It was already a registered company since 2013. But it was labelled as a "hobby" company because of the unfortunate UG (haftungsbeschränkt) tag for young companies in Germany.
You might be wondering at this point: "what is the fuss all about?"
In Germany, a normal company needs to be created with a minimum of 25 000 EUR on the company bank account. When you don't have that much money, you can start a company with a minimum of one Euro, or as much you can, but you get labelled as UG rather than GmbH.When we first started the company, I couldn't care less about UG vs. GmbH kind of discussion. It was only when we first started interacting with potential customers in Germany that we understood the problem. Due to this UG label, your company is seen as unreliable. It soon became frequent to hear: "I'm not sure if you will be around in 12 months" and this came with other implications such as banks refusing to grant us a credit card linked to the company account.
Some people joke and observe that UG stands for "Untergrund", in the sense that this type of company has strong odds of not floating and going under the ground within some months. Sadly true.
You see, in theory a company can save enough money on the bank account until it reaches 25k EUR to then upgrade. In practice, we can make money but at the same time have servers, salaries and other heavy costs to pay. Moving the tick to 25k is quite a pain. Regardless of how many thousands of Euros are made and then spent across the year, that yearly flow of revenue does not count unless you have a screenshot showing the bank account above the magic 25k.
This month we finally broke that limitation.
No more excuses. We simply went way above that constraint and upgraded the company into full GmbH. Ironically, this only happened when our team moved temporarily out of Germany and is opening a new office elsewhere in Europe.
Finally a GmbH. Have to say that Germany in some instances is very unfriendly to startups. The UG situation reduces chances of a young startup to compete at the same level as a GmbH company, even when the technology is notoriously more advanced on the UG company.
As example, in the United Kingdom you can get a Ltd. company and you are in the same standing level as the large majority of companies. Ironically, we could have registered a Ltd. in the UK without money on the bank and then use this status in Germany to look "better" than a plain boring GmbH.
The second thing that bothers me are taxes. As UG we pay the same level of taxes as a GmbH in full. Whereas in the UK you get tax breaks when starting an innovative company. In fact, you get back 30% of your expenses with developers (any expense considered as R&D) in that country. From Germany we only got heavy invoices of tax bills to pay every month.
I'm happy that we are based in Germany. We struggled to survive and move up to GmbH as you can see. We carved our place in Darmstadt against the odds. But Germany, you are really losing your competitive edge when there exist so many advantages for Europeans to open up startups in UK rather than DE. Let's try to improve that, shall we? :-)
