Comment by tgsovlerkhgsel
2 years ago
I think this is one of the reasons why Germany doesn't have a startup ecosystem.
People who are loosely playing with the idea of running their own tiny company (e.g. as a student side gig, not with the "I'm planning this like a businessperson and here's my plan how to turn it into a unicorn and how to exit" approach) take a look at the system and bureaucracy, and simply give up and forever write off the concept of running your own company as a worthwhile option.
Even becoming an independent contractor is fraught with many of the same hurdles. This creates a strong push towards employment vs. doing your own thing.
Germany, particularly Berlin, have a pretty vibrant startup eco-system. If you are just trying ideas, there is no need to register a business (legally you only have to do this once you intend to follow through long term). You can register a business for 35€ - most cities offer this online. Registering a limited liability company is a little more complicated (you need a 1h appointment with a notary), but can be done from 500€ onwards. If you plan to do less than 50.000€ in revenue this year you qualify as a micro business and don‘t need to file or pay VAT. You only need to file an annual account within a year of the financial year ending. Cost of this starts at around 500€. Our legal system and corporate culture is set up in a way that you are very unlikely to be sued for damages. So even medium sized companies (several million in revenue) frequently operate as full liability companies.
As a student sidegig you can easily just found a small businesses for like 35 EUR and do business. There’s also GbRs that can theoretically be formed on a paper towel. Thought, it will probably not be easy to raise money this way.
.. and you are personally liable for anything damages caused by the business.
Surely the requirement that a limited liability company has some minimum assets is reasonable for exactly that reason. You wouldn’t want someone to be able to form a company whose liability was limited to couple hundred Euros of assets the company was formed with.
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According to German law, executives can be held responsible anyway …
As a "student" or even a starup entrepreneur, you usually don't have "assets" under your name that your creditors can take over in case of a potential lawsuit.
If I were an entrepreneur and my startup would incur 100 million dollars of liabilities, my assets won't cut it so the more appropriate to say " you are personally liable for damages to the extent of your assets. "
Can't this be overridden (mostly) by simply specifying liability limit in all your contracts?
And you are not eligible for government startup funding support after you finish your degree, since it only supporte your first company ('exist' program).
Universities also provide consulting and crash curses for stuff like that.
A crash curse sounds risky.
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> Even becoming an independent contractor is fraught with many of the same hurdles.
It depends, there is no simple entity "independent contractor". If you can run your business as Freiberufler - roughly but not quite a freelancer - you may have found a pretty lightweight framework - even compared to other jurisdictions. Simpler accounting, no need for balance sheets and therefore for a tax advisor in most cases (still recommended). Liability can be largely limited by insurance, depending on the field of business.
I'm doing this for over 20 years and I simply have no need to own any kind of corporation.
Of course, YMMV.
It is stupidly easy to create a GmbH or UG, especially the UG. Also very cheap, if you push it two days are enough, will cost you around 100 bucks.
And if you just want to run a side business, one that doesn't have the potential to ruin you, just run it as an independent income.
You can even have your employees participate in your GmbH, either in enquity or profit. That most German start-ups don't simply means they want to keep salaries down by paying in potentially worthless enquity.
That’s not correct. Creating a UG will set you back hundreds of EUR for notary fees, commerce registry entries etc. And you have to prepare your annual accounts, which, if you let a professional handle it, will easily cost you hundreds more
I love how being compliant, taxes, accounting, other regulations seems to be such a hard thing for people looking for millions of VC money while litterally thousands of companies do so every day. I do see a pattern there so, after all ignoring regulations is still a viable business model for SV companies.
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While you can quickly set up the legal entity, getting a tax number can take months (https://www.selbststaendig.de/wissen/steuernummer-beantragen). The last time we set up a company in Germany it took more than 6 weeks to get a tax number.
Oh, forgot about that... VAT numbers as well. Go through a tax cobsutancy and it is faster, did that twice.
I see this as being seperate from incorporating so, as everyone is affected by slow tax authorities.
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If you need a new GmbH really fast you can just buy one. There are companies and lawyers that are specialized in this kind of business and they keep a pool of registered GmbHs for founders to buy.
If you look up GmbHs in the central registry (Handelsregister) you will notice that many of them were founded by law firms and sold after a couple of months to the real founders. This is true even for (now) bigger and reputable companies.
It happens in Spain as well. I remember some time ago when airlines had paper magazines, there was a huge section just fur this. Not limited to Spain, but also UK companies.
If you need to incorporate and have money, you don't need to wait to start doing business.
>It is stupidly easy to create a GmbH or UG, especially the UG. Also very cheap, if you push it two days are enough, will cost you around 100 bucks.
What about the required 25k to start a GmbH?
Nowadays it is 12,5 and it becomes the capital of the company which you can use to buy infrastructure and for the payroll.
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Filings will cost you at least 100/year for nothing. And you have to keep 25% of your profits you have 25k€.
All unnecessarily complex.
If you never make any profit, you don't need to set aside 25 % of your profits.
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> It is stupidly easy to create a GmbH or UG, especially the UG. Also very cheap, if you push it two days are enough, will cost you around 100 bucks.
Having gone through the process (and a rather smooth one at that), I can say with absolute confidence that this is not true at all.
1) Talking to the notary alone and arranging the details (articles of organization, fees – as the notary might try to rip you off –, and the notary appointment) will take several email round trips, aside from the actual appointment to sign the paperwork and the required self-study to understand what you're doing.
2) Opening a bank account as a UG/GmbH that's in the process of being founded is not difficult but it's not exactly easy, either, because you will have to do it before you sign the documents at the notary, i.e. before you are incorporated, because the notary wants to see a bank statement as confirmation that all shareholders have paid their share. The bank, however, wants to see your founding documents which of course you won't have before you've gone to the notary and received the other paperwork from the local company registry (Amtsgericht / court) confirming the existence of your company. Resolving this catch 22 means several more email round trips and even more paperwork.
3) The fees of the notary alone are in the range of 100€. Add to that the fees at the Amtsgericht for incorporating and the fees for the local government (for registering your business / official company address) and you're looking at a few hundred euros in total founding costs. (I forgot how much exactly; I would have to look it up.)
4) The bank account requirement alone means that you'll probably be paying ~15€ every month to the bank. On top of that, unless you want to do the bookkeeping on paper (i.e. by hand), you'll need proper (tamper-resistant!) double-entry bookkeeping software, which (last time I looked) is not free, either. (Excel is no longer allowed!)
5) Every year you'll be paying ~60€ to hand in your balance sheet (Handelsbilanz) to the Bundesanzeiger and your "electronic tax balance sheet" (Elektronische Steuerbilanz) to the tax authorities. You'll also pay ~150-200€ to the local IHK (Chamber of Commerce and Industry) just because your company… exists(?!)
6) Speaking of bookkeeping & balance sheets, you'll also be handing in tax declarations for the different taxes your company will be subject to (USt, KSt, GewSt). Learning how to do all that is a proper time sink. Unless you want to pay an accountant, you're looking at dozens if not hundreds of hours of self-study and paperwork every year.
7) The second you want to hire anyone, social security and employee wellfare laws will mean even more work for you (at which point you'll probably hire someone just to take care of all of that paperwork for you).
Couldn’t agree more.
I went through the same process multiple times in the past and every step on the way (like you describe) is complicated, expensive, slow and error-prone. And I am actually fluent in German. I can’t imagine how someone would navigate the process without speaking it.
point 1) "as the notary might try to rip you off" i'd like to see an example. The position of the notary is the neutral one on signing deals OR notfifying the documents you sign to give you an undisputable legal binding document. Any notary trying to rip you off is walking dangerously close to immediately loosing his job - forever.
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> one of the reasons why Germany doesn't have a startup ecosystem.
But they do.
In fact every hiring post here has plenty of German companies
(not defending bureaucracy here - but it is good to know the rules and tricks before doing this kind of stuff - in fact I'd even argue you might just establish your company somewhere else in the EU, or even somewhere close)
Also - even in the US there are foot-guns that you can get into if you don't know what you're doing