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Enterprise company (limited liability) / UG

A new GmbH variant in addition to the “classic” GmbH has been possible since 01 November 2008: the enterprise company — UG — limited liability. It is suitable for the founders of small companies, especially service providers, who wish to limit their liability and for whose companies a small amount of capital is adequate.

Share capital

The share capital is at least one euro per partner. However, the shareholders’ equity should always be oriented to concrete needs because inadequate capital always entails a higher risk of bankruptcy. The minimum share capital of an enterprise company must be contributed in bar and be fully paid in before the company is entered in the Commercial Register. Payments in kind are excluded.

Liability

As a rule, the UG is liable with respect to its creditors solely to the extent of the company assets. The partners are not liable for the company’s debts to the extent of their personal fortunes. However, they are liable to the extent of their personal fortunes for personal loans or guarantees. They are also personally liable in the event of violations of the strict rules regarding the UG capital and in the event of the so-called piercing of the corporate veil (explanation: piercing the corporate veil refers to a case in which someone is personally liable with his/her personal fortune, without restrictions and jointly and severally, for the company’s debts although the form of the pertinent company includes a limitation of liability, e.g. for certain damage compensation claims).

Formalities

The partnership agreement must be notarised by a civil-law notary. A UG can be formed by means of a simple standard formation (such as cash formation, no more than three partners) on the basis of a standard record which must be certified. The standard record combines the partnership agreement, list of partners and appointment of the managing director. The standard records — one for formation by one person, another for formation by more than one person — are provided as appendices to the GmbH-Gesetz (German Act Regarding Limited Liability Companies).
The UG must be entered in the Commercial Register.

Creation of reserves

Profits may not be distributed in their full amount. 25% of the profits must be allocated to a statutory reserve until the minimum share capital of €25,000 has been reached. There is no time limit for achieving this mark.

A new GmbH variant in addition to the “classic” GmbH has been possible since 01 November 2008: the enterprise company — UG — limited liability. It is suitable for the founders of small companies, especially service providers, who wish to limit their liability and for whose companies a small amount of capital is adequate.

Share capital

The share capital is at least one euro per partner. However, the shareholders’ equity should always be oriented to concrete needs because inadequate capital always entails a higher risk of bankruptcy. The minimum share capital of an enterprise company must be contributed in bar and be fully paid in before the company is entered in the Commercial Register. Payments in kind are excluded.

Liability

As a rule, the UG is liable with respect to its creditors solely to the extent of the company assets. The partners are not liable for the company’s debts to the extent of their personal fortunes. However, they are liable to the extent of their personal fortunes for personal loans or guarantees. They are also personally liable in the event of violations of the strict rules regarding the UG capital and in the event of the so-called piercing of the corporate veil (explanation: piercing the corporate veil refers to a case in which someone is personally liable with his/her personal fortune, without restrictions and jointly and severally, for the company’s debts although the form of the pertinent company includes a limitation of liability, e.g. for certain damage compensation claims).

Formalities

The partnership agreement must be notarised by a civil-law notary. A UG can be formed by means of a simple standard formation (such as cash formation, no more than three partners) on the basis of a standard record which must be certified. The standard record combines the partnership agreement, list of partners and appointment of the managing director. The standard records — one for formation by one person, another for formation by more than one person — are provided as appendices to the GmbH-Gesetz (German Act Regarding Limited Liability Companies).
The UG must be entered in the Commercial Register.

Creation of reserves

Profits may not be distributed in their full amount. 25% of the profits must be allocated to a statutory reserve until the minimum share capital of €25,000 has been reached. There is no time limit for achieving this mark.