Germany is a thriving hub for startups and entrepreneurs, thanks to its strong economy, business-friendly regulations, and access to the EU market. One of the most popular legal structures for new businesses is the UG (Unternehmergesellschaft or “mini-GmbH”).
A UG (haftungsbeschränkt) offers the advantages of a GmbH (limited liability company) but with lower startup costs and simpler registration. Whether you’re a local entrepreneur, foreign investor, freelancer, or startup founder, a UG could be the perfect choice.
In this guide, we’ll explore:
- What a UG company?
- Top 10 benefits of setting up a UG company in Germany
What is a UG Company in Germany?
A UG (Unternehmergesellschaft haftungsbeschränkt) is a simplified version of a GmbH (Gesellschaft mit beschränkter Haftung). It was introduced in 2008 to help startups and small businesses establish a legal entity with limited liability without requiring high initial capital.
Key Features of a UG:
- Minimum Capital Requirement: Setting up a UG company in Germany requires only €1.
- Limited Liability: Personal assets are protected.
- Profit Retention: 25% of annual profits must be saved until the capital reaches €25,000 (then it can convert to a GmbH).
- Legal Credibility: Seen as more trustworthy than a sole proprietorship (Einzelunternehmen).
10 Major Benefits of Setting Up a UG Company in Germany
1. Low Startup Capital (Only €1 Required)
One of the benefits of setting up a UG company in Germany is its low capital requirement. Unlike a GmbH (€25,000 minimum), a UG can be founded with just €1 in share capital. This makes it ideal for bootstrapped startups, freelancers, and small businesses.
2. Limited Liability Protection
A UG is a separate legal entity, meaning:
- Personal assets (home, car, savings) are protected if the business faces debts or lawsuits.
- Only the company’s assets are at risk.
3. Fast & Simple Registration Process
Setting up a UG is quicker and easier than a GmbH:
- No need to deposit €25,000 in a bank account.
- Fewer bureaucratic hurdles.
- Registration takes 2-4 weeks (similar to GmbH).
4. Tax Benefits & Incentives
Germany offers attractive tax structures for UGs:
- Corporate Tax Rate: ~15% (plus solidarity surcharge and trade tax).
- Retained Profits Taxed Lower: Only 1.5% if profits are kept in the company.
- Tax Deductions: Business expenses (office, travel, equipment) reduce taxable income.
5. Increased Credibility with Clients & Investors
A UG appears more professional than a sole proprietorship, helping:
- Win contracts (many clients prefer working with GmbH/UG over freelancers).
- Attract investors (easier to secure funding with a formal legal structure).
6. Flexibility in Profit Distribution
- No mandatory dividend payouts (unlike some other EU structures).
- Reinvest profits for growth without heavy tax burdens.
7. Easy Conversion to a GmbH
Once the UG’s capital reaches €25,000, it can convert into a GmbH without complex legal steps.
8. Access to the EU Market
A UG allows you to:
- Trade freely across the EU (no customs barriers).
- Open a German business bank account (helpful for international transactions).
9. Better Banking & Funding Opportunities
Banks and investors trust UGs more than unregistered businesses, making it easier to:
- Get business loans.
- Apply for startup grants (Germany offers many funding programs).
10. Digital & Startup-Friendly Environment
Germany supports digital businesses with:
- E-commerce-friendly laws.
- Strong fintech & IT infrastructure.
- Co-working spaces & startup hubs (Berlin, Munich, Hamburg).
Conclusion
Setting up a UG in Germany offers an exceptional gateway for entrepreneurs, freelancers, and startups to enter the European market with minimal risk and capital. With a starting requirement of just €1, it removes major financial barriers while still providing the prestige and protection of a limited liability structure.
The UG is not only quick to register but also enjoys favorable tax incentives, high legal credibility, and flexibility in profit usage. Additionally, it opens doors to funding, banking, and trade across the EU. As your business grows, the UG can seamlessly evolve into a GmbH, offering long-term scalability.
If you are looking to set up a UG company in Germany, you can consult our business formation experts from OnDemand International.
FAQ’s
Yes! Germany allows non-EU/EEA entrepreneurs to establish a UG. However, you’ll need:
- A German business address (virtual office allowed).
- A local bank account (some fintech banks like N26 or Revolut Business may work).
- A notary appointment (can be done in person or via video in some cases).
- Notary fees: ~€200–€500
- Commercial Register (Handelsregister) fee: ~€150–€300
- Legal/tax advisor (optional): €500–€2,000
- Total estimated cost: €500–€1,500
Yes! Once the UG’s capital reaches €25,000, you can convert it into a GmbH by:
- Depositing the remaining capital.
- Updating the Commercial Register.
- Changing the company name (removing “UG” and adding “GmbH”).
