Posted by earcar 19 hours ago
In France you can do it as soon as you started the process.
Just looking at my own state (Michigan) I can form the most "complicated" entity for $60 filing fee. Using a fill-in-the-blank form online. And have it approved the same day for an additional $50. Get an EIN online from the IRS in 10 minutes. Walk to a bank and open an account in about another hour. Annual renewal fee is $20.
In less than a day and for $110, I have a corporation, EIN (federal tax registration number), and bank account. Open for business. An LLC is the same, just a different form filed with the state.
I can then open credit card accounts online in the business name, register for sales tax online (get the license in about a week), and open a stripe account.
Oh, and a businessowners general liability insurance policy is costing me $205 per year. $1 million in liability coverage.
Also, a founder spending months coordinating lawyers banks and tax advisors is not talking to customers or building the product. The opportunity cost here is huge.
Anyway, you are pretty close. One more push, don’t give up. :)
EDIT: Just re-read your message. I thought it said EU. But the point stands, Germany is not Europe either.
That is exactly the right direction. But for now it is just a proposal
Luckily with how the current German economy is doing this is a problem that will solve itself. It's like the last half a dozen German governments look at the Morgenthau Plan plan and thought it was an amazing idea they must implement.
Regarding the economy though, Germany is still the third richest country on earth. I think this talking point about their huge regression is mostly FUD.
The whole reality is much worse.
The tax explanation in the post is oversimplified.
Examples: With a KG, if the business earns €100k, that profit is attributed directly to you and taxed as personal income, whether you distribute it or not. At higher income levels, that’s roughly 45% including solidarity surcharge (and potentially church tax).
With a UG or GmbH, the company pays Körperschaftssteuer plus Gewerbesteuer, typically around 30% combined (depending on where its incorporated). On €100k profit, about €70k remains inside the company. If you later distribute it, you’ll pay capital gains tax based on the Halbeinkünfteverfahren on the distribution - which is 25% + Soli, bringing the total tax burden to roughly the same level as the KG.
The key difference is that with a UG/GmbH you can leave profits inside the company. That money can be reinvested into the business, other startups, ETFs, stocks, etc. - most often with only 1,5% effective tax while the money is working for you. You defer the second layer of taxation until you actually take the money out.
Also, you can pay yourself a salary. Whatever portion you pay out as salary is taxed personally just as it would be in the KG structure - but this time its company expenses, so no double taxation here either.
A few other points:
* A GmbH no longer requires €25k - its only 12,5k€ - and its also not to be locked away forever. The money can be used for legitimate business expenses immediately after incorporation.
* A decent tax advisor can usually get a VAT ID much faster than described in the article.
* A UG is widely accepted in the startup ecosystem. I’ve never seen customers reject an otherwise attractive startup because it started life as a UG. For investors, it's routine.
* Converting a UG into a GmbH later is routine, if you want to start small. If you have the 12,5k€ money, do a GmbH to save administrative hassle.
* A UG & Co. KG creates significantly more administration: two entities, two annual accounts, additional bookkeeping, additional filings, and additional advisor costs.
Of course there are valid reasons to use a GmbH & Co. KG, especially for complicated co-investment arrangements, but from what you wrote, that's not the case here. Therefore, for a solo software founder, I’d question whether the additional complexity buys you anything meaningful.
Bonus tip: You MIGHT want to consider owning your share in the Software UG not directly but through another UG, paolino UG or so. When you foresee to sell your business for significant money later, then you'll have exactly the same advantage, the money can stay in the company for reinvestment and you don't have to give up 50% of your capital gains in the moment you sign the sellers agreement. You CAN't do this easily later.
Not legal or tax advice. Just my personal experience.