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The appropriation of profits in the UG

The way in which the profits in the UG are to be used is regulated by the shareholder resolution on the appropriation of profits. There are several ways to organise the distribution of the UG’s profits: They can either be distributed to the shareholders, used as profit carried forward in the next financial year or used as a reserve. A deviation from certain uses stipulated in the articles of association is only possible by amending the articles of association.

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UG profit distribution: The most important facts in brief

Here you will find the most important information about profit distribution in the UG in brief.

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The profits of the UG are distributed proportionately among the shareholders.

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Agreements that deviate from this must be recorded in the articles of association.

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Initially, only 25% of the profits may be distributed.

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A shareholder resolution is required for the distribution of profits in the UG.

Profit distribution in the UG

If you set up a UG, you do not need any statutory minimum capital. The company can be founded with as little as one euro. Nevertheless, as with the GmbH, the company’s liability is limited to its assets.

Due to the low equity of the UG, an attempt was made to find a balance to ensure solvency. Part of the net income for the year less the losses carried forward from the previous year are therefore retained in the company. The idea behind this is that you can gradually build up a reserve until a share capital of EUR 25,000 is reached.

This is also known as profit retention. As part of this retention, 25% of the profits must flow into the reserve. Conversely, this means that only the profits in excess of this amount can be paid out to the shareholders.

Once the sum of EUR 25,000 has been reached, the UG can be converted into a GmbH.

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The pro rata profit distribution

The UG is a sub-form of the GmbH and is also subject to the GmbH Act. The provisions on distribution stipulate that profits are to be distributed on a pro rata basis. This means that each shareholder receives a share of the profit in proportion to their share in the company.

Profit distribution in the UG using the example:

  • The UG has 3 shareholders. Shareholder A holds 10%, B and C each hold 45% of the company. The maximum profit of 25% of the net profit for the year is EUR 100,000. A therefore receives a pro rata amount of EUR 10,000 and shareholders B and C each receive EUR 45,000.

Incongruent profit distribution in the UG

It is also possible to deviate from the pro rata distribution of profits, which is based on the shareholders’ shares in the UG. Such a deviation is called disproportionate or incongruent profit distribution. A possible distribution could, for example, provide for an equal percentage of profit for each shareholder.

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Special features of the loss distribution of the UG

If the company records losses, no loss distribution is carried out as long as the amount within equity is recognised at a negative value. If the shareholder intentionally causes the losses and damages the company, he or she is personally liable for them.

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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 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.

How long does it take to set up a UG (haftungsbeschränkt)?

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It can take several weeks to complete all the preparation and foundation steps. This depends, among other things, on the speed of the notary and the other authorities, but also on the entrepreneurs themselves. They must open a business account, pay in the share capital and register with the trade and tax authorities. If it is a one-person UG (haftungsbeschränkt) and the share capital is paid in quickly, the process is usually very fast. The UG (haftungsbeschränkt) can commence business operations after just two to four weeks.