UG (haftungsbeschränkt): What is Germany's entrepreneurial company?

Want to start a limited liability company in Germany but don’t have a lot of money? Then the UG (haftungsbeschränkt) is the legal form for you. You can set up this type of company with as little as €1 in share capital.


We know a lot about UGs. We’ve been perfecting the UG formation process for over a decade. So much so that we offer the fastest way to do it and at a fixed price.




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Andreas Munck

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I can help you start a UG in Germany 

I’m Andreas. For over a decade years I have been advising companies on how to do business in Germany. I’d be happy to answer your questions about setting up a UG in a one-on-one consultation.


What is a UG (haftungsbeschränkt)?

The UG (haftungsbeschränkt), or UG for short, is a special form of a GmbH (limited liability company) and therefore also belongs to the group of corporations. That’s why it’s also known as the Mini-GmbH or 1-Euro-GmbH.

Since the MoMiG (law to modernise the law on private limited companies and combat abuses) came into force in 2008, entrepreneurs have been able to take advantage of the low-cost ‘lite’ version of the GmbH. However, the number of shareholders of a UG is not limited.

As a general rule, the rights and obligations of the members of the UG are based on the individual shareholding of each member. To the extent that the rights and obligations of each shareholder depend partly on the number of shares held. Alternatively, the rights and obligations of each shareholder may be set out individually in the company’s Gesellschaftsvertrag (articles of association), irrespective of the shareholding percentage.

What do the two legal forms have in common?

The UG is considered to be a small version of the GmbH because its minimum capital contribution is €1 per shareholder.

Both the UG and the GmbH legal forms are governed by the GmbHG (limited liability companies act). The corporate form of a UG – similar to a GmbH – consists of one or more Geschäftsführer (CEOs), Gesellschafter (shareholders) and, above a certain size, a Aufsichtsrat (supervisory board).

The biggest difference between these two legal forms is the amount of share capital. While a UG can be formed with as little as one euro, a GmbH requires €25,000. For UGs, this lower share capital must be increased each year by setting up a reserve fund.

You can find out more about the similarities and differences between the two types of company here.


The UG in Germany

Similar to the Limited in Great Britain, the UG is a very popular legal form in Germany. 77% of our clients who formed a corporation in 2016 chose the UG. Of these, 70% were formed as one-person UGs.

What does UG mean?

UG stands for Unternehmergesellschaft – an entrepreneurial company. This can be one entrepreneur or several. With only one shareholder, a one-person UG is also possible.

Further designations for the UG

In many places, there are different, unofficial names for the Unternehmergesellschaft: Mini-GmbH, Small GmbH, 1-Euro-GmbH or even UGmbH. However, these designations are not legally anchored and should not be used for official purposes.

Forming a UG

Compared to the incorporation procedure of other corporations, the UG does not have any special features – except of course for the amount of the share capital.

One of the main features of the UG is that only a minimum share capital of one euro per shareholder has to be paid into the business account. The legal form UG proves to be a good option for young founders and entrepreneurs who simply cannot raise the €25,000 required share capital for a GmbH.

It’s important to note that although the share capital minimum is quite low there are still many other starting up costs to take into consideration such as notary fees, registration fees etc.

For the formation of a UG, you can either use the so-called Musterprotokoll or bespoke articles of association (Gesellschaftsvertrag). The Musterprotokoll is a standardised template and facilitates a quicker and more cost-effective start-up process. Forming with the Musterprotokoll, however, has certain restrictions:

  • Your company can only appoint one CEO and a maximum of three shareholders
  • The financial year cannot deviate from the calendar year
  • The shareholder is exempted from § 181 BGB, Insichgeschäfte, (German Civil Code)

Unlike the Musterprotokoll which cannot be altered, regulations such as profit distribution, succession or right of sale etc. can be shaped to fit your company’s particular circumstances in individual articles of association.

Therefore, consider carefully whether or not you want to take advantage of the simplified (and more favourable) procedure of a UG formation with a Musterprotokoll, because if you change something, you must have customised articles of association drawn up anyway- which will cost you more. For example, if it’s clear from the outset that several CEOs are to be appointed, it may make more sense to use customised Gesellschaftsvertrag (articles of association).

At first, this may seem a little more expensive than forming a company with a Musterprotokoll, but in comparison to a later change, it would be more favourable. You can make further change requests at any time with a statute; however, a small notarial fee is incurred for this as well.

Note: Not every Handelsregister (commercial register) accepts a change of CEO regarding the exemption according to § 181 BGB in the Musterprotokoll (model protocol). Even if the former CEO had been released, this does not always apply to the successor. In this case, you must have an individual statute drawn up in which the new CEO is explicitly exempted from § 181 BGB.

Find out more about the formation process, including all the different registrations, in our article here.

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Andreas Munck

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Got questions about how the UG?

  • Startup expert
  • 10+ years experience

Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.


UG legislation

In 2008, German legislators introduced the UG in order to create a counter-model to the British legal form Limited. But where are the laws that regulate the corporate form of the UG? Since the UG is not a legal form in its own right but actually a special form of the GmbH, there’s no independent UG law. The legal framework of the UG is integrated into the GmbHG (limited liability companies act). In other words, the existing company law was simply adapted or extended to the UG.

Unternehmergesellschaft mit Haftungsbeschränkung

Unternehmergesellschaft mit Haftungsbeschränkung translates in English to an entrepreneurial company with limited liability. This means that the partners and the CEOs of the UG are only liable with the company assets – and not with their private assets.

This regulation does not apply in exceptional cases, for example in the case of negligent or actively harmful acts affecting the company.

Overall, however, the limitation of liability of an entrepreneurial company is a major advantage over other legal forms (such as sole proprietorships/Einzelunternehmen or the GbR), in which the partners are liable with all their private assets.


Choosing a company name

As long as the company name has not yet been assigned and is also not misleading (eg ‘Textile Max’ for a pipe cleaning company) and is not too similar to other companies, almost any name can be chosen for an entrepreneurial company. Fantasy names are also possible.

When forming a company through, the desired company name is submitted to the Chamber of Industry and Commerce (IHK) for examination. If the response is positive, then the desired company name is yours for the taking. Should your IHK have any objections, the name of the prospective company may have to be changed.

Does haftungsbeschränkt (limited liability) have to be written by the company name?

Yes. It doesn’t matter whether the “UG (haftungsbeschränkt)” or “Unternehmergesellschaft (haftungsbeschränkt)” variant is used; the appendix must be used for all official business, such as correspondence, invoices or the imprint of the website.

For advertising media, social media or similar, the business name is sufficient without specifying the legal form eg UG (haftungsbeschränkt).

Accounting and typical taxes

The UG is a corporation to which the regulations of the HGB (commercial code) apply. This means that a UG is obliged to do double-entry accounting, including a Jahresabschluss (annual accounts – the German version of an annual financial statement).

It’s taxed in the same way as other corporations. A corporation tax (15%) plus a solidarity surcharge (5.5%) is applied. In the case of profit distributions to the shareholders, a final withholding tax (25%) again with a solidarity surcharge must be paid to the tax office.

Despite the legal form, the pre-tax or value-added tax (19%) is also relevant for an entrepreneurial company. If employees work for the company, wage tax, solidarity surcharge and (possibly) church tax must be considered.

Depending on the business venture, a holding structure involving one or more UGs could be a way to optimise taxation. 

Conclusion: Is the UG the right legal form for me?

Doe the UG make sense for your business? The entrepreneurial company is the right legal form for you if you want to set up a limited liability company for small amounts of money.

The costs for the formation of a UG are much lower than for the formation of other corporations, such as the GmbH which has a €25,000 minimum share capital requirement or the AG which mandates a minimum of €50,000. This entrepreneurial-engineered company is therefore ideally suited for startups or young entrepreneurs who cannot afford the €25,000 for a GmbH but still want to benefit from a limitation of liability.

At a later point in time (ie when a share capital of €25,000 is reached through reserving funds), the UG can still be renamed a GmbH, whereby founders can benefit from its good reputation.


[BEGIN: Insert an Image between this tag]

Andreas Munck

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Still, got questions about setting up a business in Germany?

  • Startup expert
  • 10+ years experience

Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.


Our UG (haftungsbeschränkt) reading list

  1. What is the UG (haftungsbeschränkt)?<<<
  2. The UG corporation
  3. The pros and cons of the UG (haftungsbeschränkt)
  4. How to set up a UG company

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