Comment by gyulai

* Set up Topexpress UG (haftungsbeschränkt) with €2k in capital but no more. This needs to exceed the cost for the notary, otherwise it is technically insolvent as soon as the notary performs his services on behalf of that entity. It is 100% owned by you, Max Mayer.

* Set up "Topexpress UG (haftungsbeschränkt) & Co KG", a limited partnership (KG) with a limited partner who is you, Max Mayer, and a general partner who is "Topexpress UG (haftungesbeschränkt)". -- This is the entity through which you'll end up doing your day-to-day business.

* Here, "Topexpress" is a non-descriptive name that could stand for anything. You might think you know what your company will do, what its product is, and what the product is called. But you probably don't. So use a funny company name generator and make sure not to overdo actually mentioning the name of your company, except where the law requires it.

* If you anticipate that €100k per year will be more than enough for you to live on comfortably, then give your partnership a partnership agreement that says that profits below €100k go directly to the limited partner (you) who does all the work, and profits in excess of €100k go to the UG that, nominally, provides the capital.

* This is a very nice setup: As long as your earnings stay below €100k, the entity is just like the kinds of entities that craftsmen use. You can flexibly take money out of the business, debiting your partnership account or put money into the business, crediting the partnership account. That's a great structure for when you don't yet know how much money your business needs, but you anticipate that you have enough money in the bank yourself to bankroll it initially. Conversely, when your private finances get tight but you know you have excess earnings lying around in the business you can take money out of the business easily. It's as easy as a bank wire, with no immediate paperwork required. Your accountant just does the tally at the end of the year.

* Since this is pass-through taxation, it's also great for when you end up generating a loss. Say your business fails and you go back to work for someone else as an employee. You can then offset these losses against future earnings to reduce your future tax bill.

Now, let's say that after countless stumbles and pivots (think "the lean startup") you've figured out "Super Product". It's already making €80k in earnings per year, and you anticipate a lot of growth and interest from investors. It is at this point, not earlier for reasons of admin overhead, and not later for tax reasons, that you do the following (while having professionals help you with this):

* Incorporate Max Mayer GmbH, 100%-owned by Max Mayer.

* Incorporate Super Product Inc in Caymen, 100%-owned by Max Mayer GmbH.

* Draw up a sales contract between Max Mayer and Superproduct Inc wherein Max Mayer agrees to sell his ownership of Topexpress UG (haftungsbeschränkt) to Super Product Inc while simultaneously resigning as limited partner and renaming Topexpress UG (haftungsbeschränkt) to Super Product GmbH.

This last piece will be a taxable event but, technically, "Topexpress UG (haftungsbeschränkt)" has never made any money. All the money has always been earned and taxed by Max Mayer. So you have a good basis to argue for a low valuation, possibly even zero, vis-a-vis the taxman who does his valuations based on rulebooks and laws, rather than how a sane business person would value a business.

Getting that tax bill will give you a level of certainty that the taxman won't later find you holding a pile of money too big to ignore and retroactively try to tax you on it based on the fact that you tried to dodge the tax at the time when the taxable event actually happened.

After the transaction is through, you have a clean structure, namely all the Germans do business with Super Product GmbH (the legal successor of the entity they have been doing business with all aong), you have the Cayman Corp for doing business with investors and international players, and you have your alter ego holding that can collect capital gains while deferring the tax liability.