Company (UG)

A “Unternehmergesellschaft (haftungsbeschränkt)” or UG in Germany is a legal form of business organization, often referred to as a “mini-GmbH” due to its similarities to a regular GmbH (limited liability company). Here are some key characteristics and details about a UG:

1. Limited Liability:

Like a GmbH, a UG offers limited liability protection to its shareholders (Gesellschafter). Shareholders are generally liable only up to the amount of their capital contributions to the company.

2. Minimum Share Capital:

One notable difference between a UG and a regular GmbH is the lower minimum share capital requirement. As of my last knowledge update in September 2021, the minimum share capital required to establish a UG is €1. However, it’s important to note that any profits generated by the UG must be used to increase the share capital until it reaches the minimum required for a GmbH (€25,000). Once this threshold is met, the UG can convert into a GmbH.

3. Formation and Registration:

To establish a UG, founders need to draft a company agreement (Gesellschaftsvertrag), which specifies the company’s name, purpose, share capital, and other important details. The agreement must be notarized, and the UG must be registered with the local commercial register (Handelsregister).

4. Management:

A UG can have one or more managing directors (Geschäftsführer) who are responsible for running the day-to-day operations of the company. The appointment and powers of managing directors are typically defined in the company agreement.

5. Financial Reporting:

Similar to a GmbH, a UG must maintain proper accounting records and prepare annual financial statements. These statements may need to be audited, depending on certain criteria.

6. Taxation:

UGs are subject to corporate income tax (Körperschaftssteuer) and trade tax (Gewerbesteuer) on their profits. Shareholders may also be subject to income tax on dividends received from the company.

7. Flexibility:

UGs provide flexibility in terms of ownership structure, and they can have multiple shareholders. It’s possible to convert a UG into a regular GmbH once the minimum share capital requirement is met.

8. Termination:

A UG can be dissolved through various means, such as a shareholder resolution, insolvency, or legal action. Assets remaining after settling debts and liabilities are typically distributed to the shareholders.

Please note that the legal and regulatory landscape in Germany can change, and specific requirements may evolve over time. It’s essential to consult with legal and financial advisors or authorities in Germany for the most up-to-date information and guidance when considering the establishment of a UG or any other business entity.