A comparison of the legal and financial differences

The UG and the GmbH differ significantly in terms of formation costs in particular. In addition, the UG is obliged to hold reserves, whereas these are voluntary for the GmbH. Here you will find an overview of all the important differences.

The UG and the GmbH differ in the amount of the share capital contribution that must be made when the company is founded.

• To set up a GmbH, you need to raise share capital of EUR 25,000. However, it is sufficient to pay half of this amount, i.e. EUR 12,500, into the business account when the company is founded. In addition, the formation costs can be paid from the share capital.
• When founding a UG, a minimum share capital contribution of one euro is sufficient, which makes this legal form particularly attractive for start-ups or young entrepreneurs.

The limited liability company as a legal entity is only liable with the company’s assets, not with the private assets of the shareholders.

In the case of a GmbH, the distribution of profits is contractually regulated and depends on the distribution of shares. The shareholders are entitled to the net profit for the year, which may, however, remain in the company’s assets, if specified, and serve a specific purpose that is defined in the shareholders’ resolution.

The UG profit distribution is also divided proportionally among the shareholders. In the UG, you have less freedom in handling the distribution, which is related to the low share capital. The law stipulates that 25% of the annual surplus must serve as a mandatory reserve, meaning that only the remaining 75% can be distributed among the shareholders. The annual mandatory reserve can only be accessed in exceptional cases, such as in the case of losses carried forward or to offset deficits.

In order to ensure transparency in commercial transactions, there is an identification requirement that obliges shareholders and managing directors to have their identity verified. The aim is to counteract money laundering and other illegal activities.

When registering a GmbH, the managing directors must prove their identity to the commercial register by means of an identity document. As a result, the identity is checked and confirmed by the registry court.

The situation is similar with the UG. In this case, the shareholders must provide evidence when registering with the commercial register; there is no further examination by the registration court.

The choice of the right legal form depends on several factors that significantly influence the financial and legal structure of your company. One of the most important considerations is the available start-up capital: a UG is ideal for founders who want to start with little equity, while a GmbH is suitable for companies with more capital reserves. Liability risks also play a decisive role, as both legal forms offer the advantage of limited liability. Long-term growth objectives should also be considered - if you plan to scale your business quickly and attract investors, the GmbH might be more advantageous due to its higher reputation. Finally, tax and administrative aspects, such as the reserve requirement for the UG, also influence the decision. Comprehensive advice is therefore important in order to choose the legal form that best suits your business model and your goals.

The decision between a UG (haftungsbeschränkt) and a GmbH largely depends on your financial resources and the long-term goals of your business. While the UG offers an affordable and quick entry into self-employment, the GmbH provides greater prestige and flexibility in profit distribution. Significant differences exist in startup costs and the obligation to build reserves. However, both legal forms offer the benefit of limited liability, making them particularly attractive for founders.

Key Differences at a Glance:

Startup Costs:

• UG: Up to €1,600.
• GmbH: Approximately €27,500 (including share capital).

Share Capital:

• UG: Can be established with as little as €1.
• GmbH: Requires a minimum of €25,000, with at least €12,500 to be paid in at the time of incorporation.

Reserve Obligation:

• UG: Mandatory allocation of 25% of the annual surplus to reserves until €25,000 is reached.
• GmbH: Reserve allocation is optional.

Profit Distribution:

• UG: Profit distribution occurs after deducting the 25% mandatory reserve.
• GmbH: Profit distribution without reserve deductions.

Registration Requirements:

• UG: Registration of managing directors in the commercial register.
• GmbH: Registration of managing directors in both the commercial register and the district court register.

The choice of the right legal form should be carefully considered, as it has a decisive influence on the financial and legal structure of your company. In our start-up packages, we offer you comprehensive advice to help you find the ideal legal form for your needs. Regardless of whether you opt for a UG or a GmbH - our experts will help you weigh up the pros and cons and make the best decision for your start-up. This will give you a secure and optimally prepared start to your self-employment.