[retromario]

A couple comments (having started both an UG and GmbH):

- I don't recommend starting an UG with less than 2k capital. If you do the minimum (1 euro), you won't have anything to pay your startup bills and it costs extra money (and a trip to the notary) to change your company's investment capital.

- While a GmbH requires 25k capital, only half has to be paid into the company. The rest is marked as a liability on the shareholders.

- A GmbH is generally looked upon as "more serious" than an UG. Some companies won't interact with you if you're an UG, but this is changing over time.

- For what it's worth, I used to hate the bureaucracy, and it can be streamlined further but over the years (and multiple attempts) I've come appreciate how it reduces the risk that you are dealing with shady companies.

- Thanks for the tip about Fidor bank! Setting up a company bank account is a pain in the ass in Germany.

[dvcrn]

I incorporated in German as well and while I studied all of the procedure and book keeping in school, it was still extremely scary and I would never ever do it again without an accountant.

I want to emphasize on the "less than 2000 Euro" part. There is a good amount of people who literally start with 1 euro, pay the notary and have to file bankruptcy because the 1 euro can't cover the notary fee.

Bank accounts are tricky as well. Only some banks allow accounts for companies and they usually cost a lot more than normal ones. Internet banks recently changed that so definitely go with something like Fidor. (Again, careful that the bank account fee doesn't get your company bankrupt)

Then papers papers and papers. Don't attempt to file the entire stuff by yourself unless you are 100% sure you know what you're doing. Even tax exemptions for smaller businesses you have to explicitly pick on the first documents otherwise you will be treated as a normal company. I forgot to file some and almost got fined thousands of euros.

Then be aware of scammers. The register is public so a lot of companies just send mass scary letters to everyone that look like they come from the government. Once you sign one (which naive me did) you have to get a lawyer. You will almost always win against them but still need to pay the lawyer.

Lastly if you completely screw up, you can apply for "deletion" of your company if you have no money debt to any entity and your company is officially without money (a balance around 0 euro, but not under since this means you have to file for bankruptcy). This skips the long and tedious liquidation process and gets rid of the company immediately once the court confirms it.

[king_phil]

One more comment that saves quite a lot of money in the phase where you are building your company: DO NOT APPLY FOR VAT TAX EXEMPTION!

If you are in the initial investment phase and you have more bills than earnings, you'll get 19% of the bills back from Finanzamt. You'll pay 19% of your invoices, too, but if thats less, you're saving.

If you're starting to earn, the Finanzamt will remove the exemption anyways.

Don't know if that makes sense for an outsider, but just read it up and thank me later.

[charlesdm]

Having a VAT exemption can be interesting in some cases though. Say you sell goods to EU consumers through an entity, you can sell them legally without VAT. That's quite a competitive advantage when getting started.

[harperlee]

Can't you just donate money to the company? Would that entail tax?

[matt4077]

"Donate" sounds strange, but yes, you can pay any bill from any account – including your personal one, or cash in your wallet. Technically, this would be regarded as a loan to the company, and you can later pay it back to yourself. As long as it's a business-related expense and the company's name is on the bill (above a certain threshold), you can claim those expenses on the business' taxes if you later make any revenue.

What may make this a bit complicated (and make the advice given above sound) is that one of the condition triggering bankruptcy is having more liabilities than assets. If you start the company with 1 Euro, and then go for coffee with the notary spending 10 Euros with the intent to claim it as a business expense, you're 9 Euros underwater. Not sure if this is something you have to monitor throughout the year or if it only becomes relevant when you actually do the bookkeeping at the end of the year.

Contrary to popular opinion (and the article) this stuff is quite easy to sort out as long as it doesn't involve real money, so I wouldn't worry about it. I know some people start companies with a bit of money for this reason, or even use something physical (i. e. their notebook) as an initial deposit into the company.

And just in case people are wondering "but why": these rules are supposed to protect vendors. Limited liability companies shield the founders from financial responsibility, so the rules are written in such a way that founders/owners are on the hook for at least 25,000 Euro (GmbH), or – nowadays – that the risk is clearly communicated to vendors. You can start a personal company much easier (basically a form with an address field and three questions) if you don't need limited liability.

[realityking]

> Not sure if this is something you have to monitor throughout the year or if it only becomes relevant when you actually do the bookkeeping at the end of the year.

You have to deal with it as soon as you can not meet a obligation. ("Zahlungunfähigkeit") If you give your own company a loan, then you can meet your obligation and you're fine on this side.

You also have to keep an eye on your debt level but that's more complicated, especially for owner-loans.

> I know some people start companies with a bit of money for this reason, or even use something physical (i. e. their notebook) as an initial deposit into the company.

Funding with physical good ("Sacheinlage") is however only allowed with a proper GmbH. This rule makes it sometimes a little bit interesting to convert an existing, fully liable, business into a limited liability corporation if if all the goods and money don't add up to 25,000 Euro.

[charlesdm]

Is this really seen as a problem for a consulting business or a tech business without significant capex?

Most jurisdictions have similar laws, and as long as you put money in through loans when you need it, you're fine, since you will be able to service your liabilities.

[helge5]

What do you mean by 'donate money to the company'? Why/for what purpose? There are various ways to bring money into the company, e.g. you can increase the share/base capital of the company. You can also give the company a credit, but careful, it needs to be on conditions you'd give a similar 3rd party. Probably a topic for your tax accountant. If we are talking low-profile, say a UG w/ 1000 Euro base capital, you'd usually increase the baseline capital steadily up to the 25k Euro and turn it into a regular GmbH (though that doesn't really matter a lot unless you want to take on regular credits).

[i_don_t_know]

It might subject you to gift tax. If you give more than 20k€ to a private person over the course of X years, you have to pay 20% gift tax on the amount above 20k€. Something like that, the numbers may be wrong. I don't know if there are similar rules when you give money to a company.