Setting up UG – the mini-GmbH for founders

An Entrepreneurial Company with Limited Liability (UG) 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 an Entrepreneurial Company with Limited Liability (UG)?
2. Differences from a GmbH
3. Pros and cons
4. Requirements for founding an UG
5. Step-by-step guide: founding an UG
6. Costs of forming
7. Online incorporation
8. Conclusion: who should choose an UG?
9. FAQ

What is an Entrepreneurial Company with Limited Liability (UG)?

Definition and legal framework

An 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.

Differences from a GmbH

* Cash contributions are capital injected by shareholders as money, either in cash or transferred to the company account. Contributions in kind involve assets such as machinery, property, vehicles or rights that are brought into the company instead of cash.

Important: UGs may only receive cash contributions, while GmbHs can be capitalised with both cash and contributions in kind.

Additional notes:

• An Entrepreneurial Company with Limited Liability (UG) is particularly suited for entrepreneurs who want to start quickly and with minimal capital, although it comes with stricter rules on profit retention.
• A Limited Liability Company (GmbH) offers higher prestige from the start, greater flexibility, and is better for business models involving investors or larger funding needs.
• Shareholders of a UG can later convert the company into a GmbH once they have built up the required share capital.
• Both types provide strict limited liability protection for the company’s assets; however, in cases of breaches of duty, so-called “piercing the corporate veil” (Durchgriffshaftung) can apply, potentially exposing shareholders to personal liability.

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

Requirements for founding an UG

The Entrepreneurial Company with Limited Liability (UG) provides entrepreneurs with a straightforward and affordable pathway to start their own business – requiring low initial capital and offering limited liability protection. To ensure a smooth company formation, the following requirements must be met:

• Natural persons or legal entities can act as founders – whether as sole proprietors or in teams. All founders and directors must be of legal age, capable of managing the business, and free from disqualifying entries in the commercial register.
• A minimum share capital of €1 is mandatory, payable entirely in cash. Contributions in kind (such as machinery or property) are not permitted for a UG.
• A written articles of association or a simplified model protocol is required, and must be notarised.
• The UG must have its registered office in Germany; a PO Box cannot be used as a business address.
• The company name must include the suffix “UG (haftungsbeschränkt)” and must not be misleading.
• After notarisation, the UG must be registered in the commercial register. Only upon registration does the UG gain full legal status.
• Additional registrations with the trade office, tax office, chamber of commerce or chamber of crafts, and accident insurance association are necessary for full compliance.

Meeting these criteria lays a sound foundation to establish your UG quickly, securely and legally.

Start simply and confidently now!

Step-by-step guide: founding an UG

Setting up a UG involves several essential steps. Here's how to register your company efficiently and in full compliance with the law.

Define your business idea and check your company name

Clearly outline your business concept and verify with the Chamber of Industry and Commerce (IHK) that your desired company name is available and compliant. The name must feature the suffix “UG (haftungsbeschränkt)” and must neither mislead nor be already taken.

Prepare articles of association or use the model protocol

A notarised articles of association is mandatory for founding a UG. For up to three shareholders or single founders, the standard model protocol can simplify and reduce costs. More complex structures benefit from a tailored contract that regulates shares, management, and profit distribution in detail.

Schedule a notary appointment

Arrange a meeting with a notary, either in-person or via video conference. During this appointment, the articles or protocol are formally notarised. All founders and directors must be present or properly represented.

Open a business bank account and deposit share capital

After notarisation, open a business account for your UG and deposit the agreed share capital fully in cash (in-kind contributions are not permitted). The payment receipt is required by the notary to proceed with registration.

Register with the commercial register

The notary submits all necessary documents to the local court to register your UG in the commercial register. Your UG legally comes into existence only after this entry and then enjoys full legal capacity.

Register your business with the local trade office

After commercial registration, register your business at the appropriate trade office. Usually, the managing director handles this personally. The trade office will inform other authorities as required.

Tax registration with the tax office

You'll receive a tax questionnaire from the authorities after trade registration. Once completed, you receive your tax number, which is essential for issuing invoices and filing tax returns.

Complete further mandatory registrations

Register your UG with the local Chamber of Industry and Commerce (IHK) or Chamber of Crafts (HWK), the statutory accident insurance institution (Berufsgenossenschaft), and the Transparency Register. These registrations ensure legal compliance and provide access to support networks.

With this comprehensive guide, you'll be fully prepared to set up your UG quickly, safely and correctly. Nothing stands in the way of your successful start!

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 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.

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.