date | theme

23. February 2019 | Founding of GmbH in Germany: Costs / Steps / Benefits / Capital / Duration

07. September 2022 | How to bring in the share capital when founding a GmbH

20. May 2022 | List of shareholders at the GmbH and their legitimacy (§ 16 GmbHG)

23. May 2023 | Start-up costs in the opening balance sheet of a GmbH (this contribution)

Start-up costs are the costs incurred when setting up a GmbH. Whether and to what extent the GmbH may bear the start-up costs is not always quite clear in practice. In the case of smaller companies, there is often no approach to start-up costs in the opening balance sheet. We explain to what extent the GmbH may assume start-up expenses and how these are to be included in the opening balance sheet of a GmbH.

The company with limited liability (GmbH) becomes a legal person upon its registration in the commercial register according to § 13 (1) GmbHG. According to § 13 paragraph 2 GmbHG, the creditors of a GmbH can demand and achieve the satisfaction of their claims only from the GmbH and only from the assets of the GmbH. The shareholders, however, do not have to stand for the liabilities of the GmbH. In order, in turn, to limit the risk of creditors, the shareholders must undertake to provide deposits and actually and fully provide these promised services, so-called share capital.

The equity of the GmbH includes not only the share capital, but also the other assets that are provided in connection with the establishment as surcharges by the shareholders. However, these other deposits are not subject to the strict legal provisions of formal capital stock. The creditor-protecting capital raising rules and capital conservation rules do not apply to such Agios.

In balancing the conflicting interests of shareholders and creditors of a GmbH, however, the burdens on equity capital incurred in the establishment of the GmbH must also be taken into account. These are to be seen in particular in the notary costs for the company contract, for the shareholder resolution, as well as for the registration of the GmbH in the commercial register and the court costs for the registration. The cost of construction can be reduced if the model protocol is used. Here the notarization of the shareholder resolution for the foundation of the GmbH is not necessary. All these costs are called start-up costs.

As start-up costs, however, such expenses incurred by the commencement of business activity are excluded. The purpose of this expenditure is not to create the owner of the enterprise, but to create the activity of the owner. This includes, for example, expenses incurred for the procurement of the company premises, the necessary personnel or also through the purchase of goods, raw materials and necessary technology. Also included are expenses for the preparation of a company concept or a company planning and consulting costs incurred thereupon.

A distinction must therefore be made between start-up costs and costs of starting up business. Before the establishment of the GmbH, the activities of the future shareholders may be directed both towards the establishment and the commencement of business activities. Therefore, the date of establishment cannot be applied as a delimitation. In individual cases, a demarcation can therefore be difficult because the foundation of a GmbH is based on an entrepreneurial concept and the entrepreneurial concept and design of the GmbH as a company carrier can influence each other.

This becomes clear for contributions in kind. The value of a contribution in kind can be measured, on the one hand, by its substance value. This refers to a sale proceeds to be realised in the event of a sale less any possible expense incurred by the sale. In addition, the value of a contribution in kind may result from the contribution in kind being transferred to an entity, used there and then valued at exposure. The valuation with replacement costs requires an entrepreneurial activity. Thus, the concrete decision to take up business is to be regarded as part of the establishment.

The distinction between start-up costs and costs of commencing business leads to the fact that, according to the notarial act, the expense must be borne unrestrictedly by the company, since after the establishment of the company, the further activity can only be directed towards commencing business. The special regulations for the start-up costs therefore serve as a result to burden the GmbH only with expenses incurred during and before its establishment.

Entry in the commercial register is based on an application. According to § 7 paragraph 1 GmbHG, this is to be submitted to the court whose commercial register is locally competent due to the registered office of the GmbH. According to § 8 (1) GmbHG, the application, which is generally referred to as an application, shall be accompanied by the articles of association, the legitimation and the company list.

If contributions in kind are to be made instead of cash deposits, further documents must be submitted. These include the contracts for the transfer of the contributions in kind to the new company, the report on the foundation of the material (§ 5 (1) no. 4 GmbHG) and other documents from which the commercial register can determine the value of the contributions in kind.

Fees are incurred which the commercial register requires for registration in the commercial register. If contributions in kind are provided by the shareholders, the costs of checking the value of the contributions in kind, as well as those for the transfer of ownership to the company, are included in the formation costs.

The conclusion of the social contract itself requires the notarial form in accordance with § 2 (1) GmbHG. It shall be signed by all partners. The social contract consists of two parts. One part represents the contractual agreement of the founding shareholders to establish a GmbH. In addition, the contract contains the conditions under which the company intends to operate in the course of trade and the rules governing the relationship between the partners.

The mandatory content of the articles of association is, in accordance with § 3 paragraph 1 GmbHG, the company, its registered office, its counterpart, the amount of the share capital and the number and nominal amounts of the shares, including the persons who take over the shares.

These mandatory regulations can complement the shareholders in many ways. It is customary to determine the transactions that require a shareholder resolution, regulations on leaving the company and provisions on determining the severance payment of a resignee. These provisions essentially define the relationship between the shareholders.

The founding documents must be submitted to the commercial register in German or German translation. Therefore, when establishing the company, the notary must ensure that the individual founders are sufficiently proficient in the German language and understand the content of the declarations they make during the founding meeting. Therefore, expenses for the translation of founding documents may continue to arise if the founding shareholders of the German language are not competent. An interpreter may also be required at the Society Meeting, where the founding of the company is decided. Consequently, the costs of translation are mandatory costs.

The list of shareholders must first be created and then transmitted to the commercial register. The expense for this is part of the founding costs.

The other start-up costs also include the consultancy costs incurred on the occasion of the foundation of the GmbH. Consultancy costs include those incurred due to the design of the articles of association and also tax or business advice. Even a founding partner can already be remunerated for his efforts and expenses incurred when founding the GmbH. The prerequisite for classification as start-up costs is to act on the occasion of the start-up. In this case, however, activities are also covered which have no direct temporal or factual connection with the establishment of the GmbH.

The GmbH is provided with a fixed capital to compensate for the limitation of liability of the shareholders. In principle, this should not be reduced by assuming start-up costs. If burdened by the start-up expense, the capital promised by the shareholders would already be reduced at the start-up. Therefore, in principle, the shareholders have to bear the founding costs.

However, the BGH recognises the assumption of the founding costs in accordance with § 26 paragraph 2 AktG. Pursuant to that provision, the company may be required to bear the founding expenses if the total expenses incurred by the company to shareholders or other persons as compensation or reward for the formation or preparation of the company are specified separately in the articles of association. With the introduction of the model protocol for the establishment of a GmbH in accordance with § 2 paragraph 1a GmbHG, the legislator expressly allows the takeover with Section 5. The two versions of the model protocol state that the company bears the costs of incorporation. According to the amount, the takeover in the model protocol is limited to an amount of 300.00 euros, maximum the amount of the share capital. Further costs shall be borne by the partners.

However, the GmbH should only be able to cover the necessary expenses. Expenditure shall be deemed necessary if it arises under law or if it is appropriate in nature and scope. In practice, costs of up to 10 % of the respective share capital are considered as transferable. If this limit is exceeded, a closer examination is usually carried out by the registry courts. If the expenses assumed exceed the amount of 60 % of the minimum share capital, the limit of what is necessary is in any case exceeded. Therefore, the creditors would have to be available undiminished after the founding act at least 10,000 euros. The amount that the GmbH may take over is generally limited to 10% of the share capital. For higher acquisitions by the GmbH, a special justification is required.

On the other hand, the limitation to a maximum amount of € 300 does not seem absolutely necessary, since the Regel-GmbH usually has a significantly higher equity capital than the UG. The stringent limitation at the UG appears to be necessary because the legislature waives a formulated social contract for the UG at the time of establishment according to the model protocol, so that the effort for the establishment of an UG is significantly reduced.

The shareholders of the GmbH may provide financial or other resources as equity capital in addition to the statutory share capital. Then there is no need for a strict limit on the assumption of the start-up costs. Rather, the shareholders have made further funds available to the GmbH without increasing the formal liability capital. These funds could also have been retained by the shareholders and used to pay the founding costs. The shareholders are therefore free to dispose of their own capital, which is not capital stock or the variation margin laid down in the articles of association.

The provision governing the assumption of the founding costs is to be included in the statutes. With the assumption of the expense, the share capital provided by the shareholders is economically reduced, which must be notified to the creditors. Therefore, the mere incorporation into the founding protocol is probably not enough. When included in the articles of association, this provision always appears in a current document of the GmbH and is thus easier for the shareholders and the creditors of the company to recognize.

According to § 242 (1) HGB, the merchant must prepare a financial statement at the beginning of his trade, which represents the ratio of his assets and debts (opening balance sheet). According to § 13 paragraph 3 GmbHG, a commercial company is only considered to be a company registered in the commercial register. However, it is mainly assumed that the accounting obligation already begins with the establishment of the GmbH. It therefore begins with the first transaction, which represents the establishment of the GmbH and the fulfilment of the Obligation. The date is when the founding members and the notary have signed the founding protocol. The signature under the registration of the company with the commercial register as well as under the list of shareholders takes place after the date of establishment.

In the opening balance sheet, the merchant must draw up a financial statement in accordance with § 242 (1) HGB, which represents the relationships of his assets and debts. The basis of the financial statement is the list (inventory) in which the merchant has to record his real estate, claims and debts and the amount of the cash and other assets. In addition, state the value of each item of property and debt.

After the signing of the founding act, the GmbH’s claim against the shareholders for payment of the contribution was incurred. In this respect, there is therefore a requirement that Vor-GmbH has to include in its inventory. In the case of a GmbH with a share capital of € 25,000, this creates a claim in this amount against the shareholders. The claim of Vor-GmbH already arises at this time, although the GmbH is not yet registered in the commercial register.

The claim on the provision of the contribution must be shown in the balance sheet against the subscribed capital item. In the case of a GmbH with a share capital of €25,000, then €25,000 according to § 42 (1) GmbHG is to be recognised as the subscribed capital. Subscribed capital shall be recorded as the first item on the liabilities side. The undue deposit obligations are to be openly deducted from the subscribed capital item (§ 272 (1) sentence 2 HGB) and both values are to be shown as called-up capital item.

In addition, the start-up costs are to be included in the supplementary balance up to the amount specified in the founding contract. The amount is based on an estimate by the founding members. The exact amount is not yet fixed at this time and may be less than the amount entered in the contract. The debt of the GmbH is therefore at least in terms of amount uncertain. Therefore, the liability arising from the assumption of debt is to be shown as an uncertain liability according to § 241 (1) HGGB under the provision. Therefore, it does not matter to what extent the shareholders have already paid start-up obligations.

The start-up costs require a counterpart in order to balance the balance sheet. The expense is to be distinguished as an accruals on the asset side.