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UG vs. GmbH: Which legal form should you start with?
The two most common company forms for German startups, compared on cost, capital, liability and credibility.
UG vs. GmbH
Most software founders in Germany choose between the UG (haftungsbeschränkt) and the GmbH. Both are limited-liability companies; the difference is mostly the share capital.
The UG
- Can be founded with as little as €1 of share capital (though €500–€1,000 is more practical).
- Must retain 25% of annual profits until it reaches €25,000, at which point it can convert to a GmbH.
- Sometimes perceived as less established by partners and investors.
The GmbH
- Requires €25,000 share capital, of which €12,500 must be paid in at formation.
- The default expectation for venture-backed startups.
- More credible with banks, enterprise customers and investors.
Rule of thumb
Bootstrapping and cash-tight? Start as a UG and convert later. Raising venture capital soon? Go straight to a GmbH so you don't have to restructure. Always confirm with a Steuerberater and Notar.
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