The profit of the UG is distributed pro rata. The distribution of profits, on the other hand, follows special rules.

Here you will find the most important information about profit distribution in the UG in brief.

If you set up a UG, you do not need any statutory minimum capital. The company can be founded with as little as one euro. Nevertheless, as with the GmbH, the company’s liability is limited to its assets.

Due to the low equity of the UG, an attempt was made to find a balance to ensure solvency. Part of the net income for the year less the losses carried forward from the previous year are therefore retained in the company. The idea behind this is that you can gradually build up a reserve until a share capital of EUR 25,000 is reached.

This is also known as profit retention. As part of this retention, 25% of the profits must flow into the reserve. Conversely, this means that only the profits in excess of this amount can be paid out to the shareholders.

Once the sum of EUR 25,000 has been reached, the UG can be converted into a GmbH.

The UG is a sub-form of the GmbH and is also subject to the GmbH Act. The provisions on distribution stipulate that profits are to be distributed on a pro rata basis. This means that each shareholder receives a share of the profit in proportion to their share in the company.

Profit distribution in the UG using the example:

• The UG has 3 shareholders. Shareholder A holds 10%, B and C each hold 45% of the company. The maximum profit of 25% of the net profit for the year is EUR 100,000. A therefore receives a pro rata amount of EUR 10,000 and shareholders B and C each receive EUR 45,000.

It is also possible to deviate from the pro rata distribution of profits, which is based on the shareholders’ shares in the UG. Such a deviation is called disproportionate or incongruent profit distribution. A possible distribution could, for example, provide for an equal percentage of profit for each shareholder.

If the company records losses, no loss distribution is carried out as long as the amount within equity is recognised at a negative value. If the shareholder intentionally causes the losses and damages the company, he or she is personally liable for them.

The distribution of profits in the UG (haftungsbeschränkt) is clearly regulated: Part of the profits must be used to build up reserves to ensure long-term financial stability. This protects the UG from undercapitalisation and creates the possibility of converting the UG into a GmbH when the share capital reaches 25,000 euros. The tax treatment of profit distributions is subject to withholding tax or the partial income method, depending on the shareholding ratio. A holding structure offers considerable tax advantages and enables efficient reinvestment of profits. In order to find the best possible solution, founders should consider seeking professional advice. Would you like to find out more? You can book additional counselling sessions in our community area.