UG in Germany: Learn the basics about Unternehmergesellschaft

What is a UG?

The UG is a private limited liability company designed for entrepreneurs who want to start a business with minimal capital. It offers the same legal protection as the traditional German limited liability company ‘GmbH’, but requires only €1 per founder in share capital.

The UG is fully incorporated at the notary and then registered in the commercial register 💬Handelsregister, giving it legal personality under German company law. Its official name must include the ending ‘UG (haftungsbeschränkt)’ to signal that liability is limited to company assets. Although seen as a mini GmbH, it functions independently and is suitable for both solo founders and multi-member startups.

What does UG (haftungsbeschränkt) mean?

The term Unternehmergesellschaft (haftungsbeschränkt) translates to ‘entrepreneurial company (limited liability)’ — a name that sounds descriptive but does not imply any specific type of business.

Unlike the GmbH, which has existed for decades, the UG was only introduced into German law in 2008. The suffix haftungsbeschränkt was likely added by lawmakers to clarify that the company’s liability is limited to its assets — especially because the abbreviation UG on its own offers no context and could easily be misinterpreted.

📌 The full legal name ‘UG (haftungsbeschränkt)’ must appear on all official materials — including invoices, contracts, websites, letterheads, imprints and company filings.

What is unique about the UG?

While the UG shares many legal characteristics with the GmbH, it comes with a few special rules that make it more accessible and founder-friendly in its early stages:

Use of standard articles

Founders can set up a UG using standard articles 💬Musterprotokoll — a simplified template provided by German law. This document replaces custom articles of incorporation 💬Satzung and significantly reduces legal and notary costs. Check out our comparison of the the two options here. However, its contents cannot be modified or expanded. Plus, it is only available if the company has no more than three shareholders 💬Gesellschafter and one managing director 💬Geschäftsführer.

Mandatory profit retention

Unlike a GmbH, the UG must set aside at least 25% of its annual profits until it reaches €25,000 in equity. This rule for profit retention 💬Rücklagenpflicht ensures that the company gradually builds equity over time. Once this threshold is met, the UG can be converted into a GmbH but it’s not mandatory.

Cash contributions only

Unlike a GmbH, a UG does not allow contributions in kind 💬Sacheinlage, e.g. equipment, intellectual property. All share capital must be paid in cash 💬Bareinlage and deposited into the company’s business bank account before registration.

UG vs other common legal forms: A quick comparison

Is the UG the right match for you?

The UG is ideal for:

• Founders with limited initial funds
• Entrepreneurs testing a new business idea in Germany
• Solo founders who want to separate personal and business liability
• Startups planning to grow into a GmbH later
• Non-residents looking for a legally recognised structure with low startup costs

📌 It’s not the best fit if you want to raise large investments early on, or if you’re looking for a company form that avoids complex accounting obligations.

Formation (in brief)

To set up a UG, you’ll need notarised formation documents, a business address, a German bank account 💬Geschäftskonto, and a commercial register entry. After successful registration with the tax office 💬Finanzamt, your company receives a tax ID and can officially start operations.
For a detailed walkthrough, check out our guide on how to register a UG in Germany

Legal requirements to start a UG

To form a UG in Germany, there are a few basic prerequisites you must meet:

• Legal age: You must be at least 18 years old to act as a shareholder or managing director
• Business address: Your company must have a registered office in Germany 💬ladungsfähige Geschäftsadresse.
• Minimum capital: You can start with as little as €1 in share capital 💬Stammkapital. However, a practical minimum of €500–€1,000 is recommended to cover the notary fees and other initial setup costs.
• Bank account: A German business bank account is required to deposit the share capital before registration. Learn more.
• Company name: You need to come up with a valid company name and objective.

📌These requirements apply to both residents and non-residents. If you’re founding from outside of the EU, you may need power of attorney and apostille for the notary process, or a short visit for in-person identification 

Accounting and legal obligations

The UG is subject to all standard accounting and tax rules for German corporations. This includes:

• Advance VAT return💬Umsatzsteuervoranmeldung
• Double-entry bookkeeping 💬doppelte Buchführung
• Annual financial statements 💬Jahresabschluss

These obligations are manageable but should not be underestimated — especially if you’re not familiar with German business regulations. Most limited liability companies do not handle these tasks on their own but work with professional accountants and tax consultants.
📌 Keep in mind that these services come with ongoing costs of at least €2,000, which should be factored into your annual budget.

FAQ

Is a UG the same as a GmbH?

Not quite. Both are limited liability companies, but a UG can be started with €1 and must save part of its profits until €25,000 is reached. Even if their legal framework is almost identical, their perceived reputations are not the same.

Can non-residents start a UG in Germany?

Yes. You can establish a it from abroad, but you’ll need a local business address, a notarised agreement, and a German bank account.

How many people can start a UG?

A UG can be founded by one or more people — there’s no legal limit to the number of shareholders. However, if you want to use standard articles, the company must have no more than three shareholders and one managing director.

Who can be chosen as managing director?

Any natural person aged 18 or older can be appointed as managing director of a UG. They can either be a shareholder or an employee. The person does not need to be a German citizen or resident, but must be legally capable and pass a basic integrity check (i.e., no relevant criminal convictions or business bans). If the MD lives outside Germany, additional steps such as a certified passport copy or power of attorney may be required during the registration process. Read more here.

How much does UG formation cost?

Basic costs typically range from €550 to €1,200 plus share capital depending on your choice of standard or custom articles. See our cost overview for details.

Can a UG receive funding or investment?

Yes, it can receive funding but it may be more challenging in the early stages. Many investors prefer GmbH structures due to their stronger capital base. If raising external capital is part of your early strategy, you may want to consider forming a GmbH instead.

Do I need a tax advisor for a UG?

It’s not legally required, but highly recommended. The accounting obligations for a UG are complex and can be difficult to manage without professional support — especially for founders unfamiliar with the German tax system.