Found a UG: This is how you proceed - step by step
There are various legal forms to choose from for the company formation a company formation in Germany. These include the so-called Unternehmensgesellschaft (UG for short). In this article, you will learn everything you need to know about the company formation of a UG on the topics of
- Prerequisites
- Advantages and disadvantages
- Costs & taxes
- and liability
you need to know.nullWe also provide you with easy-to-understand step-by-step instructions so that you can set up your UG quickly and with legal certainty.nullFounding a UG - the most important facts at a glance
- Advantages and disadvantages of a UG
- Requirements for UG company formation
- Duration & costs
- Founding a UG step by step
- company formation of a UG: Frequently asked questions
Table of contents
- What is an entrepreneurial company (haftungsbeschränkt)?
- Founding an entrepreneurial company - requirements
- Founding a German UG - a brief overview of the steps
- Costs for the company formation of a UG
- Found a UG: Duration of the company formation
- Advantages and disadvantages of a UG
- How to set up a UG - instructions in 10 steps
- Found a UG: Alone, in pairs or in threes?
- Obligations of a UG: what you need to look out for
- You pay these taxes for the UG
- Founding a business company: What about the liability of a UG?
- How a UG can be dissolved again
- Is it possible to set up a UG and later convert it into a GmbH?
- Founding a UG - done quickly with Recht 24/7
- Frequently asked questions about the company formation of a UG
What is an entrepreneurial company (haftungsbeschränkt)?
The abbreviation UG stands for Unternehmergesellschaft. It is a special form of GmbH and is a type of corporation. Similar to a GmbH, the shareholder(s) of a UG are not personally liable, but only with the share capital contributed.nullThe addition "(haftungsbeschränkt)" is important in this context. This addition is always mandatory in the company formation . If it is not listed later and actually used, business partners can assume that the person conducting the business is fully liable. Consequently, the company owner(s) of a UG can be held personally liable in case of doubt(see BGH ruling of 13.01.2022, ref.: III ZR 210/20).
Founding an entrepreneurial company - requirements
It has been possible to set up a UG in Germany since 2009. The aim is to enable founders to limit their liability - even if they are unable to raise the share capital of EUR 25,000.00 required for a GmbH.nullThe following requirements must be met in order to establish an entrepreneurial company:
- Minimum age of the managing director: 18 years
- Minimum age of shareholders: 18 years
- At least 1 managing person and 1 participating person (if you found a UG alone, you can take on both roles)
- Company headquarters in Germany
- registrable company name
- Model protocol (this is the advisable rule) or written articles of association
- Business account for paying in the share capital
- Share capital as a cash contribution: The share capital agreed in the articles of association must be paid in. Contributions in kind (e.g. real estate) are not permitted.
Founding a German UG - a brief overview of the steps
How to found a UG:
- Making fundamental decisions
- Obtaining permits
- Have names checked
- Create articles of association
- Have it notarized by a notary
- Appoint shareholders
- Open a business account and pay in share capital
- Entry in the commercial register
- Registration with the tax office and trade office
- Registration with other offices
Costs for the company formation of a UG
When company formation a UG, you will incur costs of varying amounts. The total costs are made up of notary and legal fees, as well as the costs for the registry court. There is also the fee for registering the business after the company formation. If you use a sample protocol for the company formation , it will be cheaper.nullThe notary fees are up to EUR 7,000.00 share capital:
- for one shareholder approx. 190.00 Euro
- with 2-3 partners approx. 290,00 Euro
The amount is due after notarization. You will receive an invoice from the notary.nullThe registry court costs amount to EUR 200.00 and will be invoiced to the new company approximately 10 days after notarization. The costs consist of EUR 150.00 for registration and EUR 50.00 for retrieving the documents.
Found a UG: Duration of the company formation
It usually takes 4 weeks to set up a UG - in some cases even 6 to 8 weeks. The actual duration depends on various factors:
- How quickly can the founder and notary find an appointment?
- Was the business account opened on time?
- Will the desired company name be accepted by the local court?
- Is there agreement among the shareholders on the structure of the articles of association?
If you want to found a UG quickly, you should not carry out the individual founding steps one after the other, but in parallel.
Advantages and disadvantages of a UG
Setting up a company as a UG has advantages and disadvantages - as with other forms of company formation .nullAdvantages:
- Private assets of the participating persons excluded from liability - no personal liability risk
- Minimum share capital of only EUR 1.00, but practice shows that most notaries require a share capital of EUR 500.00
- Comparatively low start-up costs
- UG as a legal form is suitable for all types of businesses and services. company formation is possible with one or more persons
- can easily be converted into a GmbH after reaching a share capital of 25,000.00 euros
Disadvantages:
- Share capital must be paid in cash, contributions in kind are not possible
- Full profit distribution only when the sum of EUR 25,000.00 is reached (savings obligation), 25 percent of the profit must be "saved"
- Company name must always have the abbreviation "UG" and the addition (haftungsbeschränkt)
- Partly somewhat less prestigious than a GmbH
- Obligation to prepare balance sheets and accounts
How to set up a UG - instructions in 10 steps
Now you know the advantages and disadvantages of company formation a UG, how long it takes and what costs are involved, you are faced with the question: "How do I form a UG?". Below we explain the steps in detail and tell you what you need to pay attention to.
Step 1: Make basic decisions
First of all, you need to deal with the basic aspects of your UG. These include the company name, the registered office and the number of shareholders. In addition, you need to determine the purpose of the company and a managing director in order to found your UG.
- Company name: Must not already be entered in the commercial register or be formulated too generally, as is the case with "Auto UG", for example. The company name must not be misleading. A CFT IT-Security UG (haftungsbeschränkt) must deal with IT security, not just the sale of notebooks.
- Registered office: This must be in Germany.
- Object of the company: Specifies in detail the area and the specific type of activity of your UG.
- Share capital: How much share capital do you want to set up your UG with?
- Shareholders: How many shareholders should there be? (at least 1)
- Managing director: Who should take over the position of managing director? (at least 1)
Take enough time for these points. They have a significant influence on the smooth running and duration of the UG-companycompany formation.
Step 2: Obtain approvals
Not every business start-up can be set up without prior approval. For example, you need
- in the security industry
- in gastronomy
- in the construction industry and
- in road haulage
a corresponding permit to set up a UG. If you are unsure which one is required for your self-employment, the trade office can help you.nullPermits should be available at the latest after your UG has been entered in the commercial register.
Step 3: Have the company name checked
The company name must first be entered in the commercial register. It must therefore neither already exist in the same commercial register nor be too general or misleading. To speed up this process, you should check the name of your UG in advance. To do this, you cannullInspect the commercial register and the company register
check the trademark register (www.dpma.de) for existing trademark protectionnullIt is also advisable, and required by some registration courts, to have the company name checked for admissibility at the local Chamber of Industry and Commerce. The IHK name check is free of charge in many federal states.
Step 4: Create articles of association
For the company formation of a UG, you need either a model protocol or articles of association. Both are legally equivalent. With the model protocol, however, you save considerable notary fees of approx. 500.00 euros. You can use it if you want to set up a UG on your own. Otherwise, it is permissible for up to three shareholders and one managing director. For all other cases, a partnership agreement is required by law. This provides information about shareholders, managing directors, the company name and the registered office. It also describes the specific activities of your company.nullA shareholders' agreement is usually complex and should ideally be drawn up by a lawyer and then checked by a notary.
Step 5: The notary appointment
In order to found a UG, an appointment with a notary is essential. All shareholders and the managing director must attend and present their identification documents. Shareholders and managing directors can be represented by a notarized power of attorney. Afterwards, the sample protocol or the prepared articles of association are certified, the application to the commercial register is signed and notarized. Once this has been done, your UG is "in company formation" and is already legally capable of doing business.
Step 6: Open a business account and pay in share capital
After the notary appointment, you can open a business account at any bank. This requires the presence of the managing director. Remember: The share capital must be paid in full in cash, contributions in kind are not possible with the company formation of a UG.nullAfter opening the business account and paying in the share capital, you will receive a payment slip. The notary will need this as proof that the share capital has been paid in. He can then proceed with the application to the registry court.
Step 7: Entry in the commercial register
Your UG can only be entered in the commercial register once the share capital has been paid into the business account in full. The notary must submit the following documents to the local court for registration
- Model protocol / articles of association
- Registration with the commercial register
Once all documents are complete, your UG will be entered in the commercial register.
Step 8: Registration with the trade office
Once your UG has been entered in the commercial register, it must be registered with the trade office. The office in the town where your company is based is responsible for this. This registration is often referred to as "applying for a trade license". In Germany, the trade license must usually be applied for in person by the managing director. Some municipalities also offer business registration via the Internet.nullImportant: The entry in the commercial register and any necessary permits for the UG company formation must be submitted with the business registration.nullThe trade office then automatically forwards all relevant information to other authorities. This includes, for example
- the employment agency
- the IHK or Chamber of Crafts
- the employers' liability insurance association
Step 9: Registration with the tax office
In accordance with § 137 AO, registration with the tax office must take place within one month of the articles of association being notarized. To do this, the managing director must apply for and complete the questionnaire for tax registration at the tax office. A corresponding box must be ticked for the application for the VAT identification number. Once you have completed the form and sent it to the relevant tax office, you will receive your tax number and VAT identification number by post within a few days.nullOnly the internet portal "My ELSTER" is available for electronic transmission. You can obtain the certificate required for electronic authenticated transmission by registering with My ELSTER.
Step 10: Registration with other offices
As a trader, you are obliged to be a member of the Chamber of Industry and Commerce. If your UG operates a craft, it will become a member of the Chamber of Crafts. In addition, membership of the employers' liability insurance association is mandatory for all companies.nullAs the registration court will forward your application to the above-mentioned offices, you do not need to do anything. You will be notified automatically and invited to become a member.nullTip: To protect the company name of your UG, you can file an application for trademark registration with the German Trademarks and Patent Office. You can find out exactly how this works in our article "Trademark registration with Germany's number one".
Found a UG: Alone, in pairs or in threes?
In principle, you can found a UG on your own. In this case, you are automatically also the managing director. This has several advantages, because on the one hand you make decisions alone and on the other hand you receive the full profit. However, you also bear full responsibility and have to raise the share capital yourself.nullIf you want to set up a UG with two people or if more people are to join the UG as shareholders, this responsibility - as well as the share capital - is shared between several shoulders. Disadvantage: Profits generated are also divided among the shareholders (usually according to the shares held).
Obligations of a UG: what you need to look out for
As part of its commercial activity, a UG has to fulfill a number of obligations. These include the following in particular:
- Savings obligation: As already mentioned, a UG is obliged to build up reserves. 25% of the annual profit must be paid into a reserve due to the savings obligation. This obligation only ceases to apply when the share capital reaches EUR 25,000.00.
- Obligation to file for insolvency: As soon as the UG is over-indebted or insolvent, the management is obliged to file for insolvency (§ 15a InsO). This must be filed immediately, but no later than 3 weeks after the reason for insolvency becomes known.
- Obligation to keep accounts: Due to its legal form, a UG is obliged to keep accounts and must prepare a commercial balance sheet and a tax balance sheet every year. Due to its complexity, this usually has to be done by a tax consultant and triggers additional annual costs. These depend on the turnover of the company and the tax consultant. Initially, they amount to at least approx. 500.00 euros for an annual turnover of 50,000.00 euros.
- Addition "UG (haftungsbeschränkt)": The addition "UG (haftungsbeschränkt)" must be included in the company name and must always be stated (e.g. in correspondence)
You pay these taxes for the UG
As an entrepreneur, you must balance and calculate the tax burden for your UG. The following taxes are payable:
- Corporation tax: 15% of the company's surplus plus 5.5% solidarity surcharge, payable quarterly in advance
- Capital gains tax: 25 percent plus solidarity surcharge, but only if profits are distributed to shareholders
- Trade tax: Amount varies from municipality to municipality, the tax-free amount is 24,500.00 euros
- Wage tax: between 14 and 45 percent, if employees are employed
- VAT: 19 percent on all invoice amounts (7 percent for products or services for basic needs, such as food)
Founding a business company: What about the liability of a UG?
The great advantage of the UG is that, as with a GmbH, only the company is liable and never the entrepreneur with his private assets. The prerequisite for this is that the entrepreneur manages the UG correctly, e.g. there is no delay in filing for insolvency. Only in such or similar exceptional cases can the entrepreneur be liable with his private assets.nullAll business debts are directed only against the UG and not against the entrepreneur and his private assets. There is no possibility of accessing the shareholders' private assets to settle debts. Even in the event of insolvency, the shareholders only have to fear the loss of their contribution.nullHowever, this liability only applies if the UG has already been entered in the commercial register. If liabilities have already arisen prior to registration, both shareholders and managing directors can be held personally liable. For this reason, larger purchases and contracts should only be made after the final entry in the commercial register.
How a UG can be dissolved again
Lack of assets, insolvency or the expiry of a limited period of business activity: there are many reasons for dissolving a UG.nullIf there is no insolvency or inability to pay, the UG can easily be terminated by liquidation. This is done in 3 steps:
- Resolution
- Liquidation
- Deletion
A UG can be dissolved by a majority resolution of the shareholders. The dissolution resolution then results in liquidation. The business purpose of the UG changes from an entrepreneurial activity to the dissolution and termination of the company. Current business is terminated, existing receivables are collected and outstanding payment obligations are fulfilled.nullThe deletion of the UG from the commercial register can only be applied for after liquidation has been completed. Once this has taken place, the UG ends as a legal entity. The legislator therefore provides for a blocking year between the resolution to dissolve and the deletion from the commercial register in order to process everything cleanly and correctly. In practice, deletion without a blocking year is almost never possible and is only recognized if the company was not active as a business at all. An example of this is deletion immediately after the notary appointment for company formation if the entrepreneur has changed his mind.
Is it possible to set up a UG and later convert it into a GmbH?
As soon as your UG has a share capital of EUR 25,000.00 - for example due to reserves or a capital increase - you can convert it into a GmbH. This is possible at any time if you can raise the money. In practice, only 12,500.00 euros must be paid in at the time of conversion. You therefore need EUR 12,500.00 in the business account to convert to a GmbH - either through your reserves or a payment from your private assets as a capital increase.nullIn order to convert a UG into a GmbH, a majority resolution of the shareholders is first required (3/4 majority). The articles of association must then be amended and the new ones notarized. After a notification change to the commercial register and a corresponding entry, the change of name is complete.
Founding a UG - done quickly with Recht 24/7
Before you can found a UG, many requirements must be met, which we have summarized above.nullThere are legal pitfalls to be aware of that are often overlooked by inexperienced founders. With Recht 24/7 , you can set up your UG quickly and with legal certainty. Our experienced lawyers will provide you with advice and support throughout the entire formation process.
Frequently asked questions about the company formation of a UG
How much profit can a UG make?
Up to a share capital of EUR 25,000.00, 25% of the annual profit must be retained to form reserves. The remainder may be distributed to the shareholders.
How much does a UG cost per year?
The costs of operating a UG are made up of the following items:
- Costs for the fulfillment of accounting and tax obligations
- Costs for compulsory membership of the IHK/HWK
For a UG with a turnover of 50,000.00 euros, these costs are around 600.00 euros per year. If your UG is active and has a high turnover, these costs will increase in accordance with the tax consultant fee ordinance and the IHK/HWK fee schedule.
Can anyone set up a UG in Germany?
All natural persons of legal age and companies are eligible as founders of a UG.
Can I set up a UG without a notary?
No, this is not possible. Notarization of the company formation is required by law.
What health insurance do I need as the managing director of a UG?
Salaried managing directors are subject to the compulsory insurance limit (currently EUR 64,350.00 per year). They can only switch to private health insurance once they have exceeded this limit.nullWith a simultaneous capital participation, insurance in a statutory health insurance fund is also possible.
Founding a business company: When is it advisable to set up the company as a UG?
The company formation of a UG is recommended for all commercial companies due to its limited liability. Due to the limitation of liability, only the UG is liable with the share capital and never the entrepreneur with his private assets. The company is legally equivalent to a GmbH.
Can foreigners become managing directors of a UG?
Yes, EU citizens and non-EU citizens can set up a UG in Germany.
