The Gewerbeanmeldung typically registers you as a sole proprietor (Einzelunternehmer) or GbR (partnership). Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG. Those require notarized founding documents, minimum capital requirements (€25,000 for GmbH), and a commercial register entry (Handelsregister)
The simple Gewerbeanmeldung structure is problematic for venture capital because most VCs require a corporate entity structure (GmbH/UG) and converting from a simple structure to a proper corporation later can trigger tax consequences.
At each investment round all shareholders must appear before a notary or provide notarized power of attorney, the entire investment agreement must be read aloud by the notary, changes to company documents require notarization, and each notarization costs thousands of euros and creates delays.
Major decisions which are likely to affect shareholders require formal shareholder meetings with proper notice periods. Unanimous consent is often required for key decisions. Capital increases must be executed through complex formal processes. Registration with the commercial register takes weeks. Minimum nominal values of shares restrict flexibility. Required reporting to tax authorities is extensive. I can go on and on. And don't even get me started about German employee stock option plans.
> Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG.
Meh, do they really? Only if they want to go the VC route. But in this topic we're talking about more healthy ways to build and grow a company and for that you don't need a GmbH or GbR to start.
Is this really true? I'm in the US, and have a corporation in the US. I am shielded from liability through the corporate veil, but I also have a $50/mo $2M/incidence liability umbrella. I honestly have no idea if either are necessary, in 20 years of "doing business" I've never had a single liability needing to be covered by insurance or the veil.
I think it's wise to have, just in case, but even in lawsuit happy America where I have had to fire multiple clients mid-project due to various reason. I've never had blowback or even the treat of a suit. We all just went our separate ways.
Lawsuits are more common in Germany than the US. Possibly because the procedure is different, with lower overhead, and penalties are not reduced for reasons like: you don't have the money to pay.
I believe Germany is generally heavy on liability and light on ways to avoid it. If you damage someone's property, there may be a procedure to confirm that you damaged their property, and then you must pay the value of the damage - as well as the court fee because you didn't just pay it upon asking. No ifs or buts. You cannot avoid paying it in any way, including the clever use of paperwork to avoid paying it. That's why there's a high bar to form a GmbH. As you correctly pointed out, good insurance can also limit your effective liability. I think such business liability insurance products are very common in Germany.
After reading that, for all the talk the USA has about "personal responsibility", it doesn't seem that serious about it, does it?
I haven't been sued either, and I live in Germany. I did pay someone $100 to replace something I accidentally broke, and walked away with the broken thing. No court was involved there and I didn't bother to claim insurance.
Limited liability is something you should always want, and if it merely costs a $30 filing fee and some forms, you should get it, but it's obviously jurisdiction-specific and in Germany, with the much higher requirements, it's obvious that they really only want medium to large businesses to have it (though this isn't a direct rule, I think).
From this thread I just learned about the Unternehmergesellschaft (haftungsbeschränkt) which is apparently a GmbH that can be formed for less than $25,000, but instead, you have to set aside 25% of your profit until you have $25,000, at which point you can convert to a normal GmbH.
> I've never had a single liability needing to be covered by insurance or the veil.
That’s how insurance works. You don’t need it often and maybe not even your entire life, but if it happens and you aren’t covered it will ruin your life.
If this description is not accurate for the situation then you probably don’t need insurance.
I'll warn you that insurance companies often try not to cover a loss or all of it. They often try to cheat their customers. So, having insurance isnt equal to a structure that makes you personally immune to liability because what the insurance company will do is unknown.
And I'll warn you a limited liability entity doesn't necessarily protect your personal assets either.
Undercapitalization is a big one that people don't often realize - going without insurance an not enough funds to cover a claim will usually pierce the veil.
Same goes with little things that typically don't matter to the owner of a one person company, like failing to keep board/member annual meeting minutes and sending them to the state body that requires them, and the biggest one for most small businesses - commingling funds and "alter ego" doctrine - the company is not you, the company's money is not yours.
There are a lot of ways that limited liabilities vanish - especially for smaller businesses like OP is describing.
> > Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG.
> Meh, do they really? Only if they want to go the VC route.
Funnily enough, a German friend of mine and his buddy got accepted into YC some years ago and apparently YC handed them the funds before they had even incorporated or anything, so at least from the point of view of German law they were essentially a partnership (GbR). Not sure how that even worked, especially in terms of delineating what the entity actually was that they and YC owned together. Did YC own 7% (standard deal) of… them? (Without incorporating you are personally liable after all.)
Anyway, from what my friend told me they had a whole bunch of cash lying around on a personal account for quite some time lol
Then again, this was before covid – money was incredibly cheap back then.
The Gewerbeanmeldung typically registers you as a sole proprietor (Einzelunternehmer) or GbR (partnership). Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG. Those require notarized founding documents, minimum capital requirements (€25,000 for GmbH), and a commercial register entry (Handelsregister)
The simple Gewerbeanmeldung structure is problematic for venture capital because most VCs require a corporate entity structure (GmbH/UG) and converting from a simple structure to a proper corporation later can trigger tax consequences.
At each investment round all shareholders must appear before a notary or provide notarized power of attorney, the entire investment agreement must be read aloud by the notary, changes to company documents require notarization, and each notarization costs thousands of euros and creates delays.
Major decisions which are likely to affect shareholders require formal shareholder meetings with proper notice periods. Unanimous consent is often required for key decisions. Capital increases must be executed through complex formal processes. Registration with the commercial register takes weeks. Minimum nominal values of shares restrict flexibility. Required reporting to tax authorities is extensive. I can go on and on. And don't even get me started about German employee stock option plans.