, may have to register for corporation tax, VAT, register as an employer for paying national insurance, you'll probably need business insurance, etc.
https://www.gov.uk/set-up-limited-company
If you buy and off the shelf company then you don't need any of that - they supply a pile of stuff (e.g. articles of association) and you don't need a solicitor to be involved.
Edit: And these days you don't even need two people - used to be that you needed two directors or director and company secretary.
You don't need to use a lawyer to draw up the docs unless you have special requirements: you can use the proforma memorandum (it's auto-filled if you apply online) and adopt the model articles of association.
- https://assets.publishing.service.gov.uk/media/5a7da236e5274...
- https://www.gov.uk/guidance/model-articles-of-association-fo...
You can open an Estonian company with 0.01 € capital. It will look ridiculous in the registry, and you will still be liable for the remaining 2499.99 € personally anyway, but it is possible. I’ve seen a couple 100 € companies, which is more reasonable I guess.
You can also declare that you’ve paid the capital in, without any proof required for small amounts (up to 50k € IIRC). If you lie about it, I suppose you’ll be personally liable for everything, so definitely not worth risking it. Just put in like 500 €, set it aside on the business account, and don’t touch it.
(IANAL)
That sounds a bit like the UK concept of a Company Limited by Guarantee - which is used by a lot of charities.
Edit: I'm not a lawyer either!
Then it’s not an LLC, though. Personal assets exposed.
Up to 2500 €.
You could put in 2500 € in capital – then your personal exposure will be zero. In practice, I don’t think it’s a meaningful difference, you will just have to keep the whole 2500 € on the company balance by the end of each FY. (Unless you wanna deal with non-monetary contributions!)
If you put in 500 €, you’re liable for 2000 € personally, but you don’t have to keep them for your annual report. (It also means your company looks a bit riskier, since you might not have the 2000 € personally, so you might have trouble getting credit or whatever, but otherwise I don’t think it’s a big deal.)
---
Edit: to the author: you should really look into Estonia (or any other sane jurisdiction mentioned elsewhere in the thread). You can still set up a KG (or a sole proprietorship), then put an Estonian OÜ in front of it. Costs something like 300 €, can be done online (you’ll probably need an e-residency card, an Estonian e-signature thing for foreigners, which is another ~150 €). Annual reports are fairly easy if you keep your books properly. And you’ll need an address in Estonea which is also like 125 €/yr. No additional taxes most likely (but check with a real accountant).
Still a limited-liability company. "You might be personally liable for up to €2,499.99" is not anything like the same as "your personal assets are exposed to all company debts".
You are right, of course, but in most jurisdictions the limit is lower than 25k EUR (e.g. in PL it's 5k PLN ~ 1.2k EUR; I believe in the UK it's even less), and you can trivially look up the capital of any business in the business registry online --> you can decide if you are dealing with a multi-million behemoth or a mom-and-pop shop.
Used to be 16k in the Netherlands and now is barely anything. 1.20euro is common with 120 shares at 1ct nominal.
Unless it's c-corporate which require 25k usd. Money don't have to sit in bank account, you can buy a laptop etc.
> A company that starts with nothing wouldn't be a GmbH (limited liability company), it would be a GoH (company without liability), and there's a good reason why those don't exist...
What's the good reason? In the UK I can started a Ltd with £1 of share capital, about £100 of fees, and filling out a form online. I will be shielded from personal liability if it goes tits up unless I've broken the law, knowingly traded insolvent, or otherwise been an idiot.
The wider thread appears to be Germans commenting that it's unthinkable that such a thing could exist, and thus it's all the author's fault.
what you probably mean is an OHG, an Offene Handelsgesellschaft It is one of the simplest form a group of people can found. All members are liable with their personal assets if the OHG files for bankruptcy or is unable to meet its obligations.
There is no need for a company to be able to cover liabilities. It's a stupid rule.
There’s a lot of confusion here:
- There is no double taxation if you just pay yourself a salary (since it’s a normal business expense). If you want to take money out of the company flexibly, a GmbH is the wrong structure.
- I’ve never heard of anybody doing an UG/GmbH + KG to get started. This is highly unusual. Most people either do just a simple UG or maybe they set up a holding structure with two separate GmbH / UG entities.
- Related to the above: if you go with a simple, standard structure you will incur minimal legal fees. You don’t need a lawyer, you just directly task a notary and tell them you want a standard setup.
- If you don’t want the complexity of a limited liability company, the standard way to reduce liability risk is to get liability insurance. Many, many people do this instead of having a GmbH.
The valid criticism is the a) lack of digital processes and b) sequential processing of steps that could happen in parallel. For example, I sped up my own GmbH process by driving to the register court and paying in cash on-site. For whatever reason that’s much faster and saves about a week.
> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state collects before it will let me try.
> And the cheap door has a price of its own: to some clients, “UG” reads as “not serious,” and they would rather deal with a GmbH
The post itself explains exactly why the first complaint is a fallacy and the second one is true:
> The simplest setup is a sole proprietorship [...] also makes me personally liable for everything. A client sues? They are not suing a company. They are suing me. My savings, my apartment, my name.
> So I wanted real limited liability, which means a company.
The liabilities of a limited-liability company aren't your risk.
The people who stand to lose out if your company folds are not you but your customers, creditors and anyone else with a claim to more than the company can repay.
The more capital it has, the less likely it is to collapse while having more liabilities than assets.
Yeah, I found that part odd too.
Also, you can found a GmbH and only pay in 50% of the €25k. My understanding is that you're still personally liable for the rest, but it lowers the hurdle to founding a GmbH at least somewhat.
If a company collapses while having more liabilities than assets then that's fine. No one is being forced to extend any credit to them.
Before Europe gets lumped in as one country, founding a company in Netherlands and Sweden, speaking from personal experience, is a breeze.
Although Sweden is a bit strange in the fact that banks have as much equal say as the government authority does in you starting a company, and if they don't want you as a customer, they can simply deny the right for your company to start!
I've also done it both in Sweden and the Netherlands. Sweden is a breeze if you have BankID, sure (and as you said, if the bank likes you). The Netherlands wasn't exactly a breeze — I had to book a face-to-face appointment with KVK and all the slots in Amsterdam were taken, so I took the train about an hour away.
I don't dislike that they at least want to see you in real life once tbh. I love ease of registration like anyone else, but with tax avoidance and all that, idk. Feels right to me to have at least seen yourself once.
But is it really you?
that's an interesting question
how much would it cost to pay someone "1 hour away by train" to go into that office for you?
Unsure how long ago this was, but I recently registered with KvK and didn't have to show up at all, just pay 80-ish euros.
I've done it in 2018 and just needed to go to a notary to wet sign something (not KvK)
Same in Poland. Almost 100% things regarding companies or personal things you can do online. Self employment company can be set even via bank app. Ltd a bit longer online (unless you need a custom ltd agreement).
Can confirm. JDG registration took like a couple of days and I didn't need to get my ass off my chair.
Germany, France and Spain are some of the biggest offenders here.
Some years ago a case became quite famous in Spain. Someone wanted to turn a winery into a eco-tourism boutique hotel with a winery tour and experience. Should be simple in theory, in practice they were waiting for authorization to open for more than 4 years.
I’ve been involved with startups and small businesses for more than a decade, and I haven’t still heard of any of them doing things 100% by the book, because it’s just impossible.
People just start and hope the taxman doesn’t come.
That is refreshing to hear. Unfortunately I can't get out because of exit tax, an unrealized capital gains tax for the privilege of leaving the country. That is way worse than what I mention in this post and will get its own post soon.
You phrase this as if it’s absurd. Why should it be possible to offshore your future capital gains without paying an exit tax? You live in a country with a tax system that assumes people pay into it.
Unrealized capital gains taxes generally are a bit absurd, but I can see how the state would feel forced to do it if you're leaving. Seems like there should be some way to get a registered agent or something to keep the old company legally "in Germany" while you leave, but idk
Why should it be possible to keep this person from buying food and housing with their labor?
The whole premise is nonsense to begin with.
Your question is more well formed if you challenge the premise that the tax you owe should scale linearly with the value of your assets. Obviously a business benefits from things the state provides, and the business should pay it's share to cover those costs. Maybe, honestly, even a little extra.
The challenge is if someone makes a software company, and a team of 20 workers on computers create a €10B business, does the state have a fair claim to €5B of it when the company at most with the most generous possible estimate (and then double it for good measure) used €50M of state services?
The premise of taxes?
You can delay it until the disposal of your shares , if you move within the Eu
In the UK it used to be one form and a fee of £25 or something like that. I think, nowadays, that's probably just done online as well.
But I understand the admin has gone up significantly. Though I presume AI is pretty good at generating the boiler plate bureaucratic work (privacy policy, anti slavery statements, etc).
That won't get you a VAT ID, which is the key thing he says he needs to be able to bill people outside of Germany. It is significantly cheaper than 9k EUR and faster than 6 months to get in the UK, however.
Do you really need a VAT ID though? There is the “reverse charge” mechanism, which IIRC you can use until you sell a lot in any given country. (IANAL)
It is free to become VAT registered and only takes a few days for the VAT number to be assigned and posted to you.
Yep, it is straight-forward.
The hard part, I heard, was closing a UK company!
For a small company with 0 assets and one owner which has ceased trading, I believe you can just abandon it, stop filing and wait for it to be wound up - but check this!
It's honestly not hard either. Certainly doesn't require any face-to-face interaction or anything.
In Germany it might be easier to open a company remotely via Estonia
This is pretty bad advice as your company will be dual resident with Germany having the right to tax .
That means you pay German taxes + double amount of compliance ( because you have to file everything in Germany+ Estonia ).
That way, AFAIK, the German government will determine that the "place of effective management" is Germany, and tax you also there.
Double taxation is not better.
DE & EE should have a double taxation agreement.
https://www.fin.ee/en/double-taxation-agreements
Have multiple friends who have done an Estonian OÜ despite being primarily German. No issues on this tax side.
If they are still a German tax resident , they are committing tax evasion . § 1 Abs. 1 KStG
It doesn't really matter.
If you do business in Germany you are evading taxes just by the fact of doing business. Everything and anything you make belongs to the government. It is an unfortunate loophole in the law that temporarily permits you to steal some of your profit back from the government where it rightfully belongs.
Yeah, this is sarcasm, but not really. The practical reality is that it simply makes no sense to incorporate in Germany. For example, the OP missed six months of opportunity just to please the bureaucracy and it's not even the end of it.
If you don't like the laws/rules then just leave Germany . There is no justification for tax evasion .
What if there were multiple (2+) founders of a company, and some lived in Estonia? I think in one case they had a Croatian co-founder as well.
This will most likely result in Permanent establishment (PE) in Germany (e.g due to fixed place of business). That means Germany will tax the company anything which is attributable to the German guy.
I would say that depends of the company's legal form. If you have an "AG" or "GmbH" you get double taxed anyway, one time the company and than again your salary. So if you have an Estonian equevilant of a GmbH/AG your company will get taxed by Estonia and your salary by Germany. The Estonian E-Residency Website at least confirms my assumption but in case of Germany I could be very well wrong of course...
https://www.e-resident.gov.ee/understanding-cross-border-tax...
You don't get double taxed, you get taxed on your salary and your company gets taxed on whatever profit remains after paying salaries.
I think you misunderstood double taxation . You probably understood it as taxation on corporate and personal level. But in this context it means taxation in two jurisdiction (Estonia,Germany)
> Although Sweden is a bit strange in the fact that banks have as much equal say as the government authority does in you starting a company, and if they don't want you as a customer, they can simply deny the right for your company to start!
Wait, how does that work? Are you saying that if the bank doesn't like me, instead of just denying me a loan, they can convince other banks not to loan to me as well?
It's not about a loan. You have to put ~2,000 EUR in your company account in order to start it, and they might refuse opening an account for you. They're not going to talk with other banks, but if they have a good reason to think working with you is going to be difficult, chances are other banks will think so as well.
That's actually not the only option. You can also transfer property (apportegendom) to the company, such as vehicles, machines, patents/copyright/trademarks, real estate or pretty much anything of value, to use as your share capital.
You just have to specify it when registering the company, and have an accountant certify the value.
But obviously, it's more annoying and you have to keep track of depreciation.
They can't convince others, so I shopped around until I found a willing bank. This is due to introduced KYC requirements and the harsh penalties associated with them - so banks are preferring to err on the side of caution.
Same story goes for opening a personal account.
it sounds more like they can choose not to work with you just like in America, but maybe the reasons are allowed to be more spurious
Once had a call with a Netherlands founder (i am european too), and told me "Declare your company in Delaware, everything will be much easier"
That could work _if_ your company has actual substance in the US. Otherwise you just expose yourself to much bigger problems.
Such as?
If I set up a US llc as a Belgian while residing in Belgium, Belgian tax authorities will claim the center of control is in Belgium and claim it is a Belgian company.
will they do the registration for you too?
Of course not. They'll just claim your llc needs to pay local corporate income taxe, VAT, pay local social security, dividend withholding tax, ... on top of whatever needs to happen to keep US authorities happy.
like?
I paid someone 100 euros for a title, i said hi, and I send quarterly 0 euro issues. That's all the effort I need to do in The Netherlands
To be fair, it's also much easier to start a company in Germany if you choose a simpler legal form. It's probably still easier in the Netherlands or Sweden, but the authors pain is at least partially self-inflicted.
Yeah it’s also very easy to do in the UK.
Getting a little bit more annoying year-on-year for maintenance with stuff like identity checks and software requirements for eg tax information, but still trivial to initially create
Legally, the banks in Sweden have no right to deny anybody as a customer. This is explicit in the law as a requirement for the bank to be covered by government depositors insurance.
In practice banks will deny anybody to open an account, for no reason at all, because they are above the law in Sweden. The country has for a long time been owned by a few powerful banker families.
Edit: Down voters might first want to look at Wikipedia for the Wallenberg family. This is as much part of Swedish culture as IKEA or meatballs.
I challenge anybody to find a country in modern history which is more owned and controlled by bankers than Sweden.
Same in Belgium. Easy peasy. Took no time at all.
>Before Europe gets lumped in as one country
The classic European trick: it's one strong union when you want to use counting stats or independence from America , but you can't lump in the duchy 3km away as the same when you want to pick and choose the metrics that make you look good.
I don't think it's that different from pointing out that registering and/or operating a company in e.g. Delaware or Texas is a very different experience from doing so in New York.
It didn't actually click for me until this post that there was an actual US State called Delaware. I just thought it was a type of company.
Sure, a Delaware Corporation, like a Long Island Iced Tea.
No. No. You’re thinking of Arizona Iced Tea, which is a New York corporation.
Arizona Iced Tea at least nominally includes ‘tea’
Kind of a tangent, but as someone who's done both, registering in Delaware versus New York is actually basically the same process.
For one thing, it’s a geographic location and not automatically the same as the EU
The duchy 3km away is impenetrable fortress where the trace between money coming in and going out magically disappears.
Germany is one of the worst countries when it comes to bureaucracy nothing is fast here if you go the legal path and stay within the law (which is mostly for small people big players have different ways) and as you see everything costs a lot so if you are founding a pure online business do yourself a favor and incorporate somewhere else and if you still live in Germany look into licensing or subcontracting yourself to your company in another country it's way more flexible and you probably have Easier access to grants etc.
Another part is taxation the tax office takes your money really fast but returns can be another slog where the tax office denies legal claims again and again untill you get a lawyer etc. and it generates costs again needlessly because it's really dependent on who works on your tax records and there mood apparently.
I have yet to find the mythical efficiency everyone was talking about.
Trains, Berlin Brandenburg Airport, this.
It's rules and adherence to rules, more than efficiency, that I've found in my experience.
> I have yet to find the mythical efficiency everyone was talking about.
Comes down to a misrepresentation of history. Germans were never known to be efficient, they were known to be precise with everything, including bureaucracy. This happens to be handy with machinery, but not much else.
...but their machinery (or cars and motorcycles at least) are needlessly complex and unbelievably frustrating to work on.
Really I think that they just landed on some really successful marketing.
My experience with German colleagues is not efficiency; but they do have a remarkable ability (in my field) to read a 400 page regulator rulebook and overlay it on a 200 page design document and pinpoint the rulebook edge cases not covered by the design...
The efficiency is a thing of the past, an mainly when dealing with manufacturing, which we were really good at.
The world got faster, but german industries and politics never got the memo.
Another recent example : https://www.telegraph.co.uk/world-news/2026/06/10/germanys-h...
They laid 600+km of cables wrong ultimately delaying the project by 6 years.
It's a mistake to think Germany is efficient, I don't know where they got that stereotype.
Germans are thorough, not efficient.
There is no efficiency to be found.
It's a "cover your ass" mentality that resists any changes.
Germans a rule based and were really precise which came in handy like 50 years ago. The modern German is not flexible enough for the modern job market. German companies are also not flexible enough to compete. Germany goes downhill for a reason.
Don't incorporate somewhere else it will only lead to disaster. The company will end up being German tax resident anyways due to management and control being in Germany as you live in Germany .
Then you have to be compliant in 2 jurisdictions (file forms/balance sheets in both countries etc..) and worst case you could become subject to double taxation (if there is no agreement).
The optimal solution is just to leave Germany .
> The optimal solution is just to leave Germany
Just go to one of them Baltic states. They actually have a functioning electronic ids and other necessary infrastructure.
There’s no reason to live in Germany if you’re working with international clients.
Malta and Cyprus offer much better quality of life and also significantly less taxes .
Also Polands IP Box(5% tax rate) regime can be very interesting to software engineers right across the border.
Can't you just incorporate a Wyoming LLC (zero corporate tax + federal tax because you're non-resident in the US) then just open a Wise account?
Wyoming LLC gives passthrough taxation, and because you're in Germany, you'll be subject to just German personal taxes alone.
What should the US LLC do ? It will end up being treated like a GMBH in Germany (keyword : Typenvergleich ) and you will have to do all the bureaucracy in the us + Germany and end up paying the same taxes
Bookmarking for my personal posterity.
Finanzamt may well decide this is a German company in the cunning disguise of a cowboy hat, and charge it German corporate tax
It's the scientific slash managerial state brought to you by Anglo-German leftist thinkers of the 19th century. Enjoy utopia.
I do not know an EU or Asian country that doesn’t have a similar paperwork misery; I had a company in DE and in many others; you won’t survive in Spain as SL if you are small and follow the rules either. So literally no one does. No different in DE. We never got fined or even reprimanded. Largest fine in DE we got was for charging the wrong VAT for some items and that was not really that bad compared to all the tax breaks we got.
In Romania it's so bad that there are companies who will handle everything for you, even if technically the chamber of commerce has a digital interface as well. Everything is handled online and you get digitally signed papers in a reasonable amount of time.
This is probably the solution, an EU-wide company that has local offshoots and can handle the bureaucracy for a fee.
When there is an industry offering workarounds-as-a-service, then it is time for legal reform.
As far as I know, incorporating a BV in the Netherlands can be done in 1-2 weeks, with a lot of less pain. Many services are integrated and available online.
Estonia makes it very easy.
> nothing is fast here if you go the legal path and stay within the law
> and as you see everything costs a lot
this sounds like a system primed for corruption
if you can pay half the needed amount to do everything 5 times as fast, would you not do it?
Doesn't Germany have Controled Foreign Company rules?
Yes , but cfc rules are mostly targeted against passive income and exclude active companies. They wouldn't matter in that case anyway as he would shift the tax residency to Germany by managing & controlling the company from Germany.
Not to defend German bureaucracy but if you are serious and want results this is not how you do it.
If you want a GmbH quickly there are specialized lawyers that maintain a pool of freshly founded GmbH's for you to buy. Everything is set up for you to start. If you don't like certain things like the company name, you can always change it later.
That being said, I know plenty of people who founded their GmbH themselves and it went smoothly. It's not that it can't be done, it's more that OP chose an overly complicated and untypical scheme and was surprised about the complications.
> there are specialized lawyers that maintain a pool of freshly founded GmbH's for you to buy
It doesn't sound easy nor cheap to buy a company and change the company name.
UG & Co. KG has a couple of advantages and while it did add some money and time to the table, it doesn't change the story.
Notaries in the US are the price of a dinner. Many people have waited up to 6 months to receive their VAT ID from Berlin.
> from Berlin
That's your problem right there. If you live in Berlin, take the 2 hours and go to Hamburg or Leipzig before doing anything that needs a working bureaucracy.
I'm not 100% sure, but I believe there was an issue with the "place of effective management" or perhaps the company address not being in your federal state.
You probably would've needed to get an address there somehow, yes. There's services that do that for you, the non-shady ones being provided by lawyers and notaries.
[ed.: a tiny office in Leipzig is pretty cheap too, but you'd need to ensure mail doesn't pile up there unchecked.]
Unfortunately I'm not joking about this entire thing. Berlin's underfunded, overstressed bureaucracy is to be avoided like the plague.
[ed.2: to be clear, it'll still not be great. Just less bad.]
> It doesn't sound easy nor cheap to buy a company and change the company name.
Again this is very straightforward and routine in the UK: https://paramountformations.com/product-category/off-the-she... ; a similar experience to buying a domain and spinning up a website on it. In organizations like investment banks they will have shells ready to go in the way you would have kubernetes pods.
I don't think domestic invoices should be reissued once the VAT ID arrives.
So, the story is really that it takes a couple of weeks for a freshly founded company to be ready to invoice customers outside of Germany, which I agree, is a sad state.
They never said cheap, they said quickly.
> If you want a GmbH quickly there are specialized lawyers that maintain a pool of freshly founded GmbH's for you to buy.
That. It's possible to go even simpler if no limited liability is needed.
Just Gewerbeanmeldung costs maybe 30€ and takes less than a month normally. Large cities even have online forms for this.
Also the reporting duties are much simplified. ChatGPT and some accounting software are very helpful. Although a tax consultant and probably a liability insurance are recommended to avoid bad surprises.
I incorporated a GmbH with Musterprotokolle and it still look me longer than OP.
Especially the combination of UG & Co KG. Never heard that one!
Yes, my suspicion is that OP went to a lawyer and said: "I want to minimize my risk as much as possible, what do I do?"
And of course, lawyers being lawyers, answered you need to wear both a belt and suspenders. This is the answer you'd expect from a lawyer. It is your responsibility as a founder to do the risk assessment. The fact that almost no one wears both a belt and suspenders might have been a hint.
> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state collects before it will let me try.
But it was his call. As the author has already pointed out, he could have started a sole proprietorship, but he did not want to take on that risk. The 25'000 is because it's not his risk if he starts a GmbH, it's the GmbH's risk.
Also, the 25'000 are not a toll, it's the company's Stammkapital. The GmbH owns that money. And afaik, in Germany you only have to pay in half of the 25k.
Yes, can confirm. You can start a GmbH with exactly half of it (12.500€). And the money does NOT need to stay locked on the bank account. You can spend it for company purposes (but NOT for founder wages).
Founder wage is a company purpose, else it wouldn't be allowed. Its not your personal money anymore once deposited into the companies account.
Yes, afaik you can pay out founder wages with Stammkapital.
However, it has to be actual wages, i.e., the founder has to do work in return for a salary, and the salary has to be reasonable. You can't just have the GmbH pay you back the money you put into the company. There are also other limitations (https://dejure.org/gesetze/GmbHG/30.html), but that's the main one.
I can't verify if the author's attempts are even real tbh. Sounds like they were creating problems for themselves just to see how much it would cost to get sort them out. For a GmbH you also want to get an accountant and just delegate the whole process to people who can guide you before you hurt yourself.
Yeah, this reads to me like "I made some weird decisions, and now I'm upset they resulted in a weird situation." My feeling is that starting a GmbH is relatively simple, quick, and cheap, so it's not worth trying to engineer some workaround to problems that most likely didn't exist in the first place.
As others commented already - the author does not seem to understand principal idea behind running a business - a company is not something "yours", because you can just simply sell your shares or be moved out from the company by other partners.
Company is a state's legal entity given to designated people to manage (the forming person/partners) and profit from doing it successfully. If those people fail they have to follow strict rules (liquidation) or they will be sued personally for misconduct. That entity gives much more possibilities because it is limited liability - part of which is held by the state, and part by the running founders.
If you want something yours, you go with the sole proprietorship.
I've run a tech business on three continents, and nothing comes close to the Kafkaesque labyrinth of the German world.
Everything is unbelievably complicated and over-engineered, and every layer is immune to change. Every rule was rational when it was added, and now everyone has a financial stake in continued complexity. The German notary is the highest-paid notary in the world, and the highest-earning professional in the country.
That said, I think a lot of the frustration comes from a mismatch of expectations. Germany wasn't designed for randos to start companies and thrust change on society. All the bureaucracy is a filter, and what it filters out is change itself.
You were never supposed to incorporate a company. You were supposed to get a job at Volkswagen.
Can't agree with you more.
For information: GmbH & Co. KG is one of the most complicated forms an company can be founded, the same goes if the inner company is an UG. Many things have to be done twice. The only good thing is that an investor or an owner are not liable with their private money.
> The only good thing is that an investor or an owner are not liable with their private money.
That’s incredibly important. More than a footnote. I would consider any other form to be non-viable if it doesn’t have such protections.
For comparison, starting an LLC in the United States is a trivial operation. I can’t even remember how long it took me to set mine up because it was a trivial event. Maybe a couple hours, mostly research? I also have to fill out an online form and pay a few dollars every year to renew the LLC.
Setting up a plain UG or GmbH gives the same advantage of not being liable with your private money, and is also a comparatively trivial process. Especially if you are the sole owner. Still slow compared to the US or UK, but not half a year slow
Starting out a company as a UG & Co KG is a tax optimization move, not a liability issue
> Starting out a company as a UG & Co KG is a tax optimization move, not a liability issue
Thanks for the clarification. However I’m still surprised that tax optimization is also considered a footnote in these conversations.
In the countries I’m familiar with (mostly the US, minor second-hand experience with friends in some other countries as they started their businesses) starting a limited liability business venture that has the tax structure of a business isn’t considered a heroic effort. Starting the business is basically the least of your concerns. Almost a formality.
When I first started my company I half assed it. The LLC was quick and the EIN took two weeks. I accidentally signed a contract with my name instead of the company and elected to be a sole proprietorship. These are all the worst ways tax-wise to do this.
By Nov that year I decided to look into the tax implications and they were unpleasant so I wrote the IRS asking to be considered an S corp from the beginning of the year and they sent me a letter saying it was so. I ran payroll in Dec to catch up.
When doing taxes likewise I added a cover letter explaining the mistake about which entity was to receive the money and then assigned the income to the S corp on the return and worked everything through and corrected it in the right way.
The return took months to process and I had a mistake in the taxes that I was fined for a couple thousand which was reasonable but they accepted all these natural errors that I fixed up.
That sequence of encounters with the US government blew my mind. The much maligned IRS was eminently reasonable.
The GmbH has the tax structure of a business, as it is a business.
He wanted something more special than that.
Which is possible, but complicated.
You can get the same in Germany with the much simpler GmbH or UG. GmbH & Co. KG is much more complex and mostly used to save some taxes in some scenarios.
(However I absolutely agree that all of this is much too complicated and slow here in Germany)
In Germany you need a notary in the us you don't.
The notary adds about a week to the process (2-3 hours of your time, plus the time to wait for the appointment), and about $1000 (depends on how much money you put in the company). And for "standard" setups you can skip the lawyer and simply use the templates and "free" legal advice from the notary (free as in "included in the notary fee you have to pay anyways")
Yes, it's more involved than an online form. But in the grand scheme of things, a notary is neither a huge expense (the tax advisor will likely cost you more) nor a big time sink
Why do Europeans put up with that notary nonsense? Ideally almost all notary jobs should be destroyed.
It is not complicated, it is in fact quite standard here in Germany.
I explain in the post how the other options are worse.
Yes, what you are doing is complicated.
I did a GmbH with "Musterprotokolle" so virtually no lawyer fees and quick and easy to set up.
And a GmbH is limited liability. It's in the name. Gesellschaft mit beschränkter Haftung. GmbH.
The Geschäftsführer is liable for certain (avoidable) things in either case.
The difference is that that the Co KG can be taxed like a "Personengesellschaft". So you wanted to optimize taxes, which leads to a more complicated structure.
You are certainly allowed to choose such a more complicated setup if you think it's better for you. But then don't moan about it being complicated. It was your choice.
> But then don't moan about it being complicated. It was your choice.
I don’t understand why you’re deriding someone for explaining why establishing a common business structure is slow and complicated.
The fact that a less advantageous business structure is available faster, but with significant tradeoffs, does not diminish the problems with this business structure.
I am pointing out that his claims are, in fact, not true.
It is not this complicated to set up a limited liability company in Germany. It is this complicated to set up his choice of a two company setup. Which is, I repeat, his choice and much rarer than a GmbH, at around a 5-10% ratio. Because it is more complicated, not just to set up, but also to run. You have two companies, so two sets of books, two sets of audited returns etc.
Which is why most companies are not GmbH & Co KG. They are plain GmbH. A GmbH & Co KG is a much more complex setup and known to be a much more complex setup. Which he knowingly chose.
And his claim that this is somehow necessary for limited liability, which would be a legitimate "significant tradeoff" is simply not true at all. That's what the GmbH is for.
Now maybe he was badly advised by his lawyer, but then complain about the bad advice. Not about the consequences of choices you made.
GmbH & Co KG are not that common, in fact the overwhelming majorities are GmbH, UG or AG (public corporation). The only benefit you can get out of this shell structure is that you don‘t have to disclose investors publicly
Well said!
It is one of the most complicated forms. A GmbH alone is good enough in 99.99% of cases, and its usually done really quick.
Also, if you believe in your product there usually isn't a reason to go for a GmbH this early. You can send invoices a lot earlier with just a eK or GbR. Its not an issue to adhere with your private money if your product isn't causing damages.
> Its not an issue to adhere with your private money if your product isn't causing damages.
Might happen really easily though. E.g. you install some package which has been compromised, infecting your software product and suddenly all your customer's systems are cryptolocked and you are on the hock for millions of €€€.
Or your db crashes in new and creative ways and your backups don't work for some reason and now your customer lost an expensive contract because critical data that was in your db is gone.
Of course, you can try to foresee every eventuality, but you will indubitably overlook something and probably never make it to market.
Isn't that what (liability) insurance is for?
(if there's anything Germans like as much as bureaucracy it's insurance)
Every good company in Germany has insurance. General liability insurance
Professional indemnity insurance
Business interruption insurance
Directors and Officers (D&O) insurance
Commercial legal expenses insurance
nowadays Cyber insurance
I think I might have forgotten one or two...
Not in mine. Check the post.
So basically you go for the legal stuff only really big companies use (instead of changing once its necessary) because you dont believe in your own product and dont want to be held liable, got it.
Every sane founder uses a limited liability company (e.g. UG/GmbH). What's a bit unusual is the "& Co. KG" part.
Do people in Germany see limited liability as some kind of crazy thing only a scammer would want?
Nope.
But the GmbH & Co KG setup the poster wants is not needed for limited liability.
You get that with a plain GmbH (or UG), which is much, much simpler to set up.
Depends. Given OP built yet another AI tool, yea, I want to hold them liable in case something goes wrong (not that I'd buy these tools in the first place).
Useful info, explains a lot. Thanks.
But hey, at least they get to write about their mid company name ("Plenty" - lol) got (rightfully) rejected...
He wanted to go all out and maximise "company form". Same as optimizing your website for hundred of thousands of visitors even if you have only like one hundred visitors...
If the parent comment is correct and this form is necessary for personal financial protection, I wouldn’t consider that “all out”.
That’s the bare minimum consideration for a viable company structure.
OP wanted to set up a nested copmany structure. Instead of Person -> LLC it goes Person -> Limited Partnership --> LLC. The in between company is only for tax-efficiency and has nothing to do with limited liability.
It's not.
You get one chance at getting your company form right. Any other new chance costs a ton of money in restructuring. Software is malleable, companies are less so.
I am not familiar with German business entity structures, so this is very interesting.
So, if I started a sole proprietorship, it is not possible to convert it to a full blown, privately held corporation in Germany?
It is obviously possible, the process is probably very similar in effort and expenses to founding it in that form directly.
You have to savour the lack of self-awareness in this one.
> Founder chooses the most complex legal structure that's readily-available... and is surprised that this complexity comes with laywer and notary fees.
> Founder decides to incorporate a company with the name of a popular brand of kitchen rolls... and is surprised that it's too generic.
> After "weeks of correspondence" (and, I suppose, extensive research), founder decides to incorporate a company that's named the same as a Swedish online marketing company instead. Very distinctive. No risk of confusion, ever.
Is the GmbH the most complex legal structure? What about the AG?
Going from the scheduled notary appointment to having the first company registered comes out to 17 days in the timeline. 24 days if you add the time for getting the notary appointment. From experience, getting your tax id will take another four weeks or so, depending on your local tax authority. OP is still in that four week window, starting from the point where the paperwork was filed. So about 2 months total of processes you can't speed up.
But notably in OP's case, most of the time is actually spent with the lawyer and tax advisor, no the bureaucracy itself. The more complicated company structure (Ug & Co KG is basically one company (an UG) owning another (a KG), giving a very similar structure to an UG at a slight tax advantage), doesn't help, but it's really not where the majority of the time here is lost (it probably does account for about half of the money though)
The authors claim that he spent "9,600 euros to start a company" is misleading. Since he wants to reduce his liabiliy and therefore the risk of his customers as much as possible, he opted for a complex solution that involved founding two joined companies.
In addition, he counted 2,000 € of shared capital as an expense, which it isn't. He did not opt for a "cheap" UG which requires no up-front capital, because of its bad reputation.
He also includes a bill for accounting software of 426.97 € into his calculation. This has nothing to do with founding costs, but are operational expenses.
As the author states that he set up the company through a law firm, I wonder which of the figures includes the cost of this service. To be fair, this should be listed separately, as such costs can vary widely or be omitted entirely if the company is incorporated solely through a notary.
Also the information about the minimum deposit when founding a GmbH is incomplete. He states: "A GmbH wants 25,000 euros sitting in a bank account before it is allowed to exist." Fact is that you need only deposit half of it upfront into the GmbH; you only have to deposit the rest of the money if the company is in trouble. The company can also immediately lend the deposit back to the founder at market rates. If the company’s articles of association permit it to hold shares in other companies, the company may also use the contributions to purchase shares or similar financial investments. His law firm should actually have advised him on this matter.
The main differences between a standard GmbH and a GmbH & Co KG lie in their somewhat different tax arrangements.
So all in all, the author paid 7,227.74 € to found a rather complex company structure. Judging by his reasoning, presumably for the wrong reasons.
When I found a GmbH in 2019 without the help of a law firm, it cost me about 2,000 euros (if I recall it correctly).
it seems absurd that they would reject a plain and simple name? i imagined company names would be available on first come, first serve basis. why is that not the case?
Why so little? You are priviledged!
Imagine 3 young Italians that would like to work together in a startup. Let's consider only the first year, imagine a B2B SaaS, they are incorporating but they'll work on the product and approach possible customers. Zero revenue.
Well, if you followed the law, you probably would spend something between 23'000€ and 25'000€ in total. WITH NO REVENUE. This is because even if you work for free for your company, you still have to pay taxes for INPS, our pension system.
And if someone invests in your company, you can't live out of nothing and would like to pay a founder even the minimum salary, YOU HAVE TO PAY INPS AGAIN.
This is crazy, our country is a joke.
EDIT: Adding a bit more of scary context and nice sprites.
None of the common financial advisor you find in Italy have ever heard of funding ways or contract terms that are really well known globally.
Do you want to include drag along and tag along clauses in your company statute? You have to talk with really expert lawyers and notaries in Milan that will bill you thousands of € for something that in Delaware is a pretty much standard single line of text.
That sucks, my fellow Italian. I haven't looked into our country since I live abroad for a long time, but I'm also paying health insurance here which is not cheap at all, and haven't added it to the post since it's not necessarily a company spend.
Cordiali saluti!
Che gli dei ti assistano in terra tedesca <3
Having to pay into the social welfare system you benefit from :O :O :O :O
That's very funny, considering my generation won't have the pension we're paying for.
"To some clients, 'UG' reads as 'not serious.'" -> more of a sales isssue
Consulting or dev work doesn't need deep capital. we're insured for X if Y happens. A UG is fine. The "not serious" label only sticks because founders keep caving to it.
Let the client adapt to your setup, not the reverse. If their compliance department doesn't get it, that's a gap to close, evry time you stand your ground, you normalize the UG for the next founder.
German system supports wealthy individuals who are planning to stay in Germany long-term, but is horrendous for anyone without cash in the bank willing just to try something out.
I grew up in Germany and Austria and did my first startups there, then went to New Zealand and built startups there and currently live in Portugal and built startups there. Europe is broken beyond believe. I moved everything back to New Zealand because the bureaucracy, the level of compliance, the insane inefficient here is killing me. if the EU is serious about wanting to build a meaningful startup scene then it has to listen to EUinc, drop its completely unfounded arrogance and learn from others. So looking forward to leaving again. I highly recommend founders in the EU to found in a sane county, if inside EU is a hard requirement, look at Estonia and Lithuania, skip the rest.
I founded a UG with 2 friends. 7.500 capital, 2.500 each. From that money, we paid the notary. We drafted with chatgpt on our own and presented it to an attorney for review, ~300€. Notary ~1.200€. All in all, we are 1.5 years in, we still have ~3.000 left from that 7.500 capital. Obviously you're doing something wrong
He wanted a GmbH
No, he wanted an UG & Co. KG
> “No,” said the lawyer. German company names have to be distinctive, and “Plenty” is a plain English word. Berlin would reject it.
Good.
Been there too. Paying thousands of € for a notary just to read some text you wrote out loud to you is absurd.
The cherry on top is the exit tax:
> And no, I could not just leave instead. My first company, Freshflow, is valuable enough that walking out of Germany would trigger a massive six-figure exit tax, on gains I have not even realised, purely for the privilege of leaving.
This is ostensibly there to prevent large-scale tax fraud but has ridiculously low thresholds that make life difficult for anybody who is shareholder of even a small company.
You can delay the exit tax until the sale of the company , if your move is within the EU.
Maybe I am missing the point, but what is the alternative? You found a company in Germany, dont realize your gains, therefore dont pay taxes, then leave the country, realize your gains, and still dont pay taxes? Why should Germany or any other country allow this?
The issue is liquidity. The tax comes due as soon as you leave, but you might not be able to liquidate your shares quickly enough to be able to pay those taxes. Depending on how your company gets valued these can be eye-watering numbers.
This is something you can solve with enough time, but if I get a job offer where I'm supposed to start in 2 months? Very inconvenient. (There are some ways to spread this out have this tax burden spread out over time, but it still represents significant friction)
You own a company so valuable that the tax on selling it shares puts you in serious trouble, but you still need to a start "a job"? A Job that requires you to change your nationality/tax residency to a non EU-state?
Edit: Maybe I should give an example: Lets say you build up a company, your shares are worth ~100k, while you payed yourself a living salary of ~2k so you could pay rent and buy groceries but not much more, especially no savings. Now you get on offer to work in the US for 180k/a, you sigh "finally" and just want to move, but the German wants 30k Taxes on your unrealized ~100k capital gain before your leave - Is this the kind of situation you are referring to?
Pretty much. I just have a symbolic 5% stake in the company and working there has certainly not made me rich. I'm still early in my career so I don't have a ton of savings. It wouldn't cause "serious trouble" but paying tens of thousands in taxes on top of the cost and hassle involved in moving overseas is still a significant burden and certainly a case of the regulation missing its mark.
how about not taxing money you dont have?
The last paragraph is very important to the story. His setup is essentially a shell company which add complexity. Setting up a UG is very easy, needs little capital and is especially created for one-person-companies. Additionally he is able to send invoices, just not internationally. I have a feeling setting up this corporate structure and registering it internationally would also not be done instantly in other countries.
"The one thing the state exists to let me do, bill them cleanly, is the one thing I still can’t."
I sympathize but I'm not sure that is the sole reason the German state exists.
"one" != "only one"
The quote is not "one", it's "The one".
"The one thing" actually does == "only one"
“The one” != “a”
I am an electrician. Got my certification done with Handwerkskammer, went to the city hall, registered my company and filled online form rejecting the option with VAT number since all my clients are in greater Munich area. Same path could be chosen with VAT number. Ranting about choosing most complex business form and having no money for a consultant is not adequate in my eyes. Btw I am always liable as electrician (since it is dangerous) and can’t hide behind limited liability company in Germany.
> Btw I am always liable as electrician (since it is dangerous) and can’t hide behind limited liability company in Germany.
Under some circumstances you can be held liable through a GmbH, but not generally speaking.
> rejecting the option with VAT number
Means you are planning to run a small business (making less than minimum wage on a yearly basis), also you are opting out of Vorsteuerabzug. Anyone that wants to live off their business needs VAT. And that is given by Bundeszentralamt für Steuern and the wait times are often excruciating.
> Ranting about choosing most complex business form and having no money for a consultant is not adequate in my eyes.
You shouldn't need a consultant to open a company. Should be a form and that's it. Maybe an accountant to certify your books, but that's it.
They are not trying to just open a company, they are trying to create one the more complex nested company setups allowed by German law.
And you really don't have to. I just went to one a single meeting, signed a single piece of paper, paid 60€ (probably still <100€ these days) and was done with it. But as GP already alluded to: I didn't choose the structure that is very well known to be the complicated one.
If you're choosing to go with the most complicated way of setting up a company, a consultant probably doesn't hurt.
When you choose that you need double layer of limited liability. Maybe having a consultant is extremely good idea. To understand exactly what you need to do at both layers. And maybe in such setup some slow down should be fully expected. As one layer is acting for the other in your stead...
To me things taking longer and being more complicated sounds entirely reasonable and natural in such setup...
But his clients aren't all the the greater Munich area so how is that even similar? Surely having a complex form is the issue as this is what fits his needs. Why does the form need to be complicated?
> My first company, Freshflow, is valuable enough that walking out of Germany would trigger a massive six-figure exit tax, on gains I have not even realised, purely for the privilege of leaving.
Without this "exit tax", every founder of a successful business would have a huge incentive to leave and to realize the gains elsewhere. It's not a tax for the privilige of leaving, but for the privilege of building a company. I can see only three alternatives to this:
- Abolish the capital gains tax entirely.
- Make defering it impossible. Force people to pay immidiately. No "exit tax", but people have to pay for unrealized gains.
- Tax people when they realize their gains in a foreign country.
It should be possible to move within Europe, then when the liquidity event happens tax me from the countries where I've lived, proportionally to the time I've lived there.
If you want to move out of Europe, you get the exit tax as before.
A fourth alternative is to leave, and a fifth is to not start a company at all.
Now you understand why the USA deploys 3-4x the amount of VC capital compared to the EU. And prior to the current administration, entrepreneurs mostly wanted to get to the US.
Are you aware that the US charges an exit tax if you choose to renounce your citizenship? And if you do not renounce it, they will tax you no matter where you live in the world?
As far as I understand, the US taxes its citizens whereever they live (the third alternative I mentioned).
I looked into GmbH (german) , BV (dutch) , and OU (estonian) . GmbH seems very unpleasant. BV and OU are easier to obtain. But BV requires your primary place of business to be the Netherlands, which isn't always practical when you're trying to extend your activities internationally. OU is supposed to be better for international operations, but -because it's a single country initiative- creates new and interesting tax problems.
At this time, the whole system seems to revolve around geographic location. As long as you stay put you're sort of fine, but if you move around within the EU, the law doesn't stay stable around you. This is impractical.
EU Inc seems to be a new initiative to fix a lot of the patchwork problems, but doesn't seem to be live yet. ( https://commission.europa.eu/topics/business-and-industry/do... )
I'm told that interstate commerce in the US isn't always necessarily easier, mind. Maybe the EU can take some lessons learned.
> But BV requires your primary place of business to be the Netherlands, which isn't always practical when you're trying to extend your activities internationally
You bill from the Netherlands and I think this is the only thing required. Uber in Europe charges your cards from Uber BV for example. And I think Uber is pretty international.
Especially as a solo entrepreneur, your llc would have to have substance in the Netherlands. Otherwise, it risks getting requalified as a country-where-you-reside llc.
Why would you otherwise voluntarily subject yourself to the extreme complexity of countries like Belgium or Germany if you could just set up a simple Bulgarian or Estonian llc?
It can be done, but there's contortions to sort out to fit a square peg in a round hole.
If someone has experience doing it right, I'd absolutely be willing to pay for their time to exchange advice.
As far as I'm aware , EU inc would be an opt in initiative meaning that it likely wont change anything in Germany. DE has a a very powerful notary lobby that will oppose this at all costs.
I read that as the founder being able to opt into choosing EU Inc, not that only some EU member countries would offer it.
edit: it's a regulation, not a directive, so it will be directly available in all countries, without each country creating its own laws to implement it. But it'll take until 2028 or so until it's actually be available.
Outside of some kleptocracies, Germany has long had a reputation as the hardest place to found a firm.
I recently helped my friend (3rd country national) to open a new business in Czech Republic.
It took 3 months from registration to sending her first invoice. The longest wait was on the bank account: a very few places are willing to open company account if you don't have an EU residency. Without the bank account, she couldn't deposit founding capital (základní kapitál) which is required to complete the registration. It's even funnier cause the minimum amount to deposit is 1 CZK (5 cents).
Total cost to start business was under $8,000. The most expensive were legal services: writing down all contracts and customer agreements was around ~$5,000.
I feel like this is such an untapped market for getting digitilized. I was thinking to actually sit and vibe code it at some point but can't imagine doing this alone.
Skill issue?
I seriously don't know what you people are doing. I've set up companies in Germany, the US, Brazil and Mexico.
The US was BY FAR, the most enjoyable experience. Won't say anything else. It was a breeze! But Germany wasn't as bad as people make it sometimes. Just don't go with a super complicated, overengineered setup and you are up and running almost instantly. Better won't mention Brazil, though.
If you have the resources, get some QUALIFIED lawyer/notary on board and it'll all be super chill and quick. And if you're just getting started, just do a sole proprietorship as you get started (and you can start working pretty much on the same day), and have the GmbH setup process run on the side.
Running the business is the hard part!
Important note: The cost / delay he's talking about isn't registering a company; it's getting a VAT number. I've done both in the UK, and while getting a VAT number is significantly cheaper than 9k EUR and significantly faster than 6 months, it's not nearly as quick or cheap as simply registering the company, which is what many commenters (and even the author in TFA) are comparing it to.
Mh, seems to me about ranting as some things went wrong. With all due respect, founding a company shouldn’t be that easy; otherwise investors wouldn’t give you money for it. “UG” reads as “not serious” – no, that was in the past. Times have changed.
I’m not here to defend a big country that clearly has to do better, of course.
Man decides to go for the most complicated option, complains about how complicated it was. More news at 5.
Start a limited liability company in Latvia or Estonia. It will take you 1 business day, you can do it remotely, and, because of EU laws, you can do business everywhere in EU. Basically nothing you can do with Gmbh that you cannot do with Latvian or Estonian equivalent
https://www.vid.gov.lv/en/first-steps-entrepreneurs
The biggest issue is to find a tax consultant for your GmbH/UG, especially when you have low revenue (below 1M).
Can confirm, starting and running a business in Germany is miserable.
The processes are all non-digital, and have many steps like Notaries for example.
We outsourced it for 2.5k (extra) and it was still painful, took almost 2 months and worst of all wasted so much time and focus.
The worst was sitting at the notary, and getting read out loud by her what we were about to sign (also paying for that).
If you think about starting a company, spend some time to think through what it would mean for you to be a Delaware C Corp or an Estoinian one. It will increase your chances of success as you can focus on what matters.
I don’t know the specifics but the OP chose a complicated setup. Why not just use a GmbH which is the equivalent to an Inc in the US? The capital requirement is 12500 in the bank not 25000 as stated. There are online services that run the whole process for you similar to Stripe Atlas. Even setting up a UG (with 1 euro stating capital) is very easy but you have to upgrade to a GmbH once you receive investment (investors usually demand it). For the whole process there are standard forms. You only need to pay lawyers if you want to personalize your setup.
Maybe OP was just not advised well which is surprising given the amount of information available online (startup guides for Germany)
I guess that’s what happens when you get advised by a lawyer.
They state that in the post, it is a tax-optimisation since it is a single-person company.
Europe will suffocate under the weight of its own bureaucracy. The sad thing is that it is not new to me, I've heard so many stories like this one. This is the kind of friction that makes founders incorporate elsewhere.
Also, a founder spending months coordinating lawyers banks and tax advisors is not talking to customers or building the product. The opportunity cost here is huge.
Anyway, you are pretty close. One more push, don’t give up. :)
Germany is not EU though. Very different bureaucracy in different EU countries. Up to a point, EU doesn't add a single bit of bureaucracy to the stack. Only once you reach a certain limit you will have to enroll in an international VAT system, which is not too bad.
EDIT: Just re-read your message. I thought it said EU. But the point stands, Germany is not Europe either.
Ah yes, Germany == Europe.
I have heard it is also more difficult to get married in Germany.
My friend bought an apartment. In February. Still in processing at the Amt (bureau). It's nightmare fuel. They are sending physical letters, and are hand-matching payments from banks. Apparently, they couldn't match a 53 EUR transfer last week, so a ~400k EUR payment is stalling.
The issue is, the people holding the stamps (and believe me, they ARE stamps, with ink and all) are in charge, and are VERY reluctant to give up that comfy job. Zero accountability, too, since once you are a government employee, it's incredibly hard to get fired. So they stall the process, forever, without any reprecussions.
I am all for having and caring about process and dealing with everyone equally. That's why I live in Germany and not in Eastern Europe where often some money under the table is the only oil in the machine. No such oil in the German machine, thankfully. But it's infuriatingly slow, because bureaucrats are in control and will never willing give up that control.
3 to 4 months is standard procedure in Belgium.
Not sure what he means with "2000€ share capital", which allegedly is locked.
Typically, you can spend your "Stammkapital" for business purposes (e.g. in a GmbH). It doesn't need to stay in your bank account.
The blog post does not read as written by someone who has understood the whole legal process, maybe that's where your confusion comes from.
The Stammkapital was required for the UG, and it's very much locked since the whole purpose of that is to take liability.
So for a UG it's a Kommanditeinlage. But it doesn't change the fact that you can spend this money for business purposes. You just can't wire it back to yourself or pay it to yourself as a wage. Feel free to buy office furniture or company devices with it.
It's a common misunderstanding that this money needs to be reserved somewhere for liability purposes. That's not correct. You can spend it, both in a GmbH as well as in a UG. Look it up youself (e.g. https://www.anwalt.de/rechtstipps/stammkapital-muss-ich-das-...)
According to the article you linked, it can be used to pay yourself a wage, as long as it's not excessive.
it is very funny that most of the (presumably germans) in the comments are saying "it's not that bad and it's fine because you chose a complicated LLC structure"
Looks like he got hot milked by “advisors” who insisted in an overly complicated setup. Setting up a UG is fast and easy as long as you stick to the standard and you don’t need advisors or lawyers.
My understanding what is described is Limited Liability corporation hold inside Limited partnership. Not either of those alone. This setup allows some tax games. But also clearly is also much more complicated to setup as first you would need the limited partnership...
It's probably only funny because the commenting germans are aware that there is a much simpler "UG" (without the &co KG), which is pretty much a LLC, which you can open on your own, a bit faster, much cheaper. But apparently OP didn't do that for tax reasons (in a normal UG, if you want to pay yourself, you gotta pay income tax and all the other stuff)
If an american comes and says they founded a public company (with stocks and all), and complained about the fuzz involved, you would also tell them that it's their own fault, right?
That said, maybe the US/Delaware LLC has this component as well, I'm not a lawyer :D
This is what happens with complex organizations. People develop expertise in navigating the organization, feel pride in that expertise, and then snottily mock those who struggle. Even though they didn’t create it, don’t really like it, and have no stake in it.
But it is all arbitrary bureaucracy with little value beyond its own internal logic. Still gets fanboys somehow.
I gave up on trying to set up an company in Germany. Founding is the 1st side of the coin, but the other side of the coin are the complexities of closing your company (which takes at least a year as well) and exit tax (you might get taxed 6-7 figures when moving abroad even if you don't really make reasonable money).
You can just buy a ready made GmbH.
This costs about 28k€, 25k€ are deposited in the company.
That is called Vorratsgmbh and takes very little time.
You still have to go to a notary and do paperwork to change the name of the company.
Fascinating, and useful for those of us considering starting up in DE.
I think most red tapes and bureaucracies have loop holes. For example, a different, simpler type of business type, then conversion to the actual desired type. At least, this has been my experience in a few countries I worked in. Sometimes it will cost more up front, but if the end result is significantly faster, maybe it is worth it.
I am sorry he has to go through this just to start a business.
Yeah, ease of doing business is always proportional to the amount of money you spend to grease the wheels of bureaucracy, so to speak.
Well, create a company in Ireland. 5 days, €300 and you can send your invoices.
I just started an LLC in Oregon and I did it in the evening and got a confirmation by the next morning and an ein next afternoon
I've setup my own company in Poland in 2015, by submitting a web form, 30 minutes later I could issue a fully VAT compliant invoice. This was not an incorporation however - that was a sole proprietorship, but I could still hire people full time, issue invoices etc.
You can do the same in Germany. Costs 29 Euros with an online form. Once the sole proprietorship is setup you apply for your tax id and done. The whole process took 2 weeks in my city. Legally you can even start invoicing as soon as you registered your business.
The problem with OP is that he chose an overly complicated structure. Probably got milked by lawyers and advisors.
thanks good to know! I felt something was off here
I was waiting for 3 months for my VAT ID to arrive. Then I just called my finanzamt and told them why I have no vat ID. I think they just forgot, finanzamt said over the phone that "they opened a ticket" and 2 weeks later exactly as promised in the beginning it was in my post.
The mantra has always been to only create the company after sending the first invoice.
Edit: oh it's setup like this to cheat on taxes.
I had already people wanting to work with me before even starting the company. Couldn't send them invoices. Most importantly: didn't speed up the process!
You can always send invoices without a company. Your tax office will sort it out retrospectively.
idk I founded a UG within a few weeks recently. Yeh it costs me maybe a thousand or so in notary fees but that's it.
A 1000 or so is … “that’s it”?
I founded my Estonian company within 3 days, that includes when the court rejected the name because a similar name already existed. Everything was online.
The real problem becomes substance in Estonia? Residence, local director, office, ...
the real problems with administration dome starts after founding in many but not all European countries.
There is light at the end of the tunnel as an EU Inc. is proposed.
However the bureaucrats in probable but all countries will try to water it down to pointless to keep or extend their responsibility territory and duties.
When these threads show up it is always funny that Germans are shocked anyone expects anything else and everyone is shocked at Germany.
Luckily with how the current German economy is doing this is a problem that will solve itself. It's like the last half a dozen German governments look at the Morgenthau Plan plan and thought it was an amazing idea they must implement.
I really didn’t have the feeling that Germans are shocked about some of these inefficiencies at all. Typically they’re just a result of long processes thus difficult to change. I do agree that Germany and the EU as a whole should not make this process so cumbersome. It shouldn’t be easier to found a US foreign LLC from abroad than a company in one’s own country. The proposed EU LLC might solve some of those issues if it comes to fruition.
Regarding the economy though, Germany is still the third richest country on earth. I think this is talking point about their huge regression is mostly FUD.
Do you really need for the legal process to be completed before invoicing?
In France you can do it as soon as you started the process.
You're discovering the global financial system is primarily for the rich, and not wage slaves like us. Free to those who can afford it
Its always the caste lobbying for regulations "for the good of all" that break countries apart. My country's (Argentina) largest political party lives on by heavy corporativism, otherwise they would have been booted a long time ago.
Similar story in the UK\u2014registered a company online in about 24 hours and had a business bank account within the week. The gap between the best and worst EU jurisdictions for this is staggering.
This does bring its own share of problems. 1000s of companies are registered in the UK with literally no checks. No address checking so people just pick a random address to register from the phone book!
When it comes to tax issues etc. it turns out the company registration is meaningless. The sweet spot has to be somewhere in the middle. Starting a company shouldn't be something you expect to do in a day but it also shouldn't require you to sell a kidney or fill in pointless forms.
> When it comes to tax issues etc. it turns out the company registration is meaningless.
Taxes have nothing to do with the physical location of the company. You go after the owners, and I'm pretty sure you can't open a company in the UK anonymously.
There is an identity and address checks now in the UK.
Even banks are required to validate now, had my bank asking me to validate details even when i have my business for 6 years, same company, same address, and same bank account.
Yep, and it can get quite tedious.
(2026)
1.) Yes, it took 3 months to switch the company hq + IRS + Notar etc.
2.) But it really does depend a lot on the city, state etc.
3.) UG is 500 EUR - changing to GmbH is then also quite cheap
Created an LLP, We spend around 30k INR, that is roughly 300USD.
Is it as tortuous to open a self-trader account with VAT ID, or is it just to found a company (the German equivalent of an ltd)?
Yeah very relatable unfortunately!
The EU is a single market, just form an entity in the quickest and easiest state to form it, open a bank account, payment processor and you’re off to the races, as long as you can accept Euros directly people are fine?
Who are these people that care
“Oh you don’t have a GmBH, oh your share capital is so low ohhh ho ho ho ho”
You're lucky. After that you will have to run it!
Come to Poland. You can get this done in less than a week
In Australia it is 30 minutes.
Wait until you want to convert the UG to a GmbH and realize that it's not simple or cheap at all.
It's not enough to have had properly filed tax returns every year, have a large enough profit-collection-line item in your books (25k EUR+) and then fill out a form.
No, if you want to use the profit your UG was required to accrue to raise your capital stock to 25k and rename it to a GmbH you need to get your annual accounts audited.
Or alternatively, you can pay in the difference between your current capital stock (e.g. 2k) and the 25k minimum for the UG and then rename the company and "just" have to pay for the notary, publishing to public records, court, ...
Yes indeed.
We converted Freshflow into a GmbH and needless to say it was expensive.
There's so many things that are plain wrong in the European ancient and bureaucratic commercial and corporate law.
It's insane that giving stock options (core to attract talent) or raising capital for equity is so difficult across Europe.
And don't get me started on how difficult it is to fire people that just don't work and only pretend to, spreading doing jackshit across the company.
Europe has the talent and even the capital, but the incentives are just not here, neither to attract talent nor serious investments.
The continent is old and politicians keep trying to band aid the system, consistently claim regional-national policies over common European rules, they will claim Europe makes it difficult to do business, just to reinvent their own commercial, import/export rules, tax rules non stop.
I don't want to say it's a disaster, but we really need some party that looks at commercial, trade and corporate law across Europe.
Wait until you find out about electronic invoicing mandates rolling across Europe.
Yeah, for many clerks the purpose of their lives is only to improve and enhance bureaucracy, and make the applicant's life miserable.
Honestly why go through all these hoops? Is the Wyoming LLC + Wise account route shut off for most Europeans?
Yes. Can't just emigrate. No substance in the US meaning your llc would be liable for tax as if it were an llc in the country where you reside. You'd basicly double the liabilities and administration for no good reason.
I wonder what's the reason. Poland used to have horrible bureaucracy. You could argue this was due to lack of funds, or communist baggage. Yet, over the last decade digital administration has become a norm, rather than exception.
Germany doesn't have such excuses, yet there it is.
So question is, why are you starting company in Germany, this is EU, start in better country.
He mentioned German exit tax is keeping him from doing that.
The only way to start a company in Germany is Societas Europaea and have lawyer parents. Otherwise don't bother.
How do you create an SE from scratch?
lawyer parents