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UG: Everything about the entrepreneurial company

The UG is a very popular legal form for founders and start-ups because the financial entry hurdle is so low

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FAQ

Why found a UG (haftungsbeschränkt)?

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Founding a UG (haftungsbeschränkt) is particularly suitable for young companies. This is because 1 euro is theoretically enough for the share capital. If you don't want to be liable with your private assets but don't have the start-up capital for another limited company, a UG (haftungsbeschränkt) is a good choice. Unlike a sole proprietorship, liability is limited here and private assets are protected. In practice, however, there are also many arguments against setting up a UG (haftungsbeschränkt), as it often makes more sense to set up a GmbH. Individual advice should be sought here.

What does UG (haftungsbeschränkt) mean?

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The legal form UG (haftungsbeschränkt) means that the founders are not liable with their private assets if the company gets into financial difficulties. The legal form must be indicated on all business documents, for example in e-mails, letters and invoices as well as in the website imprint. This is required so that other companies and customers can see at a glance that the company's liability is limited. The UG (haftungsbeschränkt) is less highly regarded by banks and investors and in business transactions than other corporations.

What do you need to set up a UG (haftungsbeschränkt)?

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It doesn't take much to set up a UG (haftungsbeschränkt). In addition to a company name and a business address, a business account is required to pay in the share capital. First, a shareholders' agreement is drawn up and notarised by a notary. Then you have to open the business account and pay in the share capital. The notary registers the UG (haftungsbeschränkt) in the commercial register once the share capital (at least EUR 1) has been paid in. The UG (haftungsbeschränkt) is then registered with the trade office and tax office before it can start its business activities.

What is the difference between a GmbH and a UG (haftungsbeschränkt)?

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The biggest difference between a UG (haftungsbeschränkt) and a GmbH is the amount of share capital required to set up the company. A GmbH requires 25,000 euros in share capital, half of which must be paid in when the company is founded. In the case of the UG (haftungsbeschränkt), on the other hand, EUR 1 is sufficient as share capital, provided the capital requirement does not necessitate a higher sum. In the case of a UG (haftungsbeschränkt), reserves must be formed from profits which may not be distributed to the shareholders. In addition, the UG (haftungsbeschränkt) can also consider increasing its capital and changing its name to a GmbH. Otherwise, the UG (haftungsbeschränkt) has the same rights and obligations as a GmbH in terms of shareholder, accounting and liability requirements. The UG (haftungsbeschränkt) must also pay corporation tax and trade tax in the same way as the GmbH.

What kind of legal form is the UG (haftungsbeschränkt)?

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The UG (haftungsbeschränkt) is a corporation and, strictly speaking, a GmbH with special characteristics, so it is not actually an independent legal form. It is a corporation with its own name (company), which is represented by a managing director. The UG (haftungsbeschränkt) can be founded by one person alone or by several shareholders. Like the GmbH, the UG (haftungsbeschränkt), as its name suggests, is also limited by liability, although the minimum share capital required to establish it is only 1 euro. In most cases, however, a share capital of around 1,000 euros will be used.

What is a UG (haftungsbeschränkt) & Co KG?

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A UG (haftungsbeschränkt) & Co KG is a special legal form that is made up of a partnership (KG) and a corporation (UG (haftungsbeschränkt)) and thus combines the advantages of both in one company. The UG (haftungsbeschränkt) & Co KG is ideal for founders who do not want to be liable with their private assets in the event of insolvency and who, for certain reasons, want to operate their company in the legal form of a partnership.

What is a UG (haftungsbeschränkt) simply explained?

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UG (haftungsbeschränkt) is the abbreviation for Unternehmergesellschaft and is also known as 1-Euro-GmbH or Mini-GmbH due to its limited liability. The UG (haftungsbeschränkt) is a corporation that is a sub-form of the GmbH. The difference lies in the amount of share capital. This legal form is particularly popular with start-ups and young founders who have very little start-up capital but do not want to become liable with their personal assets. The designation UG is supplemented in the company name by the designation "haftungsbeschränkt". A special form of the UG (haftungsbeschränkt) is the gUG (haftungsbeschränkt) for non-profit companies.

What does it cost to set up a UG (haftungsbeschränkt)?

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The formation of a UG (haftungsbeschränkt) is not less expensive than other legal forms. Notary fees and costs for business registration and entry in the commercial register are generally not cheaper than founding a GmbH. However, you can found a company with significantly less share capital. This can theoretically be as little as 1 euro. A UG (haftungsbeschränkt) can be founded with a capital of just 1,000 euros. If it is a one-man UG (haftungsbeschränkt), you can use the so-called model protocol for the formation and save on notary fees again.

Which taxes UG (haftungsbeschränkt) & Co KG?

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In the case of a UG (haftungsbeschränkt) & Co KG, only the UG pays 15 percent corporation tax on profits. Added to this is the trade tax. This is paid either by the KG or the UG, depending on which part of the company is responsible for organising the commercial operation. Like other companies, the UG & Co KG must pay 19% VAT on its sales. Wage tax is only payable if employees are permanently employed in the UG & Co KG.

Who may found a UG (haftungsbeschränkt)?

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A UG (haftungsbeschränkt) can be founded by one person, but also by two or more persons. Other corporations can also act as shareholders, for example the GmbH. The legal form is most frequently chosen by founders with very little start-up capital and then later changed to a GmbH as turnover increases.

How do I set up a UG (haftungsbeschränkt)?

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A UG (haftungsbeschränkt) is founded just as quickly as a GmbH. Once a company name has been found, the articles of association can be concluded and notarised. The UG (haftungsbeschränkt) can be founded by one entrepreneur alone or by two or more shareholders. A business account is then opened and at least EUR 1 of share capital is paid in. The notary then registers the UG (haftungsbeschränkt) with the payment receipt for entry in the commercial register court. In addition to the business registration, the tax registration at the tax office is also carried out before the UG (haftungsbeschränkt) can start its business activities.