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Germany's low-capital limited liability company under GmbHG §5a. Full limited liability, mandatory 25% profit-retention rule, clear conversion path to GmbH once €25,000 threshold is reached.
A UG (haftungsbeschränkt) is not a separate legal form — it is a GmbH variant under the same GmbHG statute with two statutory differences: minimum capital of €1 (vs €25,000 for a full GmbH) and a mandatory 25% annual profit-retention rule until capital plus reserve reaches €25,000. Every other GmbHG provision applies identically. The UG was created by the 2008 MoMiG reform to compete with the UK Ltd £1 minimum, giving German founders a path to limited liability without a large upfront capital commitment.
| Feature | UG (haftungsbeschränkt) | GmbH |
|---|---|---|
| Minimum capital | €1 (GmbHG §5a) | €25,000 (GmbHG §5) |
| Capital paid-in before entry | 100% cash (§5a(2)) | ≥50% (€12,500) (§7(2)) |
| In-kind contributions | Prohibited | Permitted |
| Annual profit retention | 25% until €25,000 (§5a(3)) | None mandatory |
| Name suffix | "(haftungsbeschränkt)" required | "GmbH" only |
| VC / institutional investment | Limited | Fully suitable |
Step by step, handled for you.
Consultation
UG vs GmbH analysis — we assess capital availability, investor expectations, and banking requirements. Most founders choose €500–€1,000 practical starting capital.
Articles of Association
Custom Gesellschaftsvertrag or simplified Mustprotokoll (§2(1a) GmbHG) for up to 3 shareholders, 1 director, cash-only capital — reduces notary fees by €300–€600.
Power of Attorney
Apostilled Vollmacht sent to your home country. Goldblum appears at the Düsseldorf notary on your behalf — no Germany travel required for standard formations.
Notarisation + Capital Deposit
100% of capital deposited before Handelsregister filing (§5a(2)). Bank issues confirmation of freely-available funds.
Handelsregister Filing
Notary submits electronically. Düsseldorf Amtsgericht processes in 5–8 working days. Total from apostille arrival: ~10 working days.
Post-Registration Compliance
Gewerbeanmeldung (trade office), Fragebogen zur steuerlichen Erfassung (Finanzamt), Transparenzregister filing within 14 days (GwG §19–20).
The 25% Profit-Retention Rule — How It Works
Under GmbHG §5a(3), the UG must retain 25% of annual net profit (Jahresüberschuss) after deducting any loss carry-forward in a statutory reserve (gesetzliche Rücklage). The remaining 75% is distributable. This continues until capital plus accumulated reserve reaches €25,000.
At Year 3 capital + reserve = €25,000. Retention obligation ceases. Conversion to GmbH becomes optional.
| Year | Net Profit | 25% Retention | Distributable | Capital + Reserve |
|---|---|---|---|---|
| Start | — | — | — | €1,000 |
| Year 1 | €40,000 | €10,000 | €30,000 | €11,000 |
| Year 2 | €40,000 | €10,000 | €30,000 | €21,000 |
| Year 3 | €40,000 | €4,000 (to reach €25K) | €36,000 | €25,000 ✓ |
The "(haftungsbeschränkt)" Suffix Is Not Optional
The parenthetical must appear on every invoice, contract, email footer, website Impressum, and letterhead. Omission creates Rechtsscheinhaftung — personal MD liability for obligations incurred by counterparties who relied on the false impression of a fully-capitalised GmbH. The BGH has confirmed this liability doctrine in multiple decisions.
- →Every invoice and purchase order must show "UG (haftungsbeschränkt)" in full
- →Email footers are a common omission point — automated signatures must carry the full suffix
- →Third-party platforms (Amazon Seller, Upwork) that truncate company names create risk
- →Omission triggers Rechtsscheinhaftung — managing director personal liability
Conversion to GmbH — §55 Capital-Increase Path
Once capital plus accumulated reserve reaches €25,000, conversion is a capital-increase amendment — not a dissolution and re-incorporation. Tax registration number, IBAN, contracts, permits, and VAT ID all continue without re-registration. Timeline: 4–8 weeks. Cost: approximately €3,000–€5,000 including professional fees.
- →Cash injection route: shareholders contribute additional cash to reach €25,000 (GmbHG §55)
- →Reserve capitalisation route: accumulated reserve converted to Stammkapital via §57c GmbHG — no cash changes hands
- →Tax-neutral: no restructuring tax event; no UmwG Formwechsel required
- →Entity continuity: same HRB number, Steuernummer, IBAN, and contracts
Formation Costs 2026 — Mustprotokoll vs Custom Articles
| Cost Item | Mustprotokoll Route | Custom Articles Route |
|---|---|---|
| Notary fee (net, excl. VAT) | €150–€300 | €500–€900 |
| Handelsregister fee | €150 | €150 |
| Trade office (Gewerbeanmeldung) | €20–€60 | €20–€60 |
| Transparenzregister annual fee | €20.80 | €20.80 |
| Apostille (if non-resident) | €20–€200 | €20–€200 |
| Total statutory fees only | €350–€550 | €700–€1,100 |
UG (haftungsbeschränkt) — Key Facts
€0
Minimum share capital
Practical minimum is €100–€500 to cover costs
2–3 wks
Formation timeline
From signed AoA to Handelsregister entry
0%
Annual profit reserve
Retained until reaching €25,000 for GmbH conversion
1+
Shareholders
Single-shareholder UG is fully permitted
Common questions.
What is a UG (haftungsbeschränkt)?
A UG is a German limited liability company formed under GmbHG §5a with a minimum share capital of €1. It offers identical limited liability to a GmbH but requires 25% of annual profits to be retained as a statutory reserve until capital plus reserve reaches €25,000. The full name must always include "(haftungsbeschränkt)".
Can I really form a UG with €1?
Legally yes — §5a(1) sets the minimum at €1. Practically, banks will not open an account for a company with €1 capital. Most founders choose €500–€1,000 as practical starting capital. All capital must be paid in cash in full before Handelsregister filing (§5a(2)).
What is the Mustprotokoll and when should I use it?
The Mustprotokoll (standard-form articles under §2(1a) GmbHG) is available for UG formations with maximum 3 shareholders, 1 managing director, and cash-only capital. The notary fee drops to €150–€300 (saving €300–€600). Use it for a solo founder with no governance complexity. For any multi-founder or investor structure, use a custom Gesellschaftsvertrag.
How does the 25% profit-retention rule work?
Under §5a(3), the UG must retain 25% of annual net profit (after tax, after loss carry-forward) in a statutory reserve each year. The remaining 75% can be distributed as dividends. Retention continues until total capital plus reserve reaches €25,000. Violation of the retention rule triggers a §31 GmbHG repayment claim and MD personal liability under §43.
Can I form a UG from outside Germany without travelling?
Yes. An apostilled power of attorney allows Goldblum to appear at the Düsseldorf notary on your behalf. Physical presence is not required for standard cash formations. The apostille process takes 2 days to 6 weeks depending on your home country.
What happens if I omit the "(haftungsbeschränkt)" suffix?
Omitting the suffix creates Rechtsscheinhaftung — a BGH-recognised form of managing director personal liability based on the false impression of a fully-capitalised GmbH. Every invoice, contract, email, and website imprint must carry "UG (haftungsbeschränkt)" in full.
When should I convert my UG to a GmbH?
Convert when: capital plus reserve reaches €25,000; you have enterprise customers who flag the suffix; you are raising institutional investment; or you want to admit new shareholders. Conversion takes 4–8 weeks and costs approximately €3,000–€5,000 including professional fees.
Is a UG suitable for VC investment?
Generally no. VC and seed funds prefer GmbH or GmbH & Co. KG structures. The thin capital base, "(haftungsbeschränkt)" suffix, and 25% profit-retention constraint create friction with institutional investment documentation. Founders planning to raise professional capital should form a GmbH directly.
What taxes does a UG pay?
Identical to a GmbH: Körperschaftsteuer 15% (KStG §23) + Solidaritätszuschlag 0.825% + Gewerbesteuer (~15.4% in Düsseldorf at 440% Hebesatz) → combined ~31.225%. Dividends: 26.375% withholding (EStG §43a), subject to double-tax treaty reduction.
Do I need a Transparenzregister filing for a UG?
Yes. Every UG is subject to the same Transparenzregister filing obligation as a GmbH under GwG §§19–20. Filing within ~14 days of Handelsregister entry. Failure to file: fines up to €100,000 (€150,000 for serious breaches — GwG §56).
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