An entrepreneurial company with limited liability (in German: Unternehmergesellschaft (haftungsbeschränkt)) is a German form of a
private limited company
A private limited company is any type of business entity in "private" ownership used in many jurisdictions, in contrast to a publicly listed company, with some differences from country to country. Examples include the '' LLC'' in the United Sta ...
, usually established as an alternative to a
German corporation or
GmbH (limited liability) entity. Companies organized as an entrepreneurial company have the suffix ‘''UG (haftungsbeschränkt)''’ appended to their names.
Background
The German government introduced the UG primarily to act as an alternative to establishing a traditional corporation. A UG established under German law is not a new type of
legal entity
In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for ...
; rather, it is a limited liability company similar to a GmbH, with the exception that, unlike the GmbH, it is not required to meet the legally mandated €25,000 share capital required of a GmbH—a UG can be established with as little as one euro of paid-in capital. However, a UG is still a separate legal entity from its owners and is fully liable for paying
corporation taxes and publishing annual
financial statement
Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity.
Relevant financial information is presented in a structured manner and in a form which is easy to un ...
s. UG entities can be recognized as not-for-profit, under the right conditions.
The UG form has been met with great interest, especially by
start-up companies
A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend t ...
and other entrepreneurs. As of January 1, 2012, there had been 64,371 of such companies formed. Since then, traditional corporations have been reduced in importance, having largely been supplanted by the UG (and also the GmbH) among new companies being formed.
Formation and requirements
Forming a UG is relatively similar to forming a closely related GmbH entity, however the UG is exempt from some of the capital rules applicable to a GmbH.
Company name
The company must bear the title “Unternehmergesellschaft (haftungsbeschränkt)” or, as an abbreviated form, “UG (haftungsbeschränkt)” (§ 5a GmbHG). ''Unternehmergesellschaft'' means entrepreneurial company and the German word ''haftungsbeschränkt'' means “limited liability”.
Starting a business in Germany
Berlin 2017 It signifies the fact that the owners of the company have limited liability for the company’s debts.
Share capital
The nominal amount of the business’ shares – the so-called " ordinary capital" – as defined in the company agreement, must be provided after the foundation of the company and before its registration into the commercial register
§ 5a
para 2 GmbHG). The total capital stock must be at least one euro. In practice, amounts of up to €1,000 are usually chosen.
If the total amount of share capital exceeds EUR 25,000, then a GmbH is usually formed instead of a UG. (§ 5a para. 1 p. 1 GmbHG). In contrast to the GmbH form, no contribution in kind is permitted for a UG. The share capital must be paid immediately in full as a cash contribution (§ 5a (2) GmbHG). If capital of EUR 12,500 is available, either a UG (limited liability) with a share capital of EUR 12,500 can be established, or a limited liability company in the original sense, in which only half of the share capital of at least EUR 25,000 has to be paid.
References
{{Authority control
German business law
Types of business entity