Setting up a UG – the mini-GmbH for founders

The Unternehmergesellschaft (UG) (haftungsbeschränkt) is a practical and flexible legal form designed especially for founders in Germany who want to start a business with minimal capital while limiting personal liability. Its low bureaucracy, digital incorporation options, and adaptable structure make the UG particularly suitable for start-ups, solo entrepreneurs, and small teams, offering full limited liability protection. This concise guide presents the essential steps, costs, and requirements for establishing a UG efficiently in Germany.

Summary

1. What is a UG (haftungsbeschränkt)?
2. Pros and cons
3. What do you need to set up a UG?
4. Step-by-step guide
5. Costs of forming
6. Online incorporation
7. FAQ
8. Conclusion: who should choose a UG?

What is a UG (haftungsbeschränkt)?

Definition and Legal Framework

The UG (haftungsbeschränkt) is a modern and flexible company structure, especially attractive for founders with limited starting capital. It is a widely chosen alternative to the standard GmbH, as your personal property is shielded—liability is restricted to the company’s own assets.

How does a UG differ from a GmbH?

• Share capital: You can establish a UG with a starting capital of just €1, while forming a GmbH requires a minimum of €25,000 in share capital.
• Building reserves: A UG must set aside profits until it has built up €25,000 in reserves, at which point it can convert into a GmbH.
• Target group: UGs are especially popular among start-ups and solo founders.
• Company name:The company name must contain “UG (haftungsbeschränkt)” to clearly signal its limited liability status.
• Capital contributions: Only cash deposits are allowed; contributions in kind are not permitted.

For detailed information, see GmbH in Germany: requirements, setup, benefits & costs 2025. Discover practical insights, step-by-step registration guidance, advantages of the GmbH, and how to choose the best legal structure for your business.

Pros and cons

Advantages

• You can get started with very little capital
• Your personal assets are protected by limited liability
• The set-up process is straightforward and quick
• Plenty of flexibility in terms of business structure

Disadvantages

• You’re required to build up reserves until you reach the GmbH threshold (€25,000)
• UGs generally have less creditworthiness compared to a GmbH
• There’s slightly more paperwork required compared to a sole proprietorship

What do you need to set up a UG?

Who can set up a UG?

• Both individuals and legal entities 
• It’s suitable for solo founders or several shareholders

What are the requirements?

• Minimum share capital of €1
• A partnership agreement or standard template (Musterprotokoll)
• The UG must be based in Germany

Step-by-step guide

To set up a UG (entrepreneurial company with limited liability), you’ll need at least €1 in share capital, a partnership agreement, a notary appointment to formalise the documents, and registration with the commercial register. Once that’s sorted, you’ll open a business bank account and register your UG with the tax office.

Business idea and planning: shape your business plan and ensure your preferred business name is available through the Chamber of Commerce (IHK).

Develop your partnership agreement or use a standard template: for straightforward set-ups, the standard template is fine. If there are several shareholders, a tailored agreement is advisable.

Arrange a notary appointment: the notary will formally certify your documents – this can be done in person or, since 2022, via video call.

Open a business bank account and pay in your share capital: once the documents have been notarized, set up a business bank account and pay in your share capital.

Register with the commercial register: the notary will submit your registration to the local court. Your UG officially exists only once it’s entered in the register.

Register your business with the local authority: after the commercial register entry, notify your local authority (Gewerbeamt) about your new business.

Register with the tax office: you’ll receive a tax number and complete the tax registration for your UG.

Other legal obligations:

• Register with the Transparency Register
• Register with the Chamber of Commerce or Chamber of Crafts and the appropriate compulsory accident insurance institution.

What is the cost of forming a UG?

The overall cost of establishing a UG typically falls between €300 and €800. The main expenses are:

• Notary fees: approx. €100–400
• Commercial register fees: around €150
• Business registration: approx. €20–50
• Other administrative costs: approx. €30–100

Money-saving tips for founders:

• Use the standard template to reduce notary costs
• Consider online incorporation to save time and money

Setting up a UG online

Advantages and process of online incorporation

Since 2022, you can set up a UG (entrepreneurial company with limited liability) entirely online. The whole process—from having your documents certified by a notary via video call to registering with the commercial register—can be completed digitally. This saves time, cuts down on paperwork, and is especially convenient for founders who want to stay flexible.

Converting a UG into a GmbH

Once your UG has built up reserves of €25,000, you can convert it into a GmbH. This brings advantages such as a stronger business image and greater access to financing options.

FAQ

Is a UG required to keep accounts?

Yes, a UG must comply with double-entry accounting rules. Each year, you must prepare a balance sheet and a profit and loss statement, and publish your annual accounts in the Bundesanzeiger (Federal Gazette).

What ongoing costs are involved after setting up a UG?

Regular expenses include:

• Fees for tax advice and accounting
• Membership contributions to the Chamber of Commerce and Industry (IHK)
• Costs for preparing annual accounts
• Business bank account fees
• Insurance (e.g., public liability insurance)

What happens if the share capital runs out?

When the share capital is lost, the company’s leadership is obligated to act. If the company becomes insolvent, there is a legal obligation to file for insolvency. Additionally, the UG is required to continue building up reserves until €25,000 has been reached.

Is it possible to convert a UG into a GmbH later?

Yes, once you have accumulated €25,000 in reserves, you can convert your UG into a GmbH. This calls for a notarized resolution and a modification of the partnership agreement.

Who is liable for mistakes or debts of the UG?

Liability is generally limited to the company’s assets. However, if there is gross negligence or a breach of duty (such as failing to file for insolvency on time), the management can be held personally liable.

Can I set up a UG as a sole founder?

Yes, a UG is suitable for both solo founders and teams. Legal entities can also become shareholders.

Are there tax advantages to a UG?

A UG must pay corporate tax, trade tax, and may also be liable for VAT. There are generally no tax advantages over other legal forms, but the clear separation between personal and company assets is a plus.

Conclusion

The UG is an ideal business structure for founders aiming to launch quickly with low start-up capital, while protecting their personal assets through limited liability. It is especially well suited to:

• Solo founders and freelancers wanting simple, cost-effective business setup
• Start-ups and small teams valuing flexibility, fast incorporation, and minimal capital requirements
• Entrepreneurs with limited initial funds who need to start from as little as €1 capital
• Projects in early testing phases or side ventures
• Legal entities establishing subsidiaries for risk management or new business ideas

The UG offers professional governance and liability protection without the larger capital demands of a GmbH. Its possibility to convert into a GmbH later allows growing businesses to upgrade their legal status when appropriate. For founders seeking a lean, digital, and legally secure launch, whether individually or as a team, the UG provides a practical, affordable, and low-risk vehicle for doing business in Germany.