The first legal decision when founding in Germany is the legal form. The UG (haftungsbeschränkt) is attractive at first, requiring just one euro of capital; but for start-ups planning to raise, the GmbH with €25,000 share capital is the investor standard. A holding structure — founders holding their shares through a personal holding company rather than directly — can bring significant tax advantages later if set up early.
Step two is the founders' agreement: equity split, vesting, good-leaver/bad-leaver clauses and decision mechanics belong in writing from day one. If a founder leaves early and there is no vesting, a substantial stake stays with someone no longer contributing — one of the risks investors scrutinise most.
Step three is assigning intellectual property to the company. Code, designs and trademark rights created before incorporation vest in the founders personally; their written assignment to the company is a due diligence must-have.
At financing stage, term sheets, SAFEs/convertibles and shareholders' agreements appear. Liquidation preferences, anti-dilution protection and veto rights should be understood in their commercial consequences before signing. A few hours of legal advice early on prevents months of repair work later.
The content of this website is for general information only and does not constitute legal advice.
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