Entrepreneurial company (UG)

The Unternehmergesellschaft (UG), often referred to as the “Mini-GmbH”, is a popular legal form for companies in Germany. It offers a cost-effective way for founders to establish a corporation without having to raise a large amount of share capital. In this comprehensive guide, we will look at the entrepreneurial company, including its formation, benefits, obligations and specifics.

What is an entrepreneurial company (UG)?

The Unternehmergesellschaft (haftungsbeschränkt) is a legal form of corporation in Germany. It was introduced in 2008 to provide entrepreneurs with a cost-effective alternative to the conventional limited liability company. The UG can be founded with a minimum share capital of only one euro and still offers the limited liability of a GmbH.

Establishment of a UG

1. business idea and business plan

As with any business startup, you should begin with a solid business idea and a well thought out business plan.

2. shareholders and managing directors

The UG can be founded by one or more persons. At least one managing director must be appointed.

3. articles of association and partnership agreement

The establishment of a UG requires the preparation of articles of association that set out the basic rules of the company. Often, a partnership agreement is also concluded, which contains more detailed regulations.

4. share capital

The minimum share capital for the formation of a UG is one euro. It is recommended that adequate capital be contributed to provide sound financing for the company.

5. notarization and entry in the commercial register

The founding documents must be notarized. Subsequently, the UG must be registered in the commercial register.

Advantages of the UG

• Low share capital: The UG can be established with a minimum share capital.
• Limitation of liability: The liability of the shareholders is limited to the company’s assets.
• Flexibility: The UG offers a high degree of flexibility in the management of the company.

Duties and special features

1. retention obligation

A special feature of the UG is the obligation to retain earnings. This means that a quarter of the annual surplus must be placed in a reserve until the share capital reaches 25,000 euros.

2. accounting

Like other corporations, the UG is also subject to the obligation of double-entry bookkeeping and must prepare annual financial statements.

3. conversion into a limited liability company

As soon as the share capital of the UG reaches 25,000 euros, it can be converted into a GmbH.

Disadvantages of the UG

• Reputation risk: Because the share capital is so small, the UG is sometimes seen as less reputable than a GmbH.
• Obligation to retain profits: The obligation to retain parts of the profits may restrict the growth of the company.

Differences between UG and GmbH

While the UG is often referred to as a “mini-GmbH”, there are some differences between the two legal forms. The main difference lies in the share capital; while the UG can be founded with only one euro, the minimum share capital of a GmbH is 25,000 euros. In addition, the UG is subject to the obligation to retain earnings, which does not apply to the GmbH.

Legal aspects

The UG is subject to the GmbH Act with some special regulations. It is important to know and comply with legal requirements to avoid legal problems.

Conclusion

The Unternehmergesellschaft is an attractive legal form for founders who want to start a business with little capital. However, it is important to know the specifics and obligations of the UG and carefully consider whether this legal form is suitable for the planned business venture.