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...

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.

Which is exactly how it should be handled, IMO: Deal with the abuse situations directly.

Forcing new companies to capitalize with an arbitrary amount of money at time of founding penalizes small players who want to start a company. It's also not a hurdle at all for large players who want to commit large frauds.

A construction company that pockets ten million dollars and doesn't build anything probably can't shield its owner this way, but a single-developer software consultancy that pockets ten thousand dollars and delivers buggy code can.

"Computers are hard, yo!". It devalues the profession.

And I thought no liability was bad enough... But no. Now its LLMs and " for entertainment purposes only". I take it management and leadership also read that, and don't give one fuck.

The problem is building software to those standards of reliability is expensive and slow. Consumer software never justifies it. Business software rarely does. If you want me to accept liability for the consequences of bugs in code I write, I'm giving you a schedule five times as long and a price twenty times as high.

American LLC taxation is as simple as or even simpler than Anlage EÜR. And you don't need a tax advisor to do it.

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.

Keep in mind that those companies will almost always own some debit to their employees when they blow up.

IMO, $25k is a ridiculous amount of capital to require from a company before they can operate. But capital requirements are good, and they should be proportional to employment, not company existence.

I don't get the "seriousness" memes in Germany, which sound more about gatekeeping than anything else. Why not require 1M€? This is serious! More serious! Meanwhile, they have companies likes Wirecard that went under in a day after it discovered a "hole" of 2 billion (magic!).

Why not just allow people to create a Gmbh with 2k€, and then publicise the amount of share capital so clients can make their mind? It's how it's done in France for instance, allows some flexibility (I know, a swear word in Germany), and sounds less like a social punition (something Germans love).

The hack anyway is to create an Estonian e-company, with almost no maintenance/creation costs. Germans are the largest funder demographic for this reason.

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:

  Wirecard Technologies GmbH
  Wirecard Sales International Holding GmbH
  Wirecard Acquiring & Issuing GmbH
  Wirecard Acceptance Technologies GmbH

Spoiler: the bad guys don't care about the rules!

The 25k are intended to ensure liability coverage for very small and young companies, not giant corporate networks with billions in backing (well, theoretically anyway... hah)

Running a business in Germany is for a closed inner circle. The apparatus is not meant for broke college students turning their weekend project into a company.

Now wherever that's an issue with the 25k admission fee OR with the fact that wages have stagnated for about 25 years in Germany, consequently mostly wiping out the middle class ... That's debatable.

This estimate includes things like a car, a partially paid off house and other assets.

Most of that wealth cannot easily be converted to cash which you'd need to start a company.

Also that's median. Germany is a country with a median age of 45. So yeah, someone who likely worked for 20+ years will likely have saved around 100k, I don't think you realize how that's an argument in favor of what I just stated...

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.

I disagree: the EU system broadly is there to support _the incumbants_

"Regulatory capture" is the less kind way to put it.

This probably also has a lot to do with it's much tighter market integration than the EU, although they seem to be finally addressing that issue with the 28th regime.

A popular theory of Europe's historic economic outperformance relative to the rest of the world, leading up to the industrial revolution, relies on competitive market theory: constant warfare spurring innovation, as well as relatively free movement of the best and brightest to seek greener pastures elsewhere on the continent. These days, the most ambitious Europeans tend to move to America to raise money and find talent, and it seems many EU countries are finally waking up to the fact that they need to do better to support entrepreneurship.

I would characterize it rather that the US is pro-business and pro-consumer, but somewhat anti-average worker.

It's not word choice, you are just making the wrong argument.

I would be fine with waiving my right to returns but this is not possible on purpose, so my only options are to shop somewhere else (often not possible) or found a company (not possible because it would be Liebhaberei - "Running a company without intent to make profits").

The customer almost always wins those. And the merchant always has to pay a fee for the chargeback, even when they win, so they're incentivized to avoid them.

The merchant agreement isn't as effective as a well enforced law, but it's pretty close.

Apple is another good example. Their base warranty is two years in the EU versus one year in the US, and there’s additional protection on top in many EU countries that extends it to the expected life of the product, in some cases as long as 5-6 years.

And again, all of these are backed up by the law, not just a policy that the company can revoke or decide not to enforce.

We can argue about the consumer friendliness of the regulations in the EU but they also add demonstrably to the cost of tech products (and likely other categories).

In general though, culturally, the US is much more "the customer is always right", whereas in the EU, it's considered a hassle to cater to customers that much. This mentality translates across the economy as a whole.

At least that's in my experience of being American and living in the EU for the last 10 years.

Maybe the ones voluntarily offered by companies, but not the legal ones.

The better policies given by US companies is also likely driven by competition, so by definition they wouldn't be something that a government regulation could accomplish (other than to incentivize more competition.)

Although, this is rapidly changing. Places like California are putting in similar regulatory barriers and excessive minimum taxation.

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.

In Finland forming a non listed stock company is 240€ in fees without any requirement for capital/assets.

I think Estonia is even cheaper.

Public limited liability company (Oyj) still has 80 000€ capital requirement.

[1]: https://news.ycombinator.com/item?id=48660856

It had got us "more credibility" with our clients, and 12,500EUR less in each other's bank accounts.

Thanks for your insults.

But yeah, obviously, the more capital you pay in, the more “credible” your company looks. The whole concept of limited liability means that if your company capital is X €, the creditors can only get the X € (unless you do something stupid, see https://en.wikipedia.org/wiki/Piercing_the_corporate_veil).

The fact that the minimum capital amount is so high in Germany is bonkers to me.

The intended path for the upgrade from UG to GmbH is that once the UG makes a profit, this should be used to save up the 25k€ and convert to a GmbH once it's reached.

So why not to the same here, instead of going with this more complicated setup?

The combination of "no personal risk whatsoever, minimal funds/risk coverage, maximal profit extraction" doesn't lend itself well to places with basic regulations.

Capital investments in Europe are definitely not as easy to obtain as in the US for various economic, cultural, and historic reasons, which all led to some pretty weird laws here and there, but the extra week it takes to set up a business isn't the cause.

The reason this all took so long and was so expensive is simple. As the author states:

> I wanted real limited liability

They wanted two different companies with different setups to get out of having to save up the funds or find investors while also paying the least amount of tax possible. They set up a two-company system with all the risk in one and all the earnings in the other. It's like one of those tax dodging schemes the multinationals like, except within a single country. That comes with overhead.

Funnily enough, they then end with:

> Which leaves the only real question. Why 25,000 at all? It is my company and my risk.

Weird to think it would be their own risk if they spend so much time, money, and effort setting up a system that explicitly removes all the risk from them.

All of this feels like it was based on a business plan generated by some over-eager AI that tried to optimize to tick as many boxes as possible, ignoring the real-world consequences of those choices.

Is realistic in the Netherlands to try and fulfill all formal paperwork requirements?

In my native Belgian city, outsourcing that be from ~3k€ excluding VAT/year for the very simplest CIT liable structure. That's excluding 409.3€ corporate social security contribution and 148€ provincial tax. That makes for about 300€ ex. VAT before you can start to earn anything at all. Unless you can fulfill all accounting yourself.

If you want to start a business and you don't need to pay for an office or whatever (because you can actually use those 25k for something), you can literally start over night. If you need a proper company that limits your liability, you can literally start in 2 weeks.

[1] https://service.wirtschaft.nrw/unternehmensgruendung/gewerbe...

The 25.000€ hasn't been raised since the early 1980s. (50.000 DM back then) So to have the same liability today, you would have to put down 65.000€.

So it has gotten increasingly cheaper to start a GmbH in Germany.

Not sure about Germany, but e.g. in Estonia it’s essentially public info (albeit unaudited, usually), as part of the annual report. The company has to maintain at least the declared capital amount in their bank accounts (or other assets), but the amount can be pretty much any number, so the business owner can decide what sum makes sense in their case.

25k € is way too much for most small businesses, yeah.

(IANAL)

The €25k are not a liability insurance or anything like that. It's a starting capital to make sure that the company can honor its bills. Liability is covered via separate insurances.

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

- https://assets.publishing.service.gov.uk/media/5a7da236e5274...

- https://www.gov.uk/guidance/model-articles-of-association-fo...

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 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)

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).

Edit: I'm not a lawyer either!

Also: I've always used a ZZP structure (one man company - Dutch version) for mine, not a BV (LLC), because there's a thing called Professional Liability Insurance. But maybe it's different in Germany? I can't imagine that doesn't exist there though.

And reading the article, he does found a UG! This isn’t even about GmbH!

Is this actually true?

Can't the company just loan out the 25k immediately?

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.

That's what Germany calls an "UG". Which is what OP actually ends up doing.

- 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.

Exactly! That's what I do in the Netherlands. It's also common to cover this contractually too - you can negotiate where liability falls for many cases.

Getting a limited liability company for a one-person operation is just overkill.

My wife works for a notary and most of the time people are really pushing to get an appointment but then fail to register a bank account on time so they have to wait a couple of weeks anyway without anybodies fault but their own.

Also this is not some secret knowledge. Like, these are not some tricks you learn over time this is something you could technically just ask a tax consultant or a notary. In fact the notary even likes it if you do that because if you try to be clever on your own you are most likely going to cause them more work. Like, you can literally go to a notary and say "this is my business. What should I do?" and they are either going to just do an UG with you or sent you to a tax consultant just to be sure.

Like, we have notaries because and they are as expensive as they are because they are supposed to consult you in legal matters and they are required for so many things so that you don't accidentally mess something up that is complicated.

Going to a notary really makes this so easy. You just sit there, dude's gonna read his legalese text and then sums it up in 2 sentences for you. Didn't get something? Ask questions. That's why you are there. That's their job.

It's really only difficult if you need a lil something for the AppStore for a side hustle and then try to get a GmbH straight away without ever consulting anybody that is literally only there to consult you and make it easier for you.

The problems the post describes are not that. They are barriers that the author created himself by selecting a complex corporate setup.

> 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.

I can open a company, work for a year, acrue debt, acrue tax debt, close it.

Nothing will happen. Company "estate" will be sold to cover the debt, which can also be nothing.

He wants a company but not put down any assets, but still limited liability, he has to get a UG. But obviously customers don't want to deal with that because there are no assets in case they pay 5.000€ and the company goes belly up.

Customers deal with GmbH, because they know they have at least a little bit of value in assets. So if I buy from you for 5.000€ I know that should be covered by your assets.

The guy is an idiot and has been misconsulted by the law firm and has been pulled over the table by said law firm.

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.

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!

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.

how much would it cost to pay someone "1 hour away by train" to go into that office for you?

However, that does put the company in their name. On paper, they have full control over it. That's a risk to the criminals trying to use the company as a financial asset for laundering money.

The whole premise is nonsense to begin with.

So $50m would cover their true societal cost (I'll multiply it by 10 for you, call it $5m) 10x over.

Its extremely difficult to build a clearly logical structure where a company that made a wildly successful product needs to hand half the value to the government. It's very easy to do if we hand wave with ambiguous terms like "right thing to do" and "morally obligated".

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?

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.

Same story goes for opening a personal account.

That means you pay German taxes + double amount of compliance ( because you have to file everything in Germany+ Estonia ).

Double taxation is not better.

https://www.fin.ee/en/double-taxation-agreements

https://www.e-resident.gov.ee/understanding-cross-border-tax...

Estonian CIT is 0%. If you pay dividends (which is not required), or if you pay director’s salary (optional if you’re a one-man company without a ton of admin), those will be taxed in Estonia. If you only pay yourself for your actual services – no taxes in Estonia.

Germany might tax your Estonian company if they determine the company is a German resident. Check with your accountant.

(IANAL)

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.

OP missed six months of opportunities because he is an idiot, that has been scammed by a tax consultancy that is interested in his money.

He should have setup a UG, start the business and invest into building a GmbH.

I'm sorry, but Germany is democratic country, and citizen of the country can choose by definition.

Leave your motherland because your government is crazy in one way or another? It is nonsense.

In reality, sometimes people need to do it (because it becomes too dangerous to stay), but it should not be this way. In any country.

A lot of the entrepreneurs I meet become tax & social insurance fraudsters as soon as I mention this, because they think they can setup a company somewhere but live in Spain, without paying or registering companies here.

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

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.

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.

Trains, Berlin Brandenburg Airport, this.

It's rules and adherence to rules, more than efficiency, that I've found in my experience.

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.

It depends. For some machinery the complexity is inherent, this makes German machines very good at what they do. But this approach does not tend to scale well, which is part of the reason the German economy tends to be fairly specialized with „hidden champion“ SMEs.

Made in Germany has (had?) a very positive connotation to it, but for historic reasons.

The world got faster, but german industries and politics never got the memo.

They laid 600+km of cables wrong ultimately delaying the project by 6 years.

It's a "cover your ass" mentality that resists any changes.

Germans are thorough, not efficient.

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 .

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.

Also Polands IP Box(5% tax rate) regime can be very interesting to software engineers right across the border.

Wyoming LLC gives passthrough taxation, and because you're in Germany, you'll be subject to German corporate and personal taxes alone, I presume?

Edit: changed from just personal tax to personal+corporate

e.g. Irish Ltd that is a resident in Germany

you won't have to bother with the naming problems etc. either

Especially as you will have to file tax forms and disclosures for your salary.

You guys might want to take a consultation with a proper accountant/tax advisor for these setups.

This is probably the solution, an EU-wide company that has local offshoots and can handle the bureaucracy for a fee.

> 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?

are you trying to say "bureaucrat can't speed up" or are you doubting someone physically can't give someone else some cash?

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.

The fact that this absurd situation exists is a huge proof that the bureaucracy has gotten out of hand and that Germany is unfriendly to starting new businesses.

While this is somewhat true, this is not an indication. You can start a business tomorrow for a fee of 30€. Even a normal UG is somewhat quick to set up and less expensive. Just because you insist on some non standardized company setup is not a good indication for an economy

I makes a lot of sense too. This is a one-time fee for something you gain nothing from and you learn nothing useful from.

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.

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.

[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.]

But also, yes, this is one of the reasons you can hire lawyer's offices to do this, they know how to spin it such that they're regarded as administrating the company in their location (which is arguably true at that point).

And just to note, there's the concept of "field offices" (Betriebsstätte) which would need to be set up. That does still involve Berlin bureaucracy, but only for a Gewerbeanmeldung.

(Really: ask a lawyer. I hope nobody is taking legal advice from a HN thread.)

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.

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.

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.

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.

They studied AI and are building an AI company. I doubt the idea for the business structure come from a lawyer, to be honest. Especially such an overcomplicated setup with so many real-world issues that they're running into right now.

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.

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.

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).

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.

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.

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.

Maybe the Strike Commander future was a utopia and not dystopia?

He wanted something more special than that.

Which is possible, but complicated.

(However I absolutely agree that all of this is much too complicated and slow here in Germany)

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

That applies to a normal GmbH as well, so does it to an UG. UG & Co. KG is sometimes done for tax reasons, but not liability

I explain in the post how the other options are worse.

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.

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.

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.

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.

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.

(if there's anything Germans like as much as bureaucracy it's 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...

If you additionally want to avoid being taxed when you sell stock, the entire company, or transfer it to another country, you'd create two UGs, one as the primary company, the other as a holding. That takes 2-3h for both and costs typically around 800€, but can be had for as little as 400-500€.

This is what previous German YCombinator startups have gone with and recommended in the past.

Going one step further, because a UG is so easy to start, banks will refuse to loan you money in the first year, so you can only raise money by selling shares. If you want to avoid that, you can start a GmbH with an UG as holding instead. This will take a month and requires you to sign over at least 12500€ of assets to the GmbH.

Now, what if you want all of that, but you also want a shell corporation to hide the owners and investors? Then you'd start a GmbH & Co KG, where you set up a limited liability corporation, a shell corporation with multiple special classes of stock, and potentially additional holdings. This is what OP went with.

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.

That’s the bare minimum consideration for a viable company structure.

So, if I started a sole proprietorship, it is not possible to convert it to a full blown, privately held corporation in Germany?

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)

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.

Cordiali saluti!

> 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.

In comparison, AG and GmbH also shield their owners from liability, but require capital deposits and are subject to corporate taxes.

Going with a UG-in-a-KG is an exercise in eating your cake and having it too. It's a cool legal structure that works around some of the limitations of its building blocks. It shouldn't come as a surprise that the people who can build the neat hack for you are going to want to get paid in order to do that.

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.

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.

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?

If someone has experience doing it right, I'd absolutely be willing to pay for their time to exchange advice.

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.

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.

Germans are crazy taking you to court, but it's not as risky as in the US.

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.

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)

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?

If they want to be strict about it, they should only allow German companies to do business with German subjects. Then there wouldn't be an advantage to foreign companies.

I sympathize but I'm not sure that is the sole reason the German state exists.

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.

To me things taking longer and being more complicated sounds entirely reasonable and natural in such setup...

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.

Germany feels like the government tries to make everything as hard and complicated as possible, to block ANY steps forward. It feels like organized sabotage to me.

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.

Moving to Estonia or - even bigger hurdles- the US is not without its distractions either....

It also hasn't been raised since 1981 when it was set at 50.000 DM. Which would provide a real trust to customers and suppliers working with a GmbH. This would mean 65.000€ accounting for inflation.

And trust is key in having a smooth running economy.

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!

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.

If you want to move out of Europe, you get the exit tax as before.

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.

Something is wrong here if you will be liable for at least a hundred grand of exit but balk over 25k to start a new company.

Typically, you can spend your "Stammkapital" for business purposes (e.g. in a GmbH). It doesn't need to stay in your bank account.

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-...)

Not a good idea... Companies will have to re-enter their VAT reports in previous taxation periods. It will trigger even more hassle an pushback form payers...

While EU is big and welcoming family, nobody wants to deal with non-resident bank accounts and tax liabilities :)

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

But it is all arbitrary bureaucracy with little value beyond its own internal logic. Still gets fanboys somehow.

Good.

It they're allowed to trade as Tempo in Germany, why isn't a company allowed to be called Plenty?

I agree it would be nicer if you couldn't hijack a normal word in the hopes it does well enough that people know of it and are constantly reminded of the brand, or that related searches have to consider putting this among the results, but in terms of a level playing field idk

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.

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.

Maybe OP was just not advised well which is surprising given the amount of information available online (startup guides for Germany)

You can totally setup a Inc or LLC equivalent pretty fast in Germany as long as you stick to the standard. What he is setting up is basically an LLC owning an Inc.

But if you think founding a german company is difficult, wait until have you do an ordered liquidation (not bankruptcy) - that is madness on its own.

I’m not here to defend a big country that clearly has to do better, of course.

I am sorry he has to go through this just to start a business.

This costs about 28k€, 25k€ are deposited in the company.

That is called Vorratsgmbh and takes very little time.

Edit: oh it's setup like this to cheat on taxes.

The problem with OP is that he chose an overly complicated structure. Probably got milked by lawyers and advisors.

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.

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, ...

We converted Freshflow into a GmbH and needless to say it was expensive.

The processes are all non-digital, and have many steps like Notaries for example.

The whole reality is much worse.

The tax explanation in the post is oversimplified.

Examples: With a KG, if the business earns €100k, that profit is attributed directly to you and taxed as personal income, whether you distribute it or not. At higher income levels, that’s roughly 45% including solidarity surcharge (and potentially church tax).

With a UG or GmbH, the company pays Körperschaftssteuer plus Gewerbesteuer, typically around 30% combined (depending on where its incorporated). On €100k profit, about €70k remains inside the company. If you later distribute it, you’ll pay capital gains tax based on the Halbeinkünfteverfahren on the distribution - which is 25% + Soli, bringing the total tax burden to roughly the same level as the KG.

The key difference is that with a UG/GmbH you can leave profits inside the company. That money can be reinvested into the business, other startups, ETFs, stocks, etc. - most often with only 1,5% effective tax while the money is working for you. You defer the second layer of taxation until you actually take the money out.

Also, you can pay yourself a salary. Whatever portion you pay out as salary is taxed personally just as it would be in the KG structure - but this time its company expenses, so no double taxation here either.

A few other points:

* A GmbH no longer requires €25k - its only 12,5k€ - and its also not to be locked away forever. The money can be used for legitimate business expenses immediately after incorporation.

* A decent tax advisor can usually get a VAT ID much faster than described in the article.

* A UG is widely accepted in the startup ecosystem. I’ve never seen customers reject an otherwise attractive startup because it started life as a UG. For investors, it's routine.

* Converting a UG into a GmbH later is routine, if you want to start small. If you have the 12,5k€ money, do a GmbH to save administrative hassle.

* A UG & Co. KG creates significantly more administration: two entities, two annual accounts, additional bookkeeping, additional filings, and additional advisor costs.

Of course there are valid reasons to use a GmbH & Co. KG, especially for complicated co-investment arrangements, but from what you wrote, that's not the case here. Therefore, for a solo software founder, I’d question whether the additional complexity buys you anything meaningful.

Bonus tip: You MIGHT want to consider owning your share in the Software UG not directly but through another UG, paolino UG or so. When you foresee to sell your business for significant money later, then you'll have exactly the same advantage, the money can stay in the company for reinvestment and you don't have to give up 50% of your capital gains in the moment you sign the sellers agreement. You CAN't do this easily later.

Not legal or tax advice. Just my personal experience.

Applies to all EU countries btw, you can't just choose a different jurisdiction for your new company risk-free.

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

In France you can do it as soon as you started the process.

EDIT: Just re-read your message. I thought it said EU. But the point stands, Germany is not Europe either.

That is exactly the right direction. But for now it is just a proposal

Regarding the economy though, Germany is still the third richest country on earth. I think this talking point about their huge regression is mostly FUD.

This is going against multiple EU principles, but it was only introduced in 2022 and so far, there are no judgments on its enforceability as far as I'm aware.

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.

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.

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.

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.

you should consider UK company, enormously better. or sweden. continental EU is mostly backwards.

Or maybe even until they can't physically get to work (read with accent: "that I need to do even if I don't get paid")

Worse, when you try to gently and constructively engage them on the topic, their mind is so deeply dyed with the idea, that they either simply don't understand what you're talking about or when they do, refuse to engage because they find you so weird, it's a waste of time to discuss with you.

"Was nicht dokumentiert ist, ist nicht passiert". Yeah, right, except that "Alles erstickt im Papierkram" and nothing ever fucking happens.

Germany doesn't have such excuses, yet there it is.

Unless you are a startup with large investors, that route is closed.

You can't get a visa to run your own company under normal circumstances anyways, the only routes being O1, EB5 or EB1.

To cite the modern thinkers in Corporate Avenger, «taxes are stealing and I get the feeling that were getting fucked in the ass».