The authors inability to understand this really makes wonder how much of the rest of their story is essentially self-inflicted.
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.