Conversion of UG into a freelance/sole proprietorship
March 21, 2012 | 50,00 EUR | answered by RAin/StBin Henriette Regulla-Schiessl
I have a UG with a partner. Furthermore, I work as a freelance business consultant. Now, my partner wants to leave the UG. The office has just been relocated to another city (a change in the articles of association would have to be made due to the change in location of the UG). The share capital is 1,700 euros. The UG does not have any other assets. I am the majority shareholder and managing director.
Now, I want to dissolve the UG and transfer everything to my freelance work. I would like to merge the two. I would continue using the company name of the UG, but without the designation "UG", and instead my name would appear (Previously: Company Name UG (limited liability), afterwards: Company Name Business Consulting xy).
What is the most cost-effective way to implement the merger or liquidation of the UG with continuation as a sole proprietor? What would be the specific steps until the merger or liquidation? What costs should I expect (notary, tax advisor...)?
Dear Questioner,
Thank you for your inquiry, which I will be happy to answer in consideration of your input and the rules of this platform within the scope of an initial consultation. The response is based on the information you have provided. Adding, omitting, or altering information, ambiguities, or inaccuracies in the facts can change the tax result.
1)
In principle, the merger of a GmbH, even a UG, with a natural person is possible. The prerequisite for this is that you are the sole shareholder of the transferring legal entity, i.e., the UG. Therefore, the first step would be the notarization of the transfer of your partner's shares to you. The costs at the notary may be between EUR 300.00 and EUR 500.00. However, it depends on the value of the subject matter. I assume that the GmbH, with a share capital of EUR 1,700.00, does not have a very high market value. You can also inquire with the notary beforehand.
2)
Next, the merger of the shares onto you as a natural person would need to be notarized, which would incur costs based on the value of the subject matter. I estimate that you may expect costs between EUR 500-700. Again, it would be advisable to inquire with the notary.
The advantage of the merger is that you do not have to liquidate the UG, as there is a legal succession of rights. Loss carryforwards of the UG do not transfer to you as a natural person. Furthermore, you will need a final balance sheet as of the merger date, either with fair values or book values. If fair values are used, a profit may arise. Costs for preparing the final balance sheet will be incurred with a tax advisor. Once again, it depends on the value of the subject matter (roughly: total assets plus annual performance or annual expenditure divided by 2). Please consult your tax advisor, but I believe the costs may be around EUR 700.00 to 1,000.00.
You can also sell the fixed assets of the UG to you as a sole proprietor (no notarization required) and then initiate the liquidation (without prior transfer of shares). The dissolution of the company must be registered for entry in the commercial register (notary). The liquidator must wind up the company, and the dissolution must be announced in the company gazette. A lock-up period must be observed after the publication of the dissolution.
The second option seems to be the more cost-effective one.
I hope I could provide you with an initial overview within the scope of your inquiry. Unfortunately, more is not possible within this forum. It is essential that you consult your tax advisor to find a solution tailored to your circumstances.
Best regards,
Henriette Regulla
Attorney/CPA/Tax Advisor specializing in tax law
