7 ms·

> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state c

by rob74 4mo ago

> Which leaves the only real question. Why 25,000 at all? It is my company and my risk. If I want to start with nothing, that is my call, not a toll the state collects before it will let me try. 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 structure built to let me in quietly marks me for using it. 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...

arethuza 4mo ago
When I co-founded a company in the UK in 1995 there were two £1 shares - one for each founder. Mind you it was an off the shelf company - but the process couldn't really be much simpler back then - and its probably a lot simpler now.
- notpushkin 4mo ago
  You can open an Estonian company with 0.01 € capital. It will look ridiculous in the registry, and you will still be liable for the remaining 2499.99 € personally anyway, but it is possible. I’ve seen a couple 100 € companies, which is more reasonable I guess. You can also declare that you’ve paid the capital in, without any proof required for small amounts (up to 50k € IIRC). If you lie about it, I suppose you’ll be personally liable for everything, so definitely not worth risking it. Just put in like 500 €, set it aside on the business account, and don’t touch it. (IANAL)
  - arethuza 4mo ago
    That sounds a bit like the UK concept of a Company Limited by Guarantee - which is used by a lot of charities. Edit: I'm not a lawyer either!
  - metadat 4mo ago
    Then it’s not an LLC, though. Personal assets exposed.
    - notpushkin 4mo ago
      Up to 2500 €. You could put in 2500 € in capital – then your personal exposure will be zero. In practice, I don’t think it’s a meaningful difference, you will just have to keep the whole 2500 € on the company balance by the end of each FY. (Unless you wanna deal with non-monetary contributions!) If you put in 500 €, you’re liable for 2000 € personally, but you don’t have to keep them for your annual report. (It also means your company looks a bit riskier, since you might not have the 2000 € personally, so you might have trouble getting credit or whatever, but otherwise I don’t think it’s a big deal.) --- Edit: to the author: you should really look into Estonia (or any other sane jurisdiction mentioned elsewhere in the thread). You can still set up a KG (or a sole proprietorship), then put an Estonian OÜ in front of it. Costs something like 300 €, can be done online (you’ll probably need an e-residency card, an Estonian e-signature thing for foreigners, which is another ~150 €). Annual reports are fairly easy if you keep your books properly. And you’ll need an address in Estonea which is also like 125 €/yr. No additional taxes most likely (but check with a real accountant).
      - markvdb 4mo ago
        Substance in Estonia is usually required. A rented address does not suffice for that.
        notpushkin 4mo ago
        Could you elaborate, please? I’ve thought the whole point of e.g. the e-Residency program was to bring in business that’s not substantially tied to Estonia.
        markvdb 4mo ago
        Substance would be real activity happening in Estonia: - Where are the decisions made? - Where is the work being done? Why would I otherwise pay 66% in taxes in Belgium when I could just set up an Estonian ltd, get limited liability and pay 0 until I take anything out?
- amiga386 4mo ago
  For a limited company in the UK, you need a number of pieces of legal paperwork which I think you can technically write yourself but may prefer a solicitor to draft them correctly for you, and then you pay £100 to register the company, and you (and any other directors, shareholders or guarantors) capitalise the company yourself. You are now limited in liability for what the company does, to no more than the capital you put into it. You then have to supply yearly accounts, may have to register for corporation tax, VAT, register as an employer for paying national insurance, you'll probably need business insurance, etc. https://www.gov.uk/set-up-limited-company https://www.gov.uk/set-up-limited-company
  - arethuza 4mo ago
    If you buy and off the shelf company then you don't need any of that - they supply a pile of stuff (e.g. articles of association) and you don't need a solicitor to be involved. Edit: And these days you don't even need two people - used to be that you needed two directors or director and company secretary.
  - ascorbic 4mo ago
    You don't need to use a lawyer to draw up the docs unless you have special requirements: you can use the proforma memorandum (it's auto-filled if you apply online) and adopt the model articles of association. - https://assets.publishing.service.gov.uk/media/5a7da236e5274a676d53336d/pro_forma_of_ca_2006_memorandum_for_a_company_with_a_share_capital.pdf https://assets.publishing.service.gov.uk/media/5a7da236e5274... - https://www.gov.uk/guidance/model-articles-of-association-for-limited-companies https://www.gov.uk/guidance/model-articles-of-association-fo...
puszczyk 4mo ago
You are right, of course, but in most jurisdictions the limit is lower than 25k EUR (e.g. in PL it's 5k PLN ~ 1.2k EUR; I believe in the UK it's even less), and you can trivially look up the capital of any business in the business registry online --> you can decide if you are dealing with a multi-million behemoth or a mom-and-pop shop.
- ed_balls 4mo ago
  Unless it's c-corporate which require 25k usd. Money don't have to sit in bank account, you can buy a laptop etc.
  - throw1234567891 4mo ago
    In Germany the 25k Euro also does not need to sit in the account, after you reach it.
- hetspookjee 4mo ago
  Used to be 16k in the Netherlands and now is barely anything. 1.20euro is common with 120 shares at 1ct nominal.
Lariscus 4mo ago
The authors inability to understand this really makes wonder how much of the rest of their story is essentially self-inflicted.
- WarmWash 4mo ago
  They are jealous of the US system where you can create an LLC in one hour for $200, and by the next day be doing business with all your personal assets isolated.
  - corford 4mo ago
    UK's system is very similar too, as is Estonia's.
  - _fat_santa 4mo ago
    The US system is built to support entrepreneurship while the EU system broadly is to support the consumer and employee. The US will never be able to match the EU's consumer and employee protections and the EU will never be able to match the US's ease of doing business, because to have one you have to fundamentally give in on the other. Depending on who you ask, one system is wildly better than the other, but at the end of they day they are just different systems with different tradeoffs.
    - keiferski 4mo ago
      I think this is a false dichotomy. Consumer return policies, customer service, etc. tend to be much better in the US than in the EU. I would characterize it rather that the US is pro-business and pro-consumer, but somewhat anti-average worker.
      - wbl 4mo ago
        Except every two weeks when he gets a bigger paycheck than most senior UK government positions
      - echoangle 4mo ago
petesergeant 4mo ago
> 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... What's the good reason? In the UK I can started a Ltd with £1 of share capital, about £100 of fees, and filling out a form online. I will be shielded from personal liability if it goes tits up unless I've broken the law, knowingly traded insolvent, or otherwise been an idiot. The wider thread appears to be Germans commenting that it's unthinkable that such a thing could exist, and thus it's all the author's fault.
- stop50 4mo ago
  what you probably mean is an OHG, an Offene Handelsgesellschaft It is one of the simplest form a group of people can found. All members are liable with their personal assets if the OHG files for bankruptcy or is unable to meet its obligations.
- kuschku 4mo ago
  > In the UK I can started a Ltd with £1 of share capital, about £100 of fees, and filling out a form online. I will be shielded from personal liability if it goes tits up unless I've broken the law, knowingly traded insolvent, or otherwise been an idiot That's what Germany calls an "UG". Which is what OP actually ends up doing.
  - petesergeant 4mo ago
    UG forces you to retain profit to hit a capitalisation target. An Ltd is a real company, and my £1 company has an identical legal status to one with hundreds of millions of pounds of assets.
    - kuschku 4mo ago
      Yes, there's a difference. But the question is whether that difference actually matters in practice. If you're a startup, you won't be making a profit anyway. Once you make a profit, 25k€ on the books (not necessarily cash) isn't a lot, especially as it doesn't have to remain in the company, you can use it to pay wages once converted to a GmbH. In the end, this is a question about whether you need something to be exactly the same for some ideological reason, or whether it's enough that two things are practically the same for all intents and purposes. And while in this case the German system requires a codified workarounds, in many other cases the US/UK/Commonwealth systems use significantly more complicated workarounds than the German system.
nradov 4mo ago
There is no need for a company to be able to cover liabilities. It's a stupid rule.
- hapless 4mo ago
  It's an important rule if you want the liability protections associated with a limited liability corporation If you just want to start a business, without any associated shell companies or liability transfers, it costs $0 and requires filing one sheet of paper. It is very easy! https://www.formulare-bfinv.de/ffw/form/display.do?%24context=231C0BF7DFEBFAF1DB71 https://www.formulare-bfinv.de/ffw/form/display.do?%24contex...
  - nradov 4mo ago
    You're missing the point. There shouldn't be any capital requirement just to get liability protections. No one is forcing counterparties to accept liabilities.
    - hapless 4mo ago
      clearly german regulators and/or voters disagree, as is their right nevertheless it is very easy to start a business, and this man is complaining about an entirely separate problem (it is difficult to create and incorporate two shell companies)
      - nradov 4mo ago
        How is that stagnant economy working out for Germans?
chalmovsky 4mo ago
[flagged]
tga 4mo ago
You call €25k liability? I just decided I won't work with a company that can't cover €25M in liability. Should the state force you to block that in your bank account just in case you want to work with me?
- pjc50 4mo ago
  This is why insurance exists!
- fransje26 4mo ago
  It's because some understanding was lost somewhere between the article and OP. The €25k are not a liability insurance or anything like that. It's a starting capital to make sure that the company can honor its bills. Liability is covered via separate insurances.
- deleted 4mo ago
  [deleted]
Zak 4mo ago
> 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... Those do exist in other countries. An LLC in the USA does not generally need to have a certain amount of assets. Such a company is more or less without liability until it has some assets; the worst case for its owners when it comes to a routine business debt is shutting down the company. Exceptions are possible in case of serious misconduct of course. Of course a company like that will find it difficult to borrow money, but it's not rare for its last bills to go unpaid when it goes out of business. Whether those should exist or not doesn't have a clear answer. Culturally, Germans tend to be pretty uncomfortable with "sometimes shit happens and debts go unpaid", while Americans tend to find a moderate rate of that sort of thing tolerable, especially if it makes starting a new business viable for a greater fraction of the population.
- deleted 4mo ago
  [deleted]
- rayiner 4mo ago
  Not quite. In the US this condition is handled at the back end. Running a corporation or LLC without sufficient capitalization can be grounds for piercing the liability shield in a lawsuit.
  - Zak 4mo ago
    I have the impression the situations where that actually happens are at least arguably serious misconduct, and usually targeted at someone with significant assets. A construction company that pockets ten million dollars and doesn't build anything probably can't shield its owner this way, but a single-developer software consultancy that pockets ten thousand dollars and delivers buggy code can.
    - rayiner 4mo ago
      In theory it’s based on whether the owner of the company intended to run it under capitalized in an effort to shirk liability.
PowerElectronix 4mo ago
The trust in a company should still be left to the criteria of suppliers, customer, etc. Not the random number that a bureaucrat pulled out of his arse.
- bell-cot 4mo ago
  Not saying the bureaucrats are great at this - but your "left to the criteria of" sounds like a massive duplication of effort.
logifail 4mo ago
> The 25,000 is there to make sure you can cover some liability I would suggest that this idea of a GmbH does not actually work the way you think it does. Maybe it once did, but not any more. For instance: Wirecard Technologies GmbH Wirecard Sales International Holding GmbH Wirecard Acquiring & Issuing GmbH Wirecard Acceptance Technologies GmbH Much of the regulatory structures in Europe work this way, they assume that both good and bad guys will play by the same rules. Spoiler: the bad guys don't care about the rules!
- echoangle 4mo ago
  Im pretty sure those wirecard companies all had the mandatory money in the account. They just did more damage than that.
  - antonvs 4mo ago
    Ok, so what is the point of the money?
- 9dev 4mo ago
  I don't know what that example is supposed to prove? Everyone in a business relation with one of these companies can make claims against them. The problem with Wirecard is rather that the 25k of each of them aren't going to make up for the massive damage caused by Marsalek. Then again, I don't think we should structure our systems to expect the blackest of swans that guy was. The 25k are intended to ensure liability coverage for very small and young companies, not giant corporate networks with billions in backing (well, theoretically anyway... hah)
nish1500 4mo ago
High initial capital requirements have repeatedly proven to be more detrimental than beneficial (https://mariusring.github.io/web/BacherFagerengRingWold_SelectionIntoEntrepreneurship.pdf https://mariusring.github.io/web/BacherFagerengRingWold_Sele...). Germany is an outlier in wanting to keep the barriers high. Running a business in Germany is for a closed inner circle. The apparatus is not meant for broke college students turning their weekend project into a company.
- spacington 4mo ago
  Why not? Depends on your product and expectations of your customers. B2C: I don't care what company structure you are.
- ffsm8 4mo ago
  In Germany getting 25k as a working adult is hard, because before taxes and social security that's 50k you need to earn. Thats more then an average person earns in a year before taxes, so they'll likely be saving for 5-10 years if they want to start one. Now wherever that's an issue with the 25k admission fee OR with the fact that wages have stagnated for about 25 years in Germany, consequently mostly wiping out the middle class ... That's debatable.
  - chmod775 4mo ago
    > In Germany getting 25k as a working adult is hard German median household wealth is 4x that.
    - ffsm8 4mo ago
      You mean median household net worth. This estimate includes things like a car, a partially paid off house and other assets. Most of that wealth cannot easily be converted to cash which you'd need to start a company. Also that's median. Germany is a country with a median age of 45. So yeah, someone who likely worked for 20+ years will likely have saved around 100k, I don't think you realize how that's an argument in favor of what I just stated...
    - 4mo ago
solatic 4mo ago
This is not an argument that founders should seed 25k EUR to cover liability, it's an argument that GmbH bank account amounts should be visible publicly. If I want to put in a catering order, the catering business does not need 25k EUR to cover liability. If I want to build a data center, 25k EUR is not nearly enough.
- notpushkin 4mo ago
  > GmbH bank account amounts should be visible publicly Not sure about Germany, but e.g. in Estonia it’s essentially public info (albeit unaudited, usually), as part of the annual report. The company has to maintain at least the declared capital amount in their bank accounts (or other assets), but the amount can be pretty much any number, so the business owner can decide what sum makes sense in their case. 25k € is way too much for most small businesses, yeah. (IANAL)
- Zufriedenheit 4mo ago
  All GmbH are mandated to publish their financial statements in Germany. Its on Bundesanzeiger a government website which of course takes a fee again…
  - kuschku 4mo ago
    It's also available in the Handelsregister, which is available for free.
deleted 4mo ago
[deleted]
throw1234567891 4mo ago
And you can start a company with €1. The format is UG. You have to keep 25%(?) of the profit until you reach 25k and convert into GmbH. And reading the article, he does found a UG! This isn’t even about GmbH!
tomp 4mo ago
> The 25,000 is there to make sure you can cover some liability. Is this actually true? Can't the company just loan out the 25k immediately?
- bobsoap 4mo ago
  Yes. The 25k capital doesn't have to be cash, but can be in claims or asset value as well.
davedx 4mo ago
Yeah I don't really understand the part about not being able to invoice either. IANAL but it's the other way around - you need a VAT number to invoice clients in Germany (and the EU), not outside of it. VAT is exempt for clients outside of the EEA. Also: I've always used a ZZP structure (one man company - Dutch version) for mine, not a BV (LLC), because there's a thing called Professional Liability Insurance. But maybe it's different in Germany? I can't imagine that doesn't exist there though.
- markvdb 4mo ago
  Not incorporating would be very fiscally suboptimal here (.be) for anything tech related. Your marginal tax+ social security contributions rate would be ~66% starting from 50k€ gross...
sarjann 4mo ago
Isn't that what insurance is for? So you don't need to stash away a bunch of idle capital incase something goes wrong.
notanormalnerd 4mo ago
I just did a quick check: The 25.000€ hasn't been raised since the early 1980s. (50.000 DM back then) So to have the same liability today, you would have to put down 65.000€. So it has gotten increasingly cheaper to start a GmbH in Germany.
- ccozan 4mo ago
  This is a very insigthful comment! I also checked and the notary fee I paid 10+ years ago is the same as I paid this year ( for a GmbH founding ).
thomas_witt 4mo ago
The 25kEUR requirement has been lowered a few years ago to €12,5k as required paid-in capital.
- ccozan 4mo ago
  yes but you are still liable for the full 25.000 euros.
varispeed 4mo ago
This could have been resolved by listing how much capital company has set aside for liabilities. If someone sees company only has 1 EUR, then they can assess their own risk accordingly before engaging.
Saline9515 4mo ago
The problem here is that 25k€ is too little for some types of businesses (say, a bridge architect), and way too much for others (say, selling spice mixes online). I don't get the "seriousness" memes in Germany, which sound more about gatekeeping than anything else. Why not require 1M€? This is serious! More serious! Meanwhile, they have companies likes Wirecard that went under in a day after it discovered a "hole" of 2 billion (magic!). Why not just allow people to create a Gmbh with 2k€, and then publicise the amount of share capital so clients can make their mind? It's how it's done in France for instance, allows some flexibility (I know, a swear word in Germany), and sounds less like a social punition (something Germans love). The hack anyway is to create an Estonian e-company, with almost no maintenance/creation costs. Germans are the largest funder demographic for this reason.
- pintxo 4mo ago
  It exists, it is called "UG", minimum capital 1€. You have to increase capital up to at least 25k though, out of your annual profits.
  - Saline9515 4mo ago
    Why have a different category that sounds like "unserious" to german people? I can see people in procurement departments say "oh no, we don't deal with UG".
    - port11 4mo ago
      You’ll find that many people don’t have 25k€ to invest in initial capital of a business, but that are perfectly capable of running a business regardless. 5k€ is fair for plenty of endeavours, and more should be required for riskier businesses. People seeing a GmbH as more serious is just a cultural aspect, I’d say.
    - wink 4mo ago
      Ok, so first of all, the UG was only introduced in 2008 - which even for some of us middle-aged people is more "it's relatively new" than "GmbH has existed decades before I was born". Second, not that I claim to be any representative, but this "UG is weird, unknown, not serious"... I have personally not heard that for about 10 years, so yeah, absolutely true when it was new. Third, it's still relatively rare I'd say. You stumble over one every couple of months or years, in my experience mostly online shops without their own manufacturing (but maybe that is where I am looking) - if you just look at what tradespeople have on their vans: Nope, never. Always GmbH or GbR/single person. But I have no insight into procurement departments.
ulf-77723 4mo ago
Actually only half of the 25k is needed to start the GmbH
- rmoriz 4mo ago
  Only if you have more than one Gesellschafter
glad_duck 4mo ago
It's funny, so it's not even an authorized capital? That one can usually be spent. So these 25K is simply put in the bank as a guarantee? For what exactly? Like if somebody wants go give me a loan they will look at this number and limit a loan to 25K so they are "guaranteed"? It's a great idea, put money in the bank, take 25K loan and ... what would my net assets be? What am I missing?
- selfmodruntime 4mo ago
  For debtors during an insolvency.
  - glad_duck 4mo ago
    So the only companies in Germany that are accepted are those that have positive net assets (equity), otherwise it doesn't work. Let's say I took a 100K loan, 25K won't solve any problem here. Can't take 100K loan with 25K net assets? That means what I said, you are never underwater, and it will put most startups in the US out of business.
inglor_cz 4mo ago
Most EU countries don't demand such huge initial capital from banal LLCs and they don't seem to have a significant problem with resulting liabilities. I'd guess that the German economy may actually suffer more from dissuading young people to start LLCs.
pseudohadamard 4mo ago
The OP really has decided to take the path of most resistance: An UG is exactly what his business is meant for. If he wants to be a GmbH just for appearance's sake then (a) a one-man band as a GmbH is no more "serious" than a UG (isn't a GmbH minimum 500 employees in any case?), and (b) it's an entity meant for something like Bosch GmbH, not J.Random Dude GmbH.
- wink 4mo ago
  Last I checked you can be a 1man GmbH and it's not even that rare. I would say it is actually the "default" company type, by volume (not the 1man, but of all companies - although maybe "single person company" are more frequent, but that's not typically what people would imagine as a company). I am on the other hand constantly surprised how many AG (Aktiengesellschaft) there are in Switzerland which only employ < 10 people.
shantnutiwari 4mo ago
"The 25,000 is there to make sure you can cover some liability here is the UK we can get liability insurance. For me, as a one person limited company, it was around 200 pounds, and it was tax deductible. There is no reason to have 25,000 euro deposit.

by rob74 4mo ago

arethuza 4mo ago

When I co-founded a company in the UK in 1995 there were two £1 shares - one for each founder. Mind you it was an off the shelf company - but the process couldn't really be much simpler back then - and its probably a lot simpler now.

notpushkin 4mo ago
You can open an Estonian company with 0.01 € capital. It will look ridiculous in the registry, and you will still be liable for the remaining 2499.99 € personally anyway, but it is possible. I’ve seen a couple 100 € companies, which is more reasonable I guess. You can also declare that you’ve paid the capital in, without any proof required for small amounts (up to 50k € IIRC). If you lie about it, I suppose you’ll be personally liable for everything, so definitely not worth risking it. Just put in like 500 €, set it aside on the business account, and don’t touch it. (IANAL)
- arethuza 4mo ago
  That sounds a bit like the UK concept of a Company Limited by Guarantee - which is used by a lot of charities. Edit: I'm not a lawyer either!
- metadat 4mo ago
  Then it’s not an LLC, though. Personal assets exposed.
  - notpushkin 4mo ago
    Up to 2500 €. You could put in 2500 € in capital – then your personal exposure will be zero. In practice, I don’t think it’s a meaningful difference, you will just have to keep the whole 2500 € on the company balance by the end of each FY. (Unless you wanna deal with non-monetary contributions!) If you put in 500 €, you’re liable for 2000 € personally, but you don’t have to keep them for your annual report. (It also means your company looks a bit riskier, since you might not have the 2000 € personally, so you might have trouble getting credit or whatever, but otherwise I don’t think it’s a big deal.) --- Edit: to the author: you should really look into Estonia (or any other sane jurisdiction mentioned elsewhere in the thread). You can still set up a KG (or a sole proprietorship), then put an Estonian OÜ in front of it. Costs something like 300 €, can be done online (you’ll probably need an e-residency card, an Estonian e-signature thing for foreigners, which is another ~150 €). Annual reports are fairly easy if you keep your books properly. And you’ll need an address in Estonea which is also like 125 €/yr. No additional taxes most likely (but check with a real accountant).
    - markvdb 4mo ago
      Substance in Estonia is usually required. A rented address does not suffice for that.
      - notpushkin 4mo ago
        Could you elaborate, please? I’ve thought the whole point of e.g. the e-Residency program was to bring in business that’s not substantially tied to Estonia.
        markvdb 4mo ago
        Substance would be real activity happening in Estonia: - Where are the decisions made? - Where is the work being done? Why would I otherwise pay 66% in taxes in Belgium when I could just set up an Estonian ltd, get limited liability and pay 0 until I take anything out?
amiga386 4mo ago
For a limited company in the UK, you need a number of pieces of legal paperwork which I think you can technically write yourself but may prefer a solicitor to draft them correctly for you, and then you pay £100 to register the company, and you (and any other directors, shareholders or guarantors) capitalise the company yourself. You are now limited in liability for what the company does, to no more than the capital you put into it. You then have to supply yearly accounts, may have to register for corporation tax, VAT, register as an employer for paying national insurance, you'll probably need business insurance, etc. https://www.gov.uk/set-up-limited-company https://www.gov.uk/set-up-limited-company
- arethuza 4mo ago
  If you buy and off the shelf company then you don't need any of that - they supply a pile of stuff (e.g. articles of association) and you don't need a solicitor to be involved. Edit: And these days you don't even need two people - used to be that you needed two directors or director and company secretary.
- ascorbic 4mo ago
  You don't need to use a lawyer to draw up the docs unless you have special requirements: you can use the proforma memorandum (it's auto-filled if you apply online) and adopt the model articles of association. - https://assets.publishing.service.gov.uk/media/5a7da236e5274a676d53336d/pro_forma_of_ca_2006_memorandum_for_a_company_with_a_share_capital.pdf https://assets.publishing.service.gov.uk/media/5a7da236e5274... - https://www.gov.uk/guidance/model-articles-of-association-for-limited-companies https://www.gov.uk/guidance/model-articles-of-association-fo...

puszczyk 4mo ago

You are right, of course, but in most jurisdictions the limit is lower than 25k EUR (e.g. in PL it's 5k PLN ~ 1.2k EUR; I believe in the UK it's even less), and you can trivially look up the capital of any business in the business registry online --> you can decide if you are dealing with a multi-million behemoth or a mom-and-pop shop.

ed_balls 4mo ago
Unless it's c-corporate which require 25k usd. Money don't have to sit in bank account, you can buy a laptop etc.
- throw1234567891 4mo ago
  In Germany the 25k Euro also does not need to sit in the account, after you reach it.
hetspookjee 4mo ago
Used to be 16k in the Netherlands and now is barely anything. 1.20euro is common with 120 shares at 1ct nominal.

Lariscus 4mo ago

The authors inability to understand this really makes wonder how much of the rest of their story is essentially self-inflicted.

WarmWash 4mo ago
They are jealous of the US system where you can create an LLC in one hour for $200, and by the next day be doing business with all your personal assets isolated.
- corford 4mo ago
  UK's system is very similar too, as is Estonia's.
- _fat_santa 4mo ago
  The US system is built to support entrepreneurship while the EU system broadly is to support the consumer and employee. The US will never be able to match the EU's consumer and employee protections and the EU will never be able to match the US's ease of doing business, because to have one you have to fundamentally give in on the other. Depending on who you ask, one system is wildly better than the other, but at the end of they day they are just different systems with different tradeoffs.
  - keiferski 4mo ago
    I think this is a false dichotomy. Consumer return policies, customer service, etc. tend to be much better in the US than in the EU. I would characterize it rather that the US is pro-business and pro-consumer, but somewhat anti-average worker.
    - wbl 4mo ago
      Except every two weeks when he gets a bigger paycheck than most senior UK government positions
    - echoangle 4mo ago

petesergeant 4mo ago

> 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... What's the good reason? In the UK I can started a Ltd with £1 of share capital, about £100 of fees, and filling out a form online. I will be shielded from personal liability if it goes tits up unless I've broken the law, knowingly traded insolvent, or otherwise been an idiot. The wider thread appears to be Germans commenting that it's unthinkable that such a thing could exist, and thus it's all the author's fault.

stop50 4mo ago
what you probably mean is an OHG, an Offene Handelsgesellschaft It is one of the simplest form a group of people can found. All members are liable with their personal assets if the OHG files for bankruptcy or is unable to meet its obligations.
kuschku 4mo ago
> In the UK I can started a Ltd with £1 of share capital, about £100 of fees, and filling out a form online. I will be shielded from personal liability if it goes tits up unless I've broken the law, knowingly traded insolvent, or otherwise been an idiot That's what Germany calls an "UG". Which is what OP actually ends up doing.
- petesergeant 4mo ago
  UG forces you to retain profit to hit a capitalisation target. An Ltd is a real company, and my £1 company has an identical legal status to one with hundreds of millions of pounds of assets.
  - kuschku 4mo ago
    Yes, there's a difference. But the question is whether that difference actually matters in practice. If you're a startup, you won't be making a profit anyway. Once you make a profit, 25k€ on the books (not necessarily cash) isn't a lot, especially as it doesn't have to remain in the company, you can use it to pay wages once converted to a GmbH. In the end, this is a question about whether you need something to be exactly the same for some ideological reason, or whether it's enough that two things are practically the same for all intents and purposes. And while in this case the German system requires a codified workarounds, in many other cases the US/UK/Commonwealth systems use significantly more complicated workarounds than the German system.

nradov 4mo ago

There is no need for a company to be able to cover liabilities. It's a stupid rule.

hapless 4mo ago
It's an important rule if you want the liability protections associated with a limited liability corporation If you just want to start a business, without any associated shell companies or liability transfers, it costs $0 and requires filing one sheet of paper. It is very easy! https://www.formulare-bfinv.de/ffw/form/display.do?%24context=231C0BF7DFEBFAF1DB71 https://www.formulare-bfinv.de/ffw/form/display.do?%24contex...
- nradov 4mo ago
  You're missing the point. There shouldn't be any capital requirement just to get liability protections. No one is forcing counterparties to accept liabilities.
  - hapless 4mo ago
    clearly german regulators and/or voters disagree, as is their right nevertheless it is very easy to start a business, and this man is complaining about an entirely separate problem (it is difficult to create and incorporate two shell companies)
    - nradov 4mo ago
      How is that stagnant economy working out for Germans?

chalmovsky 4mo ago

[flagged]

tga 4mo ago

You call €25k liability? I just decided I won't work with a company that can't cover €25M in liability. Should the state force you to block that in your bank account just in case you want to work with me?

pjc50 4mo ago
This is why insurance exists!
fransje26 4mo ago
It's because some understanding was lost somewhere between the article and OP. The €25k are not a liability insurance or anything like that. It's a starting capital to make sure that the company can honor its bills. Liability is covered via separate insurances.
deleted 4mo ago
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Zak 4mo ago

> 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... Those do exist in other countries. An LLC in the USA does not generally need to have a certain amount of assets. Such a company is more or less without liability until it has some assets; the worst case for its owners when it comes to a routine business debt is shutting down the company. Exceptions are possible in case of serious misconduct of course. Of course a company like that will find it difficult to borrow money, but it's not rare for its last bills to go unpaid when it goes out of business. Whether those should exist or not doesn't have a clear answer. Culturally, Germans tend to be pretty uncomfortable with "sometimes shit happens and debts go unpaid", while Americans tend to find a moderate rate of that sort of thing tolerable, especially if it makes starting a new business viable for a greater fraction of the population.

deleted 4mo ago
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rayiner 4mo ago
Not quite. In the US this condition is handled at the back end. Running a corporation or LLC without sufficient capitalization can be grounds for piercing the liability shield in a lawsuit.
- Zak 4mo ago
  I have the impression the situations where that actually happens are at least arguably serious misconduct, and usually targeted at someone with significant assets. A construction company that pockets ten million dollars and doesn't build anything probably can't shield its owner this way, but a single-developer software consultancy that pockets ten thousand dollars and delivers buggy code can.
  - rayiner 4mo ago
    In theory it’s based on whether the owner of the company intended to run it under capitalized in an effort to shirk liability.

PowerElectronix 4mo ago

The trust in a company should still be left to the criteria of suppliers, customer, etc. Not the random number that a bureaucrat pulled out of his arse.

bell-cot 4mo ago
Not saying the bureaucrats are great at this - but your "left to the criteria of" sounds like a massive duplication of effort.

logifail 4mo ago

> The 25,000 is there to make sure you can cover some liability I would suggest that this idea of a GmbH does not actually work the way you think it does. Maybe it once did, but not any more. For instance: Wirecard Technologies GmbH Wirecard Sales International Holding GmbH Wirecard Acquiring & Issuing GmbH Wirecard Acceptance Technologies GmbH Much of the regulatory structures in Europe work this way, they assume that both good and bad guys will play by the same rules. Spoiler: the bad guys don't care about the rules!

echoangle 4mo ago
Im pretty sure those wirecard companies all had the mandatory money in the account. They just did more damage than that.
- antonvs 4mo ago
  Ok, so what is the point of the money?
9dev 4mo ago
I don't know what that example is supposed to prove? Everyone in a business relation with one of these companies can make claims against them. The problem with Wirecard is rather that the 25k of each of them aren't going to make up for the massive damage caused by Marsalek. Then again, I don't think we should structure our systems to expect the blackest of swans that guy was. The 25k are intended to ensure liability coverage for very small and young companies, not giant corporate networks with billions in backing (well, theoretically anyway... hah)

nish1500 4mo ago

High initial capital requirements have repeatedly proven to be more detrimental than beneficial (https://mariusring.github.io/web/BacherFagerengRingWold_SelectionIntoEntrepreneurship.pdf https://mariusring.github.io/web/BacherFagerengRingWold_Sele...). Germany is an outlier in wanting to keep the barriers high. Running a business in Germany is for a closed inner circle. The apparatus is not meant for broke college students turning their weekend project into a company.

spacington 4mo ago
Why not? Depends on your product and expectations of your customers. B2C: I don't care what company structure you are.
ffsm8 4mo ago
In Germany getting 25k as a working adult is hard, because before taxes and social security that's 50k you need to earn. Thats more then an average person earns in a year before taxes, so they'll likely be saving for 5-10 years if they want to start one. Now wherever that's an issue with the 25k admission fee OR with the fact that wages have stagnated for about 25 years in Germany, consequently mostly wiping out the middle class ... That's debatable.
- chmod775 4mo ago
  > In Germany getting 25k as a working adult is hard German median household wealth is 4x that.
  - ffsm8 4mo ago
    You mean median household net worth. This estimate includes things like a car, a partially paid off house and other assets. Most of that wealth cannot easily be converted to cash which you'd need to start a company. Also that's median. Germany is a country with a median age of 45. So yeah, someone who likely worked for 20+ years will likely have saved around 100k, I don't think you realize how that's an argument in favor of what I just stated...
  - 4mo ago

solatic 4mo ago

This is not an argument that founders should seed 25k EUR to cover liability, it's an argument that GmbH bank account amounts should be visible publicly. If I want to put in a catering order, the catering business does not need 25k EUR to cover liability. If I want to build a data center, 25k EUR is not nearly enough.

notpushkin 4mo ago
> GmbH bank account amounts should be visible publicly Not sure about Germany, but e.g. in Estonia it’s essentially public info (albeit unaudited, usually), as part of the annual report. The company has to maintain at least the declared capital amount in their bank accounts (or other assets), but the amount can be pretty much any number, so the business owner can decide what sum makes sense in their case. 25k € is way too much for most small businesses, yeah. (IANAL)
Zufriedenheit 4mo ago
All GmbH are mandated to publish their financial statements in Germany. Its on Bundesanzeiger a government website which of course takes a fee again…
- kuschku 4mo ago
  It's also available in the Handelsregister, which is available for free.

deleted 4mo ago

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throw1234567891 4mo ago

And you can start a company with €1. The format is UG. You have to keep 25%(?) of the profit until you reach 25k and convert into GmbH. And reading the article, he does found a UG! This isn’t even about GmbH!

tomp 4mo ago

> The 25,000 is there to make sure you can cover some liability. Is this actually true? Can't the company just loan out the 25k immediately?

bobsoap 4mo ago
Yes. The 25k capital doesn't have to be cash, but can be in claims or asset value as well.

davedx 4mo ago

Yeah I don't really understand the part about not being able to invoice either. IANAL but it's the other way around - you need a VAT number to invoice clients in Germany (and the EU), not outside of it. VAT is exempt for clients outside of the EEA. Also: I've always used a ZZP structure (one man company - Dutch version) for mine, not a BV (LLC), because there's a thing called Professional Liability Insurance. But maybe it's different in Germany? I can't imagine that doesn't exist there though.

markvdb 4mo ago
Not incorporating would be very fiscally suboptimal here (.be) for anything tech related. Your marginal tax+ social security contributions rate would be ~66% starting from 50k€ gross...

sarjann 4mo ago

Isn't that what insurance is for? So you don't need to stash away a bunch of idle capital incase something goes wrong.

notanormalnerd 4mo ago

I just did a quick check: The 25.000€ hasn't been raised since the early 1980s. (50.000 DM back then) So to have the same liability today, you would have to put down 65.000€. So it has gotten increasingly cheaper to start a GmbH in Germany.

ccozan 4mo ago
This is a very insigthful comment! I also checked and the notary fee I paid 10+ years ago is the same as I paid this year ( for a GmbH founding ).

thomas_witt 4mo ago

The 25kEUR requirement has been lowered a few years ago to €12,5k as required paid-in capital.

ccozan 4mo ago
yes but you are still liable for the full 25.000 euros.

varispeed 4mo ago

This could have been resolved by listing how much capital company has set aside for liabilities. If someone sees company only has 1 EUR, then they can assess their own risk accordingly before engaging.

Saline9515 4mo ago

The problem here is that 25k€ is too little for some types of businesses (say, a bridge architect), and way too much for others (say, selling spice mixes online). I don't get the "seriousness" memes in Germany, which sound more about gatekeeping than anything else. Why not require 1M€? This is serious! More serious! Meanwhile, they have companies likes Wirecard that went under in a day after it discovered a "hole" of 2 billion (magic!). Why not just allow people to create a Gmbh with 2k€, and then publicise the amount of share capital so clients can make their mind? It's how it's done in France for instance, allows some flexibility (I know, a swear word in Germany), and sounds less like a social punition (something Germans love). The hack anyway is to create an Estonian e-company, with almost no maintenance/creation costs. Germans are the largest funder demographic for this reason.

pintxo 4mo ago
It exists, it is called "UG", minimum capital 1€. You have to increase capital up to at least 25k though, out of your annual profits.
- Saline9515 4mo ago
  Why have a different category that sounds like "unserious" to german people? I can see people in procurement departments say "oh no, we don't deal with UG".
  - port11 4mo ago
    You’ll find that many people don’t have 25k€ to invest in initial capital of a business, but that are perfectly capable of running a business regardless. 5k€ is fair for plenty of endeavours, and more should be required for riskier businesses. People seeing a GmbH as more serious is just a cultural aspect, I’d say.
  - wink 4mo ago
    Ok, so first of all, the UG was only introduced in 2008 - which even for some of us middle-aged people is more "it's relatively new" than "GmbH has existed decades before I was born". Second, not that I claim to be any representative, but this "UG is weird, unknown, not serious"... I have personally not heard that for about 10 years, so yeah, absolutely true when it was new. Third, it's still relatively rare I'd say. You stumble over one every couple of months or years, in my experience mostly online shops without their own manufacturing (but maybe that is where I am looking) - if you just look at what tradespeople have on their vans: Nope, never. Always GmbH or GbR/single person. But I have no insight into procurement departments.

ulf-77723 4mo ago

Actually only half of the 25k is needed to start the GmbH

rmoriz 4mo ago
Only if you have more than one Gesellschafter

glad_duck 4mo ago

It's funny, so it's not even an authorized capital? That one can usually be spent. So these 25K is simply put in the bank as a guarantee? For what exactly? Like if somebody wants go give me a loan they will look at this number and limit a loan to 25K so they are "guaranteed"? It's a great idea, put money in the bank, take 25K loan and ... what would my net assets be? What am I missing?

selfmodruntime 4mo ago
For debtors during an insolvency.
- glad_duck 4mo ago
  So the only companies in Germany that are accepted are those that have positive net assets (equity), otherwise it doesn't work. Let's say I took a 100K loan, 25K won't solve any problem here. Can't take 100K loan with 25K net assets? That means what I said, you are never underwater, and it will put most startups in the US out of business.

inglor_cz 4mo ago

Most EU countries don't demand such huge initial capital from banal LLCs and they don't seem to have a significant problem with resulting liabilities. I'd guess that the German economy may actually suffer more from dissuading young people to start LLCs.

pseudohadamard 4mo ago

The OP really has decided to take the path of most resistance: An UG is exactly what his business is meant for. If he wants to be a GmbH just for appearance's sake then (a) a one-man band as a GmbH is no more "serious" than a UG (isn't a GmbH minimum 500 employees in any case?), and (b) it's an entity meant for something like Bosch GmbH, not J.Random Dude GmbH.

wink 4mo ago
Last I checked you can be a 1man GmbH and it's not even that rare. I would say it is actually the "default" company type, by volume (not the 1man, but of all companies - although maybe "single person company" are more frequent, but that's not typically what people would imagine as a company). I am on the other hand constantly surprised how many AG (Aktiengesellschaft) there are in Switzerland which only employ < 10 people.

shantnutiwari 4mo ago

"The 25,000 is there to make sure you can cover some liability here is the UK we can get liability insurance. For me, as a one person limited company, it was around 200 pounds, and it was tax deductible. There is no reason to have 25,000 euro deposit.