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Old 06.01.2018, 17:16
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What is the purpose of the minimum capital required to start a company?

Hello all, I started to educate myself on the topic of finances/investing/entrepreneurship etc. and noticed that starting a Gmbh or AG or whatever it's called in any other country, requires some random amount of initial money.
What is the purpose of that sum? I have yet to find any article that explains it.
The only information I found so far is when I was reading something about the concept of limited liability, that in case the company is sued and the company loses and has no money to pay then the money is taken from that minimum initial amount. also read somewhere that it is supposed act as backup money in case of bankruptcy Is that the whole story?

To summarise:

What is the purpose of the minimum capital required to start a company?
  • acts as a backup in case of bankruptcy
  • is used in case company cannot cover the costs associated losing a case in court
  • ?


What happens if I decide to close down the company? Can I get that money back?
  • ?
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Old 06.01.2018, 17:28
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Re: What is the purpose of the minimum capital required to start a company?

If you close the business and have assets greater than your liabilities, then of course the net amount belongs to you, after all normal tax liabilities have been settled of course.
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Old 06.01.2018, 21:44
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Re: What is the purpose of the minimum capital required to start a company?

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To summarise:

What is the purpose of the minimum capital required to start a company?
  • acts as a backup in case of bankruptcy
  • is used in case company cannot cover the costs associated losing a case in court
  • ?
Yes, these are two main reasons. also in the case of limited company, i.e. SA the amount is supposed to serve to create shares. You have to create shares for that minimum amount. It means that you will need much more to create the corporation (registration fees, etc.).


Quote:
What happens if I decide to close down the company? Can I get that money back?[/B]
  • ?
If you have more assets than debts - yes. But in itself no. That is why this is a virtual protection for debtors. it just means that to create a limited company you will have to have some money and most probably more than the amount that is needed. I will say that it prevents one from frivolously establishing new companies.
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