Comment by hef19898
2 years ago
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.
Well, I had a UG as holding company in Germany and even though the company was basically dormant (besides holding shares in another entity) I still had file yearly accounts which cost about 1000€ / year. Plus another 200€+ for IHK, 100€ for Bundesanzeiger, GEZ / Rundfunkbeitrag etc. All for a company that didn't really do anything. Would you really argue that this is easy / good practice? Because in my understanding this really felt unnecessarily complex and expensive.
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Distraction. Being compliant with all these regulations takes the very valuable focus away from the main goal of a startup: Finding product market fit. Established companies have no problem being compliant because they already have everything setup.
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"looking for millions of VC money" = "I don't have money" How is that inconsistent with wanting to avoid paying money for regulatory requirements that get in the way of solving your customer's problem?
The point is not that startups shouldn't follow regulations, it's that startups are a uniquely weak type of venture, but with the potential to be tremendously valuable to society. So designing a set of regulations for startups that balances the benefits to society of the regulation with the benefits to society of the potential startups is likely to lead to better outcomes for society.
As an analogy - in the city I live in, no-one is allowed to do any digging around a tree without prior permission from the city tree specialist. That regulation is designed to prevent large construction companies from damaging old and valued trees in the community. But in theory, a child planting an apple seed or small tree without permission would be breaking the regulation - can you see how that might reduce the number of trees being planted? The answer is not to remove the regulation, but to have exemptions or light-weight versions of the regulations for those use cases, and then apply more stringent regulations as the company (or tree) grows and becomes more robust and healthy.
If you already have funding these costs are peanuts, but if you just start out or want to bootstrap the running costs of a UG (~1200 yearly?) could be a dealbreaker.
> 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.
Here is the thing: Most of these "startups" are never raising any money, let alone millions. The burden of regulation should be split into pre-raising and post-raising. (Many governments have figured that out with income, like if you have less than xx.xxx per year, you can get away from some reporting).
> people looking for millions of VC money
Startups don't begin with million of VC money which is what we're discussing here.
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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.
We did go through a tax consultancy. Still took that long. While you may be technically right in that it is separate from incorporating, it still plays into how quickly a company actually becomes usable.
But can you do business without the vat number?
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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.
12,500 is a lot more than 100 no matter where it goes to.
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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.
>If you never make any profit
Sure but then that's not really anyone's goal starting a company in Germany. So ultimately you will have to deal with this issues if you don't fancy being homeless.
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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.
I had the same assumption. However the last notary that I worked with didn’t hand in documents in time (which caused lots of trouble), handed in incorrect documents and simply did not answer to emails or calls for weeks.
He only started to act when I used my lawyer to threaten him. Even then my lawyer said that it would be very hard to start legal proceedings against the notary.
If you think notaries are 100% trustworthy you should also have a look at https://www.tagesspiegel.de/berlin/millionen-immobilie-in-be...
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I would have to look up the exact details but I was basically following the standard "Musterprotokoll" to found my company, with one tiny difference/change somewhere. Well-established court rulings said that this change didn't make a difference regarding the notary fees. The notary still charged me for it. When I pointed out the court rulings to them, their response was basically "Right, sorry, we forgot".
I have heard about several other cases like that from friends.
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Plus, notaries are working on standardized fees. No ripping of to be had. Settimg up special charters is diffnrent so, but those are best done by a specialized lawyer anyway.