A GmbH, abbreviation of “Gesellschaft mit beschränkter Haftung” (association with limited liability), is a company under German commercial law and must have a capital stock (initial assets) of at least € 25,000.

A UG, the abbreviation of ‘Unternehmergesellschaft’ (entrepreneurial association), is like a GmbH under German commercial law: a corporation with limited liability. In contrast to the GmbH, the UG requires less share capital than the GmbH. In the UG, the annual profit has to be partially saved (i.e. not fully distributed). It is also called “Mini-GmbH”.

The ‘Articles of Association’ or ‘Partnership Agreement’ is a contract in which the shareholders determine the legal basis of the company when establishing a company, including the name of the company, the business purpose, the registered office of the company. This contract requires notarisation to be effective.

A business purpose must always be stated in the articles of association. On the one hand, it should be specific to your company, but it should also not restrict it too much. Typically, it consists of one or two sentences. We will advise you on this.

A foundation with the theoretically possible share capital of € 1 would be exposed to high risk of insolvency immediately after the foundation or after the sale. You should definitely avoid this. Such a share capital also doesn’t present a good image to the outside world.

The authorities (including the commercial register, tax office) deliver mail to the company’s domestic address, which must not be a post office box. If this mail is returned due to undeliverability, the commercial register suspects that the company does not exist there and refuses registration, or at least delays further processing. Once you’ve set up an address by yourself, it’s important to make sure that an inexperienced postman doesn’t let the mail go back just because he doesn’t recognise the new company.

In the past, you could actually walk into a bank branch and immediately get an account for the company. Today, banks are no longer interested in new and small businesses. First and foremost, you need an appointment at a business customer center. This can be up to weeks in the future. You have to answer many questions about your future company in order to be of interest to the bank at all, especially if you do not want additional products from the bank. After all these formalities, some banks sometimes reject your account application without a reason. Many banks (e.g. direct banks or fintech’s) often do not open accounts for newly founded companies or certain types of business.

You can do that. Only in practice, this leads to delays in the process, as the notary commissioned by us must first send the documents to your notary after the certification. He has to process it and you make an appointment. Then the notary’s office first must prepare the deed, and then send it back to the notary so that this notary’s office can put together the entire package and initiate registration with the commercial register. Every step and every mail run can take a few working days, so we only recommend this if it is difficult for you to get to Berlin.

Only when the share capital is fully available to the managing director when the company is founded is the share capital then deemed to have been paid. According to the latest legal opinion, this is only legally secure and verifiably possible with a bank account in the name of the company with access authorization for the managing director. In the opinion of our consultants, previous procedures involving “cash” or “showing” the share capital to the notary are no longer legally secure enough.

A Standard Record of Articles of Incorporation is a simplified form for the Articles of Incorporation. It is similar to a form, in which only the individual data of the company is entered in certain place holders: Name, business purpose, registered office of the company, shareholders, managing directors.

The notarisation of an UG incorporation with UG Standard Records of Articles of Incorporation requires lower notary fees.

The Standard Records only allow some entries by prescribed place holders; other individual changes or additions are not possible. If changes are subsequently made, i.e., after the company has been established, it will then be necessary to change to a complete (customized) form of the Articles of Incorporation, e.g. due to a change of the managing director. As a rule, this is more expensive in total than if the company had been founded with a complete Articles of Association.

In principle, freedom of name applies within the framework of the statutory provisions. A company name must sufficiently identify the company and must have sufficient distinctiveness. It must not be misleading.

A GmbH must have “GmbH” or “Gesellschaft mit beschränkter Haftung” added to it. A UG must always have “UG (haftungsbeschränkt)” or “Unternehmergesellschaft (haftungsbeschränkt)” added to its name.