The Initial Capital

Initial capital and how it is used

Can the money for capitalizing the company be used or is it gone for good?

Yes, the money can be used after funding the company but this needs to be structured carefully. The capital for your company has left you for good and is now with your company – like giving it to your sister. You can use the funds for everyday needs of the company. It's not permissible to simply return it to the shareholder if you want avoid personal liability.

Must I have a German bank account?

Not all, you can take any bank you want - important is only the IBAN number. GmbHG does not explicitly mention the requirement of a bank account but practically you cannot work without one. Latest, paying a German authority requires cashless payment. Depending on your nationality, it can be more or less easy to open an account. We have compiled a list of banks that you can choose from.

For which nationalities is it difficult to open a business bank account?

Typically citizens of countries which are know for shadow business will experience problems when living abroad and wanting to open an account over here. Unfortunately, American citizens belong to this category.

American citizen have an issue to open a business account in Germany? Come on, this cannot be true! In the States, we have constantly learned about the greatness of the US.

Yup, sad as it may sound this is true. However, this has nothing to do with any president or political setup but relates to FATCA.

Why can't you open an account for my company?

Well, we love to serve and take care of you but when dealing with a bank, we would be collaborating with a third party on which we have no influence. Besides, you will have certain needs and expectations that you wish to have met. All this is beyond our abilities. Besides all that, you yourself have to establish a good banking relationship in case at any time you might need a loan or other kind of support.

Gosh, I am stunned! This stupid bank turned me down. Can't I insist that they take my company?

We regret your disappointment but such is life. No one has the right to demand from any bank that they are provided with an account. The only exception is for the so-called P-Account but that is only for private persons – not businesses.

Why do you to collect and cover the fees of the authorities during remote founding? This makes your offer seem so very expensive.

Simple! We want to take care of you and expedite the proceedings. Payments inside Germany arrive faster. We will argue with the authorities if the fees are incorrect – without charging you. One less detail for you to worry about. Especially the notary will be pleased to learn that his payment is secured and will jump to serve you quickly. Otherwise, both notary and Commercial Registry will each expect payment first before implementing anything. It's simply more difficult to sue a person for fees when living abroad.

I just realized for opening my GmbH, I can also pay only half of the funding capital. That's awesome! But tell me, when do I have to pay the rest?

It can happen that you never have to pay the rest! You know, there are only three situations when that money will be demanded:

  1. when the shareholders call it in,
  2. when the bankruptcy manager stretches out his hand,
  3. when winding up the company, and insufficient funds exist.

Does my start-up company have to give me a contract of employment immediately as shareholding director? We have not yet converted any money. I still have savings and can therefore be well prepared for the near future.

If the tax office asks you such question, this is not harmful at all. The authority just wants to know "whether" or "whether not". There is no obligation that you have to be employed at all. At what time you should give yourself an employment contract is an economic question, for which you should connect with your tax consultant.

How much should I pay in share capital for my UG? Is a single Euro really enough? That will not last the first day.

Admittedly, this is not enough for the existence of a company. Unfortunately, the answer is somewhat complex. The law requires at least one Euro - according to §5a GmbHG and logically up to € 24,999.
As a founder, you should contribute enough money so the company can generate sales and be self-supporting within a certain period of time. An insufficient protection due to not enough share capital always carries a danger of insolvency in itself. Therefore, keep in mind: A managing director is generally obligated to file for insolvency in a timely manner in the event of illiquidity.

How do I pay the initial capital into the company's account? Is a notary needed and/or via the escrow your account needed?

In Germany, this act is very straightforward! The founder transfers the money from his bank account to the company's bank account. Really, that is all there is to it.

Tagged under: GmbH, UG, Companies,