> 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.
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.
> Running a corporation or LLC without sufficient capitalization can be grounds for piercing the liability shield in a lawsuit.
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.
> penalizes small players who want to start a company
That's a barrier to entry; and who likes to perpetrate those? Why big, established companies who lobby the government.
Is the gmbh pierce proof? Because then I like the situation where if you start with $25,000 under no circumstance can they get past the liability shield.
Usually, yes. There are a few exceptions, such as serious misconduct, tax fraud and not declaring insolvency when necessary. But as long as you're following the law, you're fine.
I have the impression the situations where that actually happens are at least arguably serious misconduct, and usually targeted at someone with significant assets.
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.
In theory it’s based on whether the owner of the company intended to run it under capitalized in an effort to shirk liability.
But the larger point still stands: Limited liability was granted “on the front end” without the entity needing to demonstrate a minimum amount of capital. You’re only pointing out that in the U.S. that it’s possible that “on the back end” the owners of the entity might become personally liable.
Yes, i’m just elaborating on OP’s point. The US system is different and basically more optimistic on the front end.
Much the same in the UK. Usually some kind of fraud or failing to stop trading when it was obvious insolvency was unavoidable. No minimum capital requirements either.
Thats cause the software and computing industry early on, disclaimed all liability.
"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 ability to build reliable software has existed for a long time. Commercial airlines make heavy use of it, and serious failures are vanishingly rare.
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.
>Commercial airlines make heavy use of it, and serious failures are vanishingly rare.
Is this a joke? There's a major outage effecting flights at least yearly. The Delta one is from May...
[1] https://en.wikipedia.org/wiki/2022_Southwest_Airlines_schedu... [2] https://www.usatoday.com/story/travel/airline-news/2026/05/0...
The OP is talking about the software onboard airplanes, not the operational software used by airlines.
They should have said aircraft manufacturers, not airlines, but it’s clear what they meant.
While extreme cases are the easiest to imagine, in real life the plaintiff almost always argues to pierce the veil and the defendant always argues the opposite, and both sides earnestly believe that they are right.
And in real life piercing the veil is extremely exceptional
It's so exceptional in the UK you can run a series of fraudulent businesses which are incorporated, "buy" services, don't pay for them, then declare themselves insolvent, rinse and repeat, and there's a fair chance you'll get away with it.
It's called phoenixing. There are good few bans for it every year, but almost no convictions for fraud.
Not to mention all the fraud the Turkish barbers etc are up to
Yeah but the veil doesn’t get pierced that’s super rare, which is more important than everyone’s emotional state.
Not in the US it’s not. LLCs don’t shield your assets from personal negligence. So if you have a single member LLC with no employees (very common), an awful lot of what prompt a successful suit will be because of negligence on your part.
Have to prove fraud to get there. "Under" capitalization is a judgment call. Effectively, it's very rare. An LLC launches with effectively zero dollars literally dozens of times a day.
Haven't heard anything about LLC capitalization in this context. Liability shield can be pierced, but only if LLC is misused (i.e. "when the company is treated as a personal "alter ego" and used to commit fraud, injustice, or illegal acts"). Lack of capitalization is not one of the reasons as long as you treat it as a company, not your wallet.
No there’s lots of reasons it can’t be pierced. It doesn’t shield you from liability that results from your own negligence, and for owner operator businesses that’s a large attack surface.
This is a core difference between common law and civil law. In common law systems, things tend to get sorted out after the fact, with a judge's discretion, only if things go really wrong. In civil law systems they try to design a perfect system of laws that makes problems impossible.
I set up an LLC in the US for about $500 and pay Delaware a few hundred each year in fees. As it turned out, it was probably an unnecessary exercise and I probably won't renew in a couple years. But it wasn't a big deal.
Delaware is expensive and you must have had a very specific reason to build your LLC there, rather than for example in Wyoming - such that to raise capital, build a corporation, etc. Now if you want to shut it down in a couple of years, it's not exactly clear what you had in mind.
If you register your company in WY but will be doing business in e.g. MA, you will have to pay registration fee in both jurisdictions. Doesn't sound like a saving to me.
If you mean why not register in your state, then Delaware has some tax benefits I believe. Not sure they will apply in MA though, maybe somewhere else?
MA was going to be quite a bit more expensive. I did the transaction through Stripe and they use Delaware.
To clarify a point here, U.S. entrepreneurs (and unfortunately our union committees as well) find that sort of thing tolerable; the larger majority by an order of magnitude, U.S. consumers that aren’t currently (or planning to be) invested in a business, tend to be strongly opposed once they understand the outcomes.
We have an UG for that. A GmbH is simply the wrong legal form for that sort of thing. You can create an UG with a single Euro on the bank account (and then immediately go bankrupt once you need to pay the notary).
No we don't. UG is still a GmbH bureaucratic monster which a bit less start capital. You still need to follow all taxation rules like GmbH, which costs you few more thousands per year (Bilanzeirung, Steuerberater, Abschluss, ...) just to be legaly compliant.
American LLC taxation is as simple as or even simpler than Anlage EÜR. And you don't need a tax advisor to do it.
That’s what they said? That UG solves the issue of having to have a start capital.
> which a bit less start capital.
You may consider a capital stock of "at least 1€" even significantly less than 25k€. Not sure you are arguing in good faith.
A UG and and a GmbH is legal-wise exactly the same.
OP’s point is that you don’t need money in the bank to open an LLC like you would in Germany.
You don't need money for the UG either. You might need money for operating expenses later etc, but that's not what OP complained about and should be similar for an LLC. (Depending on type of business, location etc)
> 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.
> I don’t feel like a company with no assets or income can do that much damage to their societies.
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.
It seems anchored in the risks of the past vs the possibilities of today.
There are ways to go into debt without dealing with banks. Any time you use something and are charged afterwards, it's a debt (which you could fail to pay by being broke by the time the invoice arrives). Common example - rent/lease. Or gas/electricity.
Those vendors can always require payment in advance, or a guarantor.
For a new business with $0 the individual running it will be the guarantor on those.
There's other types of companies. Like UG or freelancers or GbR.
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The problem here is that 25k€ is too little for some types of businesses (say, a bridge architect), and way too much for others (say, selling spice mixes online).
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.
It exists, it is called "UG", minimum capital 1€. You have to increase capital up to at least 25k though, out of your annual profits.
> 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!
I don't know what that example is supposed to prove? Everyone in a business relation with one of these companies can make claims against them. The problem with Wirecard is rather that the 25k of each of them aren't going to make up for the massive damage caused by Marsalek. Then again, I don't think we should structure our systems to expect the blackest of swans that guy was.
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)
Im pretty sure those wirecard companies all had the mandatory money in the account. They just did more damage than that.
Ok, so what is the point of the money?
High initial capital requirements have repeatedly proven to be more detrimental than beneficial (https://mariusring.github.io/web/BacherFagerengRingWold_Sele...). Germany is an outlier in wanting to keep the barriers high.
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.
In Germany getting 25k as a working adult is hard, because before taxes and social security that's 50k you need to earn. Thats more then an average person earns in a year before taxes, so they'll likely be saving for 5-10 years if they want to start one.
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.
> In Germany getting 25k as a working adult is hard
German median household wealth is 4x that.
You mean median household net worth.
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...
Exactly, would bet 25% of all that your family has on a business venture?
Why not?
Depends on your product and expectations of your customers.
B2C: I don't care what company structure you are.
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.
US system seems to facilitate quick creation of monopolies and then keeps them in power long term. There is quick competition, winner takes it all and then it is it forever.
There are plenty of similar “monopolies” in the EU they just value safely exploiting consumers more than rapid growth.
Regardless US tech monopolies are almost as dominant in the EU as in they are in the US”. At least local companies wouldn’t syphon money to a different continent and could be regulated
The US system is biased this way, as well.
In a healthy market economy, entrepreneurs are meant to support the consumer, and they do so partly by competing with one another for talent, which requires supporting the employee. We could argue ad nauseam about the health of the US's market economy, but ultimately is has resulted in unignorably higher wages than in Europe, even at the lower end of the economic ladder.
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 posit that many EU citizens are still living with the idea of their historic economic outperformance even though it has not been true for many years.
It depends on the means of production (Marx had the point). One thing is if you want to open a factory, then those regulations and limitations may protect the market, consumers and reduce fraud. If you want to start a software company and sell a smartphone app, that's a very different story. I assume Germany is still in 19th century in this regard, favoring big businesses who don't mind to wait 152 days or more and pay 10K. Modern economy, or at least a big part of it, is more about agility though, for good or for bad.
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.
That’s not true. From mandatory refunds when selling online, to capped credit card fees, to longer warranties, the EU is clearly better for consumer rights. Some US businesses have realized that openly screwing your customers isn’t good business practice, but they’re somewhat of the exception I hear (and a lot of those companies offer the same policies, or better, in the EU, e.g. Costco)
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.
It seems to me that if there is some sort of law or regulation that can be passed, then that policy will be better in the EU. If the better service is a result of competition, then it will likely be better in the US.
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.
I have never received cash compensation for a delayed flight in the US, but I have in the EU. In my opinion, in the EU if the business screws up it’s their problem: in the US it is the customers, unless you shop somewhere large enough to voluntarily cover their mistakes. Which is, indeed, one reason that anybody can run a business with nothing in the US.
And all of Apple's products are much more expensive in the EU. In Austria, a MacBook Air starts at EUR1199, and the same device starts at USD1099. At today's exchange rate, that European device costs USD1360, or nearly 20% more.
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).
Apple.com like all retailers in the US don’t include sales taxes in the listed price while in Europe ~20% VAT is included.
So if you bother comparing apples to apples that MacBook starts at around $1,145 in Germany… if you actually want that 1 extra year of warranty and get Apple Care in the US it actually becomes cheaper in Europe
> We can argue about the consumer friendliness of the regulations in the EU but they also add demonstrably to the cost of tech product
Nope, they don't. You'd have to compare with some countries that are 1. Not the US 2. Have less consumer protections than the EU. And guess what? Apple products are also significantly more expensive than the US there. But hey, half your comments on here are this kind of EU bashing based on grade school reasoning.
It's surprising to see on HN of all places people unaware that Apple products (and almost all other tech products) have been a lot cheaper in the US than elsewhere for decades.
So much FUD here, same for the Bunny thread. It doesn't feel organic anymore.
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Is that so? In Germany for example, you have a legal right to return anything you purchased via a remote means of communication - so e.g., the internet, or a phone call - free of charge, within two weeks, and it must be simple to do so; if a vendor tries to obfuscate how to cancel a purchase contract, you can simply write them an email.
yeah most US companies have return policies of 30 days or more, no questions asked.
The word "most" is doing a lot here. Europe guarantees consumer rights by law, while the US relies on companies adopting the practices voluntarily. Most do, but larger companies more universally than smaller, and it's by no means universal.
Don't buy if you don't like company policy, no need to have a law. There is plenty of choice in the US. Some companies even offer 90 days (again, no laws required).
It's the reality for the vast majority of larger companies. Quibbling with word choice is really not a good argument.
We are talking of entrepreneurship and new companies, what small business are required to do for returns/refunds in the US is definitely not ahead of Europe for consumer protection.
It's not word choice, you are just making the wrong argument.
Try canceling your NYT subscription.
Let me support your argument by telling you what you just reminded me of...
I was briefly subscribed to the NYT from Germany. To my surprise, I couldn't cancel online, but had to call. (The EU has a law which requires that if you can subscribe online, you must be able to cancel online.)
They have national numbers for many countries, but they're just forwarders to the same call center, with notably mangled audio quality presumably due to multiple lossy compression algorithms applied at each hop of the call.
Additionally, there was lots of background noise when I got connected to a rep. Over this barely usable line, I was now asked to spell out my email address, which naturally took multiple attempts of painfully slow spelling before the rep was able to locate my account. (My very limited knowledge of the NATO alphabet didn't help.)
Of course, I then had to go through the spiel of declining alternative offers and providing a reason for my cancellation (all of which I never had to do in Germany before) before they finally confirmed it. Yeah, I'm glad about consumer protection law in the EU.
The same exists in the EU, French Le Monde (NYT local equivalent) required you for a long time to send a registered letter costing 7€ and a trip to the post office to cancel your subscription.
So don't subscribe. It's not that hard to cancel though, yes, you need to spend some time on the phone.
most large companies, maybe, but small-to-medium-sized businesses can and will tell you to take a hike. there are no consumer protections in the US regarding returns beyond the goodwill of the company
As it should be when you buy a product IMO. It only works out in high-trust societies and the business model is ruined by scammers. REI is a great example, some people would buy shoes, wear them out, then return them years later because the policy accepted it. It's obviously not a way to keep a company in business, but people just don't care because the reward for them is just too good to pass up.
There's a lot of overlap between protecting consumers and enabling scammers.
That's why they are dying (those who tell you to take a hike). Why would I buy from a small business without a possibility to return if I can buy from Amazon with guaranteed 30 days? It's your choice. Honestly, I bought enough stuff from small to medium companies and most of them allow returns. If not, it's my choice not to buy. Not everything should be a law, and laws are not free, somebody has to pay (just like for 30 day return). Guess who pays? Well, it's ... you.
One of the major reasons US consumers shop with megacorp over small business is because of the no hassle returns.
Exactly my point. In Germany I can order from the smallest of webshops without even reading their return policy, because I am guaranteed favourable terms by law.
In the US, if the remote merchant doesn't accept a return (or is non responsive), a credit card chargeback would be in order.
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.
This isn't without downsides though: As somebody with a niche technical hobby, it is hard for me to order from many suppliers because they understandably don't want to deal with consumer protection laws and thus exclude B2C transactions outright ("Verkauf nur an Gewerbetreibende").
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").
B2B company in the US rarely sell to consumers either and their return policy is very different. Not necessary "no return", but only if damaged, not per spec etc. Since we don't have consumer protection laws here I guess it's based on different company structure and expected revenue. In your case it may also be VAT implications (similar problem here with sales tax).
So the person that wants to sell that ultra-unique item that isn't produced by mega-corp, and the person that wants to buy that ultra-unique item despite unfavorable return policies never gets their needs met.
Why would that be the case? Maybe you’re thinking of customised or commissioned items, which are an exception explicitly called out in the law and require a defect by the seller to return (so you can’t just return eg a painting made for you on a whim, but if it arrives damaged, you can)
What happens after 2 weeks?
You loose the right to change your mind and return the goods without any reason given, but of course you still have warranty of 6 months; if anything breaks with the product in that time, you can request the seller to make up by offering a repair, replacement, or refund (whatever they deem most appropriate), and while the seller can contest that, they are obliged to prove it’s your fault, not theirs. After that timeframe, this obligation reverses.
How easy is it to enforce that warranty?
> Consumer return policies, customer service, etc. tend to be much better in the US than in the EU.
Maybe the ones voluntarily offered by companies, but not the legal ones.
Not sure if that matters much. Only the actual end result does.
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.)
It does because for one you can go to court. If a company stops playing nice because they think you’re defrauding them if you tell them your package went missing during transit, company niceness doesn’t get you anything. (That’s a random example btw, I don’t know how this is handled legally in the US. The point is that there are situations where you actually want the law on your side).
You don’t have to go to court even - there is usually a regulatory body that will enforce these for you. This is the whole reason why there is an image of America as sue-happy: they have chosen a regulatory system of “so sue them” instead of a functioning consumer protection system (or any authority with the ability to enforce the ADA, for example).
Suing people and companies is a national pastime in America. I really don't think the EU has an advantage there...
Except every two weeks when he gets a bigger paycheck than most senior UK government positions
This is the result of the US embracing capitalism more than Germany. The market has set minimum expectations, but outliers with other benefits can have an opportunity to thrive until they have an opportunity to meet those minimum expectations.
Although, this is rapidly changing. Places like California are putting in similar regulatory barriers and excessive minimum taxation.
> the EU system
Well in this specific case there is no such thing. Laws and regulations vary wildly and there are countries in the EU where you can register a company almost immediately at low cost.
Even when the UK was in the EU, you could create a limited liability company (LTD) for something like 200 pounds or less, no capital needed. So it's not true at all that setting up a business at a low cost is somehow against EU legislation.
25k requirement doesn’t protect anyone, just prevents regular contractors from easily registering limited liability company.
> 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.
State fee is 265 € now in Estonia. But the tax system is cool [1] and admin is a breeze (if your passport colour is right and you can get e-residency – not a problem for any EU/EEA citizen, obviously).
[1]: https://news.ycombinator.com/item?id=48660856
Worth noting is that there was 2500 € capital requirement until 1st of July 2019 and it was reduced to 0 €.
Public limited liability company (Oyj) still has 80 000€ capital requirement.
Here in Portugal the legal requirement is 1€ for an LLC (lda) and it took me a few hundred euros in fees only, all in morning to take care of everything.
Single member LLCs provide much less protection than most people imagine.
1. Any debt the business needs will require your personal guarantee. Even something as simple as getting a business cellphone.
2. They don’t protect you from liability for your own negligence. If you’re a very small company with no employees, almost everything someone would sue you for (for which you aren’t already personal guarantor) will arguably be down to personal negligence on your part.
It’s different if you have employees or other members because an LLC protects your personal assets against liability caused by their negligence.
But I constantly hear the advice that people operating as freelance devs should start an LLC as the very first thing they do and that’s silly in most cases.
What most people who start a single member LLC are really looking for is liability insurance.
Same in the uk, well it’s “same day” costing about $200. The normal approach is 24 hours and costs about $130
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
Whoa, not that fast. It will take a few days at least, depending on your state. Surely not 152 though.
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.).
Don’t let the insults get to you.
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 minimum capital amount is 1€, that's the entire point of the UG, to encourage entrepreneurship.
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.
> 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?
Because they want the credibility with clients, but for free.
How do entrepreneurs achieve to be considered as credible in other countries? By repeatedly providing value, not by having a high share capital. Anyway, in case of a problem the 25k€ will be eaten by lawyer fees.
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.
Registering a private limited liability company in the Netherlands costs around 400 euros. If you can file all of the taxes and other legally required paperwork yourself, you can be set up in a week or two. You will be a salaried employee of your own company, though, with a minimal salary you will need to rake in.
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.
> If you can file all of the taxes and other legally required paperwork yourself, you can be set up in a week or two.
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.
No he doesn't. You can register a Kleingewerbe at the Gewerbeamt online ([1] for NRW) and start right away. You can create an UG (literally supposed to fill the gap between a GmbH and a Kleingewerbe) within 2 weeks depending on the notary. And those 2 weeks come from the fact that the notary has better stuff to do than a UG registration and therefore probably doesn't make time specifically for you.
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...
Amazing, so you start a business which doesn’t have the same benefits as a if business and it takes “only” 2 weeks plus a notary.
In america, we have liability insurance. Is this not a thing in germany?
It is, I guess it's depending what you wish to achieve. I'm a independent software consultant based in Germany (no employees etc, also not selling any SaaS or anything) and I've got a liability insurance to cover any mess ups.
I just did a quick check:
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.
This is a very insigthful comment! I also checked and the notary fee I paid 10+ years ago is the same as I paid this year ( for a GmbH founding ).
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.
> GmbH bank account amounts should be visible publicly
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)
All GmbH are mandated to publish their financial statements in Germany. Its on Bundesanzeiger a government website which of course takes a fee again…
It's also available in the Handelsregister, which is available for free.
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?
It's because some understanding was lost somewhere between the article and OP.
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.
This is why insurance exists!
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.
Not saying the bureaucrats are great at this - but your "left to the criteria of" sounds like a massive duplication of effort.
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
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...
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 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)
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.)
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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).
Substance in Estonia is usually required. A rented address does not suffice for that.
Could you elaborate, please? I’ve thought the whole point of e.g. the e-Residency program was to bring in business that’s not substantially tied to Estonia.
Substance would be real activity happening in Estonia: - Where are the decisions made? - Where is the work being done?
Why would I otherwise pay 66% in taxes in Belgium when I could just set up an Estonian ltd, get limited liability and pay 0 until I take anything out?
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".
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!
And you can start a company with €1. The format is UG. You have to keep 25%(?) of the profit until you reach 25k and convert into GmbH.
And reading the article, he does found a UG! This isn’t even about GmbH!
It's funny, so it's not even an authorized capital? That one can usually be spent. So these 25K is simply put in the bank as a guarantee? For what exactly? Like if somebody wants go give me a loan they will look at this number and limit a loan to 25K so they are "guaranteed"? It's a great idea, put money in the bank, take 25K loan and ... what would my net assets be? What am I missing?
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.
In Germany the 25k Euro also does not need to sit in the account, after you reach it.
Yeah I don't really understand the part about not being able to invoice either. IANAL but it's the other way around - you need a VAT number to invoice clients in Germany (and the EU), not outside of it. VAT is exempt for clients outside of the EEA.
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.
Not incorporating would be very fiscally suboptimal here (.be) for anything tech related. Your marginal tax+ social security contributions rate would be ~66% starting from 50k€ gross...
Actually only half of the 25k is needed to start the GmbH
Only if you have more than one Gesellschafter
Isn't that what insurance is for? So you don't need to stash away a bunch of idle capital incase something goes wrong.
The 25kEUR requirement has been lowered a few years ago to €12,5k as required paid-in capital.
yes but you are still liable for the full 25.000 euros.
> The 25,000 is there to make sure you can cover some liability.
Is this actually true?
Can't the company just loan out the 25k immediately?
Yes. The 25k capital doesn't have to be cash, but can be in claims or asset value as well.
> 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.
> 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
That's what Germany calls an "UG". Which is what OP actually ends up doing.
UG forces you to retain profit to hit a capitalisation target. An Ltd is a real company, and my £1 company has an identical legal status to one with hundreds of millions of pounds of assets.
Yes, there's a difference. But the question is whether that difference actually matters in practice.
If you're a startup, you won't be making a profit anyway.
Once you make a profit, 25k€ on the books (not necessarily cash) isn't a lot, especially as it doesn't have to remain in the company, you can use it to pay wages once converted to a GmbH.
In the end, this is a question about whether you need something to be exactly the same for some ideological reason, or whether it's enough that two things are practically the same for all intents and purposes.
And while in this case the German system requires a codified workarounds, in many other cases the US/UK/Commonwealth systems use significantly more complicated workarounds than the German system.
> But the question is whether that difference actually matters in practice.
Apparently the author -- and every none-German in this thread -- thinks so.
Most EU countries don't demand such huge initial capital from banal LLCs and they don't seem to have a significant problem with resulting liabilities.
I'd guess that the German economy may actually suffer more from dissuading young people to start LLCs.
There is no need for a company to be able to cover liabilities. It's a stupid rule.
It's an important rule if you want the liability protections associated with a limited liability corporation
If you just want to start a business, without any associated shell companies or liability transfers, it costs $0 and requires filing one sheet of paper. It is very easy!
https://www.formulare-bfinv.de/ffw/form/display.do?%24contex...
You're missing the point. There shouldn't be any capital requirement just to get liability protections. No one is forcing counterparties to accept liabilities.
clearly german regulators and/or voters disagree, as is their right
nevertheless it is very easy to start a business, and this man is complaining about an entirely separate problem (it is difficult to create and incorporate two shell companies)
This could have been resolved by listing how much capital company has set aside for liabilities. If someone sees company only has 1 EUR, then they can assess their own risk accordingly before engaging.
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