Working Start > Business Startup > Mini-GmbH or Unternehmergesellschaft

Unternehmergesellschaft with Limited Liability, or Mini-GmbH

Definition, Explanation

Since Nov 01 2008, business starters can start their business as a so-called Mini-GmbH, colloquially 1-Euro GmbH. Legal basis is the Gesetz zur Modernisierung des GmbH-Rechts und zur Bekaempfung von Missbraeuchen (MoMiG). In particular, the new § 5a GmbHG is applied. The official term for it is “haftungsbeschraenkte Unternehmergesellschaft” (freely: starter's company with limited liability).

Features:

• Minimum required capital is 1 €
• Participators' shares can be split down to 1 € shares
• The articles used can be default ones, and do not require notarial attestation
• By the use of default articles and of electronic entry in companies register, the duration of founding is reduced to as short as one day
• 25% of annual profit has to be saved as reserve assets (duty of accumulation, Thesaurierungspflicht). This applies until the time when the equity capital amounts to 25,000 €, that is the requirement for a classic GmbH is fulfilled. From that date on, also turning the company into a classic GmbH is possible, although not obligatory
• A salary of manager-owners can be subtracted from the annual profit. However, this must not reduce the annual profit to 0 or below. If it did, the duty of reserve assets accumulation could not be fulfilled
• The name of the company must include Unternehmergesellschaft (haftungsbeschraenkt) or UG (haftungsbeschraenkt). The addition “haftungsbeschraenkt”, limited liability, is important
• The registering in companies register is done electronically in a standard form
• The registering can be done already from the moment that the founder has declared in written that the required permission certificates have been applied for
• The primary deposit is done in cash, that is without any contributions in kind
• The number of participators is limited to a maximum of 3 plus one director in case the default articles are used. In order to extend this, an attorney must make up an individual company agreement. Critical matters to mind, here, are: agreement requirements for the selling of company shares, pre-emptive rights and rights of first refusal, regulations on permission to dismiss participators and on severance payments to dismissed participators
• A default agreement need not be attested by a notary. If a company agreement is made that is different from the default agreement, it needs notarial attestation
• The participators signatures need notarial attestation
• The registered, contracted principal office address need not equal the main administration location. While the contracted address must be located within Germany, the administrative offices can be abroad, as well
• The GmbH participators are listed in the list of participators
• Each participator is obliged to file for bankruptcy in case that there is no contracted director

Costs:

• Notary charges for attestation, application, disbursement: 50 € (assumed sum)
• Companies register entry: 100 €
• Trade registering: about 30 €
• Announcement in the Federal Gazette / print media: about 100 €, for free since 2009 because entries are made electronically
• Counselling charges of notaries, tax advisers, lawyers, foundation counselling: about 100 €

Required documents for foundation:

• Default agreement for the Unternehmergesellschaft
• Registry in trade register
• Constitution of the director of the Unternehmergesellschaft
• List of participators

Advantages of an Unternehmergesellschaft (Mini-GmbH):

• Lower foundation expenses than for a “real” GmbH
• Limitation of liability to the assets of the company. Exception: deliberate acts
• Simplified foundation proceedings
• Quick foundation and immediate starting of the business
• Transferring of shares to new participators and to other participators is made easier
• Changing into a classic GmbH is possible if equity capital amounts to 25,000 € or more
• Unlike the Limited, the Mini-GmbH is associated with German law, company address in Germany, correspondency with authorities in German
• Creation of the required primary assets through business activity. In a classic GmbH, there is no duty of accumulation necessary!

Tax:

• Taxation as in a GmbH, that is a corporate tax of 25 %. Summed up with trade tax and solidarity surcharge about 29.8 %
• 50 % of profits distributed to participators are taxed (half income procedure)
• Flat rate tax:
  • for profit distributions: 25 % plus solidarity surcharge
  • for keeping in company assets: “partial income” procedure delays taxation of profit distributions, amounting to 60 %

Tips, Checklist

• Check what legal form is best suited for you. A rule of thumb is: GmbH for securing high liability risks, Limited for international transactions or the Mini-GmbH for low minimum capital
• Check whether the default agreement is sufficient for your foundation and thus covers all necessary regulations
• Request for the default agreement from a notary
• Get unbiased advice, e.g. from business starters advice programs, or through networks of business plan competitions
• Gradually extend your equity capital. This is not only advantageous for for liability risks, but also for bank talks, for investments, and to gain more flexibility
• Subvention payments like starting-subvention or commencement benefit can be requested from the labour agency by Mini-GmbHs, as well
• When founding, also get yourself a tax payer's number and a separate business bank account
• For turning the company into a real GmbH, you need a change of the company agreement, with notarial attestation

Last update: 05/07/2010