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What is a UG (haftungsbeschränkt)?

The Unternehmergesellschaft (UG) is a corporation with limited liability, just like the GmbH and the Aktiengesellschaft (AG). The UG is not an independent legal form, but rather a sub-form of the limited liability company (GmbH). Both companies have limited liability as a special feature. People who set up their own business are usually looking for a low-risk solution for their start-up. But what are the advantages of a UG (haftungsbeschränkt)? Here you will find an overview of the most important advantages of the UG.

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Founding a UG - the advantages at a glance

Are you about to start your own business? But you’re not sure which legal form you should choose? Here you will find a list of all the advantages of the UG.

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The shareholders are not liable with their private assets

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Quick and easy foundation

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It is possible to convert the UG into a GmbH later in the course of business

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Founders only need to pay in a minimum share capital of one euro to set up the company

The limitation of liability of the UG

One of the decisive advantages of the UG is the limitation of liability. The limited liability of the UG means that the shareholders are not liable for the company’s liabilities with their private assets. In the event of insolvency, the shareholders’ private accounts are therefore not accessed. In the event of liability, only the company’s assets are used.

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The foundation process: quick and easy

In contrast to a limited liability company (GmbH), no share capital of at least EUR 12,500 needs to be paid into the company account when founding a UG. If you set up an entrepreneurial company, you are only obliged to pay in share capital of at least one euro. It is also possible to use a so-called model protocol as articles of association. The model protocol is a legally pre-formulated document that defines the framework conditions for company management. It can be used under certain conditions, especially if your company is not to have complex structures, and also saves you time and money.

Flexibility: Convert UG into GmbH

If your company grows and is successful, it can sometimes be advisable to change the company form. Due to the structural proximity of the UG to the GmbH, it is possible to convert the Unternehmergesellschaft into the more complex GmbH. The prerequisite for conversion is a share capital of EUR 25,000. Although the possibility of conversion guarantees flexibility, this advantage should be enjoyed with caution. Conversion is cost-intensive and complicated. If it is foreseeable that the company will grow quickly and the formation of a GmbH is your goal from the outset, it may be advisable to form your company as a GmbH from the outset.

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When does it make sense to set up a UG?

Founding an entrepreneurial company (haftungsbeschränkt) makes particular sense for entrepreneurs who wish to limit their liability in their self-employment and manage with little capital. In principle, the GmbH enjoys a higher reputation in commercial transactions due to its high share capital. Nevertheless, the choice of a UG can make sense and, with its low minimum share capital value, enables an easy entry into entrepreneurship.

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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 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 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 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.