The 25,000 is there to make sure you can cover some liability. If you really wanted "your company and your risk", you could have used the "simplest setup", where you are liable with your own money, but if you think about it that way, it doesn't sound so appealing, does it? So of course the UG which does not (yet) have 25,000 in the bank sounds less serious than the GmbH that has 25,000 in the bank. A company that starts with nothing wouldn't be a GmbH (limited liability company), it would be a GoH (company without liability), and there's a good reason why those don't exist...

- There is no double taxation if you just pay yourself a salary (since it’s a normal business expense). If you want to take money out of the company flexibly, a GmbH is the wrong structure.

- I’ve never heard of anybody doing an UG/GmbH + KG to get started. This is highly unusual. Most people either do just a simple UG or maybe they set up a holding structure with two separate GmbH / UG entities.

- Related to the above: if you go with a simple, standard structure you will incur minimal legal fees. You don’t need a lawyer, you just directly task a notary and tell them you want a standard setup.

- If you don’t want the complexity of a limited liability company, the standard way to reduce liability risk is to get liability insurance. Many, many people do this instead of having a GmbH.

The valid criticism is the a) lack of digital processes and b) sequential processing of steps that could happen in parallel. For example, I sped up my own GmbH process by driving to the register court and paying in cash on-site. For whatever reason that’s much faster and saves about a week.

Everything is unbelievably complicated and over-engineered, and every layer is immune to change. Every rule was rational when it was added, and now everyone has a financial stake in continued complexity. The German notary is the highest-paid notary in the world, and the highest-earning professional in the country.

That said, I think a lot of the frustration comes from a mismatch of expectations. Germany wasn't designed for randos to start companies and thrust change on society. All the bureaucracy is a filter, and what it filters out is change itself.

You were never supposed to incorporate a company. You were supposed to get a job at Volkswagen.

> And the cheap door has a price of its own: to some clients, “UG” reads as “not serious,” and they would rather deal with a GmbH

The post itself explains exactly why the first complaint is a fallacy and the second one is true:

> The simplest setup is a sole proprietorship [...] also makes me personally liable for everything. A client sues? They are not suing a company. They are suing me. My savings, my apartment, my name.

> So I wanted real limited liability, which means a company.

The liabilities of a limited-liability company aren't your risk.

The people who stand to lose out if your company folds are not you but your customers, creditors and anyone else with a claim to more than the company can repay.

The more capital it has, the less likely it is to collapse while having more liabilities than assets.

Although Sweden is a bit strange in the fact that banks have as much equal say as the government authority does in you starting a company, and if they don't want you as a customer, they can simply deny the right for your company to start!

Another part is taxation the tax office takes your money really fast but returns can be another slog where the tax office denies legal claims again and again untill you get a lawyer etc. and it generates costs again needlessly because it's really dependent on who works on your tax records and there mood apparently.

If you want a GmbH quickly there are specialized lawyers that maintain a pool of freshly founded GmbH's for you to buy. Everything is set up for you to start. If you don't like certain things like the company name, you can always change it later.

That being said, I know plenty of people who founded their GmbH themselves and it went smoothly. It's not that it can't be done, it's more that OP chose an overly complicated and untypical scheme and was surprised about the complications.

But it was his call. As the author has already pointed out, he could have started a sole proprietorship, but he did not want to take on that risk. The 25'000 is because it's not his risk if he starts a GmbH, it's the GmbH's risk.

Also, the 25'000 are not a toll, it's the company's Stammkapital. The GmbH owns that money. And afaik, in Germany you only have to pay in half of the 25k.

In addition, he counted 2,000 € of shared capital as an expense, which it isn't. He did not opt for a "cheap" UG which requires no up-front capital, because of its bad reputation.

He also includes a bill for accounting software of 426.97 € into his calculation. This has nothing to do with founding costs, but are operational expenses.

As the author states that he set up the company through a law firm, I wonder which of the figures includes the cost of this service. To be fair, this should be listed separately, as such costs can vary widely or be omitted entirely if the company is incorporated solely through a notary.

Also the information about the minimum deposit when founding a GmbH is incomplete. He states: "A GmbH wants 25,000 euros sitting in a bank account before it is allowed to exist." Fact is that you need only deposit half of it upfront into the GmbH; you only have to deposit the rest of the money if the company is in trouble. The company can also immediately lend the deposit back to the founder at market rates. If the company’s articles of association permit it to hold shares in other companies, the company may also use the contributions to purchase shares or similar financial investments. His law firm should actually have advised him on this matter.

The main differences between a standard GmbH and a GmbH & Co KG lie in their somewhat different tax arrangements.

So all in all, the author paid 7,227.74 € to found a rather complex company structure. Judging by his reasoning, presumably for the wrong reasons.

When I found a GmbH in 2019 without the help of a law firm, it cost me about 2,000 euros (if I recall it correctly).

But notably in OP's case, most of the time is actually spent with the lawyer and tax advisor, no the bureaucracy itself. The more complicated company structure (Ug & Co KG is basically one company (an UG) owning another (a KG), giving a very similar structure to an UG at a slight tax advantage), doesn't help, but it's really not where the majority of the time here is lost (it probably does account for about half of the money though)

Imagine 3 young Italians that would like to work together in a startup. Let's consider only the first year, imagine a B2B SaaS, they are incorporating but they'll work on the product and approach possible customers. Zero revenue.

Well, if you followed the law, you probably would spend something between 23'000€ and 25'000€ in total. WITH NO REVENUE. This is because even if you work for free for your company, you still have to pay taxes for INPS, our pension system.

And if someone invests in your company, you can't live out of nothing and would like to pay a founder even the minimum salary, YOU HAVE TO PAY INPS AGAIN.

This is crazy, our country is a joke.

EDIT: Adding a bit more of scary context and nice sprites.

None of the common financial advisor you find in Italy have ever heard of funding ways or contract terms that are really well known globally.

Do you want to include drag along and tag along clauses in your company statute? You have to talk with really expert lawyers and notaries in Milan that will bill you thousands of € for something that in Delaware is a pretty much standard single line of text.

The cherry on top is the exit tax:

> And no, I could not just leave instead. My first company, Freshflow, is valuable enough that walking out of Germany would trigger a massive six-figure exit tax, on gains I have not even realised, purely for the privilege of leaving.

This is ostensibly there to prevent large-scale tax fraud but has ridiculously low thresholds that make life difficult for anybody who is shareholder of even a small company.

> Founder chooses the most complex legal structure that's readily-available... and is surprised that this complexity comes with laywer and notary fees.

> Founder decides to incorporate a company with the name of a popular brand of kitchen rolls... and is surprised that it's too generic.

> After "weeks of correspondence" (and, I suppose, extensive research), founder decides to incorporate a company that's named the same as a Swedish online marketing company instead. Very distinctive. No risk of confusion, ever.

At this time, the whole system seems to revolve around geographic location. As long as you stay put you're sort of fine, but if you move around within the EU, the law doesn't stay stable around you. This is impractical.

EU Inc seems to be a new initiative to fix a lot of the patchwork problems, but doesn't seem to be live yet. ( https://commission.europa.eu/topics/business-and-industry/do... )

I'm told that interstate commerce in the US isn't always necessarily easier, mind. Maybe the EU can take some lessons learned.

Consulting or dev work doesn't need deep capital. we're insured for X if Y happens. A UG is fine. The "not serious" label only sticks because founders keep caving to it.

Let the client adapt to your setup, not the reverse. If their compliance department doesn't get it, that's a gap to close, evry time you stand your ground, you normalize the UG for the next founder.

I sympathize but I'm not sure that is the sole reason the German state exists.

I seriously don't know what you people are doing. I've set up companies in Germany, the US, Brazil and Mexico.

The US was BY FAR, the most enjoyable experience. Won't say anything else. It was a breeze! But Germany wasn't as bad as people make it sometimes. Just don't go with a super complicated, overengineered setup and you are up and running almost instantly. Better won't mention Brazil, though.

If you have the resources, get some QUALIFIED lawyer/notary on board and it'll all be super chill and quick. And if you're just getting started, just do a sole proprietorship as you get started (and you can start working pretty much on the same day), and have the GmbH setup process run on the side.

Running the business is the hard part!

The worst was sitting at the notary, and getting read out loud by her what we were about to sign (also paying for that).

If you think about starting a company, spend some time to think through what it would mean for you to be a Delaware C Corp or an Estoinian one. It will increase your chances of success as you can focus on what matters.

Germans are crazy taking you to court, but it's not as risky as in the US.

Maybe OP was just not advised well which is surprising given the amount of information available online (startup guides for Germany)

Without this "exit tax", every founder of a successful business would have a huge incentive to leave and to realize the gains elsewhere. It's not a tax for the privilige of leaving, but for the privilege of building a company. I can see only three alternatives to this:

- Abolish the capital gains tax entirely.

- Make defering it impossible. Force people to pay immidiately. No "exit tax", but people have to pay for unrealized gains.

- Tax people when they realize their gains in a foreign country.

Good.

Typically, you can spend your "Stammkapital" for business purposes (e.g. in a GmbH). It doesn't need to stay in your bank account.

Why not a simple UG. Liability is limited to company assets so its the same no? If a UG looks bad, doesn't a UG & Co. KG look bad as well?

You can also just buy a clean ready made company. Also known as a shelf company.

Not an accountant but I believe before registering for VAT if you are still under the threshold you can charge anyone without VAT. The threshold for cross country transactions is 100k.

Assuming they are well-founded, what stops a market entrant promising to streamline all the paperwork? eg a LegalZoom- or Stripe-type of entity that for a flat fee of X will handle all the paperwork and filing for you using essentially pro-forma legal and tax paperwork. OP is paying $$$ (well, €€€) for law and tax firms to do sed s/xxx/TheirCo/g on a bunch of forms and papers, and check their passport photo. Isnt this an obvious opportunity for a market disruptor?

Edit: oh it's setup like this to cheat on taxes.

It took 3 months from registration to sending her first invoice. The longest wait was on the bank account: a very few places are willing to open company account if you don't have an EU residency. Without the bank account, she couldn't deposit founding capital (základní kapitál) which is required to complete the registration. It's even funnier cause the minimum amount to deposit is 1 CZK (5 cents).

Total cost to start business was under $8,000. The most expensive were legal services: writing down all contracts and customer agreements was around ~$5,000.

I feel like this is such an untapped market for getting digitilized. I was thinking to actually sit and vibe code it at some point but can't imagine doing this alone.

The fees you paid, seem quite high tbh. In particular for notary and court reg. I have the impression that the rates in Berlin are quiet above average.

The issue is, the people holding the stamps (and believe me, they ARE stamps, with ink and all) are in charge, and are VERY reluctant to give up that comfy job. Zero accountability, too, since once you are a government employee, it's incredibly hard to get fired. So they stall the process, forever, without any reprecussions.

I am all for having and caring about process and dealing with everyone equally. That's why I live in Germany and not in Eastern Europe where often some money under the table is the only oil in the machine. No such oil in the German machine, thankfully. But it's infuriatingly slow, because bureaucrats are in control and will never willing give up that control.

Company is a state's legal entity given to designated people to manage (the forming person/partners) and profit from doing it successfully. If those people fail they have to follow strict rules (liquidation) or they will be sued personally for misconduct. That entity gives much more possibilities because it is limited liability - part of which is held by the state, and part by the running founders.

If you want something yours, you go with the sole proprietorship.

In Canada you can easily and quickly obtain a GST number online. Furthermore, if you're self-employed or a small business owner, with a revenue of $30,000 or less, you are classified as a "small supplier", and don't have register and charge/collect GST.

For someone just starting out who will not be a small supplier, I believe the small supplier designation still provides a buffer zone. You can start invoicing immediately and sort out your registration later.

But I know for a fact that these ratings are pure crap. I asked them to fix the entry for Belgium once, and they replied that they trust the officials providing the info even though I sent the references to the legislation.

https://news.ycombinator.com/item?id=48325340#48336339

And the EU knows, hopefully it will improve the situation: https://www.euronews.com/my-europe/2026/03/18/48-hours-and-1...

Not a good idea... Companies will have to re-enter their VAT reports in previous taxation periods. It will trigger even more hassle an pushback form payers...

While EU is big and welcoming family, nobody wants to deal with non-resident bank accounts and tax liabilities :)

Germany feels like the government tries to make everything as hard and complicated as possible, to block ANY steps forward. It feels like organized sabotage to me.

I am sorry he has to go through this just to start a business.

Luckily with how the current German economy is doing this is a problem that will solve itself. It's like the last half a dozen German governments look at the Morgenthau Plan plan and thought it was an amazing idea they must implement.

With that being said, it seems like the author received some poor advice from their law firm:

1) If the author mostly does consulting and contract work, a sole proprietorship would have been the better option as many others here have already pointed out.

2) The UG & Co. KG construct is unnecessarily complex for a small company; it does have some advantages but if they really wanted a limited liability company, they should have used the "Musterprotokoll" (standard protocol) for setting up a UG; that would probably have cost less than €500. Lawyers love to suggest GmbH/UG & Co KG though because it means more fees for them.

3) The advice they got regarding the name was almost certainly incorrect. First of all, "case law" is not really a thing in civil law countries like Germany. The company name usually gets checked by the local chamber of commerce (IHK) and while there are some rules (you're not allowed to just call your company the equivalent of "Supermarket Co", "Plenty UG" would have almost certainly been fine. And if the IHK says it's fine, the court will accept it too.

Anyways, now that you have your company, I wish you all the best with it. You have exciting times ahead and the frustrating bit is (almost) over :-)

I’m not here to defend a big country that clearly has to do better, of course.

This costs about 28k€, 25k€ are deposited in the company.

That is called Vorratsgmbh and takes very little time.

Something is wrong here if you will be liable for at least a hundred grand of exit but balk over 25k to start a new company.

There is light at the end of the tunnel as an EU Inc. is proposed.

However the bureaucrats in probable but all countries will try to water it down to pointless to keep or extend their responsibility territory and duties.

It's not enough to have had properly filed tax returns every year, have a large enough profit-collection-line item in your books (25k EUR+) and then fill out a form.

No, if you want to use the profit your UG was required to accrue to raise your capital stock to 25k and rename it to a GmbH you need to get your annual accounts audited.

Or alternatively, you can pay in the difference between your current capital stock (e.g. 2k) and the 25k minimum for the UG and then rename the company and "just" have to pay for the notary, publishing to public records, court, ...

The tax explanation in the post is oversimplified.

Examples: With a KG, if the business earns €100k, that profit is attributed directly to you and taxed as personal income, whether you distribute it or not. At higher income levels, that’s roughly 45% including solidarity surcharge (and potentially church tax).

With a UG or GmbH, the company pays Körperschaftssteuer plus Gewerbesteuer, typically around 30% combined (depending on where its incorporated). On €100k profit, about €70k remains inside the company. If you later distribute it, you’ll pay capital gains tax based on the Halbeinkünfteverfahren on the distribution - which is 25% + Soli, bringing the total tax burden to roughly the same level as the KG.

The key difference is that with a UG/GmbH you can leave profits inside the company. That money can be reinvested into the business, other startups, ETFs, stocks, etc. - most often with only 1,5% effective tax while the money is working for you. You defer the second layer of taxation until you actually take the money out.

Also, you can pay yourself a salary. Whatever portion you pay out as salary is taxed personally just as it would be in the KG structure - but this time its company expenses, so no double taxation here either.

A few other points:

* A GmbH no longer requires €25k - its only 12,5k€ - and its also not to be locked away forever. The money can be used for legitimate business expenses immediately after incorporation.

* A decent tax advisor can usually get a VAT ID much faster than described in the article.

* A UG is widely accepted in the startup ecosystem. I’ve never seen customers reject an otherwise attractive startup because it started life as a UG. For investors, it's routine.

* Converting a UG into a GmbH later is routine, if you want to start small. If you have the 12,5k€ money, do a GmbH to save administrative hassle.

* A UG & Co. KG creates significantly more administration: two entities, two annual accounts, additional bookkeeping, additional filings, and additional advisor costs.

Of course there are valid reasons to use a GmbH & Co. KG, especially for complicated co-investment arrangements, but from what you wrote, that's not the case here. Therefore, for a solo software founder, I’d question whether the additional complexity buys you anything meaningful.

Bonus tip: You MIGHT want to consider owning your share in the Software UG not directly but through another UG, paolino UG or so. When you foresee to sell your business for significant money later, then you'll have exactly the same advantage, the money can stay in the company for reinvestment and you don't have to give up 50% of your capital gains in the moment you sign the sellers agreement. You CAN't do this easily later.

Not legal or tax advice. Just my personal experience.

1.) Yes, it took 3 months to switch the company hq + IRS + Notar etc.

2.) But it really does depend a lot on the city, state etc.

3.) UG is 500 EUR - changing to GmbH is then also quite cheap

The processes are all non-digital, and have many steps like Notaries for example.

In France you can do it as soon as you started the process.

Also, a founder spending months coordinating lawyers banks and tax advisors is not talking to customers or building the product. The opportunity cost here is huge.

Anyway, you are pretty close. One more push, don’t give up. :)

Just looking at my own state (Michigan) I can form the most "complicated" entity for $60 filing fee. Using a fill-in-the-blank form online. And have it approved the same day for an additional $50. Get an EIN online from the IRS in 10 minutes. Walk to a bank and open an account in about another hour. Annual renewal fee is $20.

In less than a day and for $110, I have a corporation, EIN (federal tax registration number), and bank account. Open for business. An LLC is the same, just a different form filed with the state.

I can then open credit card accounts online in the business name, register for sales tax online (get the license in about a week), and open a stripe account.

Oh, and a businessowners general liability insurance policy is costing me $205 per year. $1 million in liability coverage.

The whole reality is much worse.

It's insane that giving stock options (core to attract talent) or raising capital for equity is so difficult across Europe.

And don't get me started on how difficult it is to fire people that just don't work and only pretend to, spreading doing jackshit across the company.

Europe has the talent and even the capital, but the incentives are just not here, neither to attract talent nor serious investments.

The continent is old and politicians keep trying to band aid the system, consistently claim regional-national policies over common European rules, they will claim Europe makes it difficult to do business, just to reinvent their own commercial, import/export rules, tax rules non stop.

I don't want to say it's a disaster, but we really need some party that looks at commercial, trade and corporate law across Europe.

I find it interesting that most Germans don't seem to be aware of just how much worse their bureaucracy is than elsewhere, or even willing to defend such system as somehow optimal, even though it burns a lot of human energy and time while not even moving forward, just spinning the wheels in sand. Their refusal to even start thinking along the lines "maybe the Poles or the Balts or even the Romanians are doing something better and we should learn something from them" is very stubborn, probably stemming from surviving prejudice against the Wild East.

These days, no one can compete with China et al. by burying their own economy in endless rivers of paper. This is categorically the false way.

this sounds like a total nightmare. those germans need to wise up

Or maybe even until they can't physically get to work (read with accent: "that I need to do even if I don't get paid")

The thought of all that regulatory hassle you have to go through in Germany compared to those superniche ideas you would try out in our AI days, makes me weep [1].

I wonder if the gap we‘ve already saw in the last 20 years between EU and US in terms of tech success stories is just the tip of the iceberg of what’s to come.

[1] notary costs (every visit ~400€ like changing your address or business scope), registry costs (also for every address and business scope change), hiring a tax attorney to produce compliant balance sheets (2,000 - 3,000 € /year), multiple types of yearly, quarterly, and monthly tax filings (tax attorney 150-300€/ month), different taxes which will be collected federally and locally, mandatory membership in Commerce Chambers (~350€/year), legal requirement to have a „business bank account“ (here at least today there are some startups making this easier and somewhat cheaper), mandatory membership at a trade-coop (yes it costs money), public health insurers in your neck nagging you to find some legal trap you stumbled into to extract bankrupting amounts of premiums from you, same with the state pension program. And just because you close down, it doesn’t just stop (you have operate the GmbH for years after before it gets deleted, so you pay money for years after still). Then there is the Exit Tax, which on the rare case you were successful locks you into Germany forever (unless again you pay professionals insane amounts of money).

So this leaves you and your kindergarten-Management-slash-Single-parent-CRM vibe coding idea easily with effectively 500-1000 €/month just to deal with red tape.

But it’s not just the money, each of these points I listed are just sources of endless amounts of paperwork with people/Organisations that know they don’t have to respect you or care about you at all to extract money from you.

And no, UG is not helping at all because still exactly the same GmbH red tape applies. And I am 65% certain the proposed EU Incs will - in Germany - be not exempt from this.

you should consider UK company, enormously better. or sweden. continental EU is mostly backwards.

Who are these people that care

“Oh you don’t have a GmBH, oh your share capital is so low ohhh ho ho ho ho”

Germany doesn't have such excuses, yet there it is.

Worse, when you try to gently and constructively engage them on the topic, their mind is so deeply dyed with the idea, that they either simply don't understand what you're talking about or when they do, refuse to engage because they find you so weird, it's a waste of time to discuss with you.

"Was nicht dokumentiert ist, ist nicht passiert". Yeah, right, except that "Alles erstickt im Papierkram" and nothing ever fucking happens.

https://www.vid.gov.lv/en/first-steps-entrepreneurs