UG vs GmbH – Choose the right company structure for your startup in Germany

Start your business the smart way. Understand what actually separates a UG from a GmbH — including the cost difference, which is smaller than almost every guide tells you.

Why the right company structure matters

Starting a business in Germany comes with legal, tax and administrative obligations. Choosing the right structure early saves time, money and stress — and choosing the wrong one costs more to undo than it saved.

Two options dominate for startups:

• UG (haftungsbeschränkt) – low capital, early-stage friendly, converts to a GmbH later
• GmbH – the standard German company, investor-friendly, no restrictions on distributing profit

The cost difference is not what you think

Almost every comparison says the UG is the cheaper option. On notary fees, that is wrong.

Notary fees are set by statute (GNotKG) and calculated on the Geschäftswert — the chargeable value. For a company formation, § 105 GNotKG sets a minimum chargeable value of €30,000, and it applies whatever your actual share capital is.

So the notary charges the same for a UG as for a GmbH. Founding a UG with €1,000 produces the same fee as founding a GmbH with €25,000. Register fees, Gewerbeanmeldung, Transparenzregister and IHK contributions are identical too.

What does move the bill is the founding document, not the legal form:

Figures include notary fees, the capped document flat rate, 19% VAT and the commercial register fee. Note that no VAT is charged on the register fee — the notary only forwards it (§ 10 Abs. 1 S. 5 UStG). Try your own figures in our cost calculator.

The UG's advantage is a capital advantage, not a fee advantage. You need less money in the company. You do not pay less to set it up.

UG vs GmbH – key differences

The reserve obligation – the real cost of a UG

This is the difference that decides it, and most guides bury it in a table row.

A UG must retain 25% of its annual surplus as a statutory reserve until that reserve reaches €25,000 (§ 5a Abs. 3 GmbHG). Until then you can distribute at most 75% of profits to shareholders. A GmbH has no such restriction.

Put plainly: a UG is not a cheaper GmbH. It is a GmbH on a payment plan. You still end up putting €25,000 into the company — you just do it out of future profits instead of up front, and you give up a quarter of your earnings until it's done.

For a company that expects to be profitable soon, finding €12,500 at the start is often the better deal. For one that will reinvest everything anyway, the reserve costs nothing in practice.

How much capital should a UG actually start with?

A UG can legally be founded with €1. It shouldn't be.

The company owes money from the moment it exists — and it's the company that owes it, not you. Notary and register fees of roughly €400, the IHK Grundbeitrag from year one (around €150 — the Existenzgründer exemption does not apply to companies in the commercial register), the annual Transparenzregister fee, and the Gewerbeanmeldung.

That's €600 or more before the company has invoiced anyone. Found with €1 and it's insolvent on day one.

And note what does not help: because of the €30,000 minimum chargeable value, cutting your share capital saves you nothing at the notary. It only leaves the company short.

The Musterprotokoll trade-off

The statutory template is the cheapest route and it's often right for a single founder with simple needs. Two things follow from choosing it.

It cannot be used for a GmbH with individual articles — and it caps you at three shareholders and one managing director (§ 2 Abs. 1a GmbHG).

And the moment you want something the template doesn't cover — a second share class, custom majority thresholds, release from the self-dealing restriction of § 181 BGB — you need a notarised amendment, which costs more than drafting it properly at the start. Founders with more than one shareholder, or any plan to raise money, generally regret the template.

One detail worth getting right at the notary: formation costs are only deductible if the articles of association say so, and only up to the amount stated. If the founding document is silent, the company can't deduct what you spent creating it.

When should you choose a UG?

• You genuinely can't raise €12,500
• You're testing an MVP or a new idea before committing capital
• You plan to reinvest profits for the next few years anyway
• Your capital is cash, not equipment or IP — a UG can't accept contributions in kind

When should you choose a GmbH?

• You plan to raise external funding
• You expect to distribute profits rather than reinvest everything
• You want to contribute assets rather than cash
• You'll sell to large companies or the public sector, where the "haftungsbeschränkt" suffix on every invoice signals thin capitalisation
• You need credit — banks frequently require personal guarantees from UG directors, which quietly undoes part of the limited liability you founded the company for

Can you switch from UG to GmbH?

Yes. Once the statutory reserve reaches €25,000, a UG can be converted. It requires a notarised shareholder resolution and costs roughly €500–1,000 in notary fees plus register costs.

Worth adding to your total if you're choosing the UG as a stepping stone: you pay the notary twice.

How Delegro helps

• Formation for both UG and GmbH, with the notary appointment coordinated for you
• Bookkeeping, payroll and tax after incorporation — the same provider, not a handoff
• A business address, and the filings that follow registration

Ready to start your company in Germany?

Work out what your formation will cost in the cost calculator, or take the company quiz if you're still deciding between the two.

And once you're registered, the filing obligations start. Your first twelve months covers what a new company actually has to file, when it's due, and what it costs.

Either form can be founded without travelling: the notary appointment itself can happen by video, provided every shareholder's ID can be read electronically. Founding a company online sets out who qualifies and who still has to attend in person.

Sources: §§ 2, 5a, 7 GmbHG; § 105 GNotKG; § 181 BGB; Anlage 2 GNotKG (Tabelle B) as amended by KostBRÄG 2025. Figures current as of August 2026.