Frequently Asked Questions and their Answers

Questions and answers

We try to provide answers to common questions from our customers. Of course, if you have further questions related to your individual situation,
then talk to us.

Questions and answers, advantages and disadvantages of a shelf company, trust company

 

General questions

What is a “company” anyway and why do I need something like that?

A company in the form of a GmbH or UG is a corporation and a separate legal entity. The owner or owners of the company are called shareholders. The company is represented by the managing director, who must always be a natural person and sign for the company (also known as “operate under the name of”). A single person can be both shareholder and managing director of the company at the same time. The advantage of a company is that it is normally only liable with the so-called share capital and where there is no personal liability. However, the managing director has certain obligations which, if violated, can lead to the managing director’s personal liability.

What is a GmbH?

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.

What is a UG?

An 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”.

What is a company's 'Articles of Association'?

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.

Why do I have to state a business purpose?

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.

Why would you set up a UG with a share capital of € 500 if € 1 could be enough?

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.

Why is it so important that the company has a deliverable mailing address?

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.

Why is an existing bank account so important, can I get a bank account at any bank straight away?

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.

Isn't it easier if I go to a notary of my choice?

Many notaries are either overloaded or would rather notarize a property sale. For the establishment of a small UG, the notary can only charge relatively low fee rates. If you do not have a personal connection to the notary, you’ll have to wait several weeks for an appointment. The notary also has to familiarise himself with the situation, as he does not accompany this business on a daily basis and some notaries are not very experienced in this matter. As long as this process continues, you are not “immediately able to act”. Incidentally, the notary fees are set uniformly, i.e., the same for every notary apart from small differences (communication flat rates).

Can I also have the notary contract re-certified?

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.

Why is it important that the share capital is fully paid into a bank account?

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.

What is a UG Standard Record of Articles of Incorporation?

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.

What is the advantage of the foundation with UG Standard Records of Articles of Incorporation?

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

What is the disadvantage of the foundation with UG Standard Records of Articles of Incorporation?

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.

Can I choose any name for the company?

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.

Questions about shelf companies

What is the advantage of a shelf company over an incorporation from scratch?

The formation of a new company (GmbH or UG) from scratch in Germany is very formal and time-consuming (notary, bank, commercial register, etc.). During the period before the company is fully incorporated, there is no limitation of liability, i.e. the founder is personally liable for all transactions made in advance, so it is not advisable to start business during this period. Shelf companies are already incorporated and thus fully limited by liability, so there is no waiting period.

Shelf companies are therefore very suitable if you need a company that is immediately available and can do business for you at short notice, including limited liability. A shelf company (as a shelf company GmbH or shelf company UG) can be transferred (sold) at the next possible notary appointment.

Can you tell me the name and the commercial register number of the company before signing the contract?

In order to avoid misuse (which unfortunately has happened before), we cannot provide you with the company’s data. This is also for your safety; you do not want someone to act unfairly for the company before.

Why can't I make a reservation for a shelf company with you?

We consider this rather a marketing measure. We have enough companies in our portfolio from which we can sell you a suitable company (shelf company GmbH, shelf company UG) at any time, so a reservation is not necessary and would only disadvantage customers who want to buy immediately.

You still have questions?

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