What a UG (Mini-GmbH) Really Costs in Germany 2026

A UG (haftungsbeschränkt), the German "mini-GmbH", can be formed for roughly €350 to €500 in fees with as little as €1 of share capital, which is its one decisive advantage over a full GmbH. Everything after formation costs the same: the €225 commercial register fee is identical, and the annual accounting and compliance burden runs the same €2,000 to €8,000 a year. The catch is the law that defines the UG: it must lock 25% of its profit into a reserve every year until that reserve reaches €25,000. The proposed EU Inc would remove both the capital hurdle and the retention rule, but not the annual German tax bill. This is the neutral, statute-sourced version, without a formation service selling you the setup.

The UG exists for one reason: to let founders start a limited-liability company without the €25,000 that a GmbH demands. It is not a separate legal form but a variant of the GmbH under § 5a GmbHG, so almost every rule that governs a GmbH governs a UG too. That is the part the "start for €1" marketing leaves out.

What a UG costs to form

The formation saving over a GmbH comes almost entirely from the notary. Because a UG is founded with the Musterprotokoll (the model protocol) on low capital, and because § 105 Abs. 6 GNotKG waives the €30,000 minimum value the notary would otherwise base the fee on, a single-founder UG pays roughly €170 in notary fees against €700 to €1,000 for a custom-articles GmbH. That is a saving of around €500 to €650 at formation, and it is the only formation line where the two forms differ.

Everything else is the same. The register fee is €225 for both, because the Handelsregister fee does not depend on share capital and was raised to €225 (from €150) on 1 June 2025. The trade-office registration is the same municipal charge.

The €1 that is not really €1

A UG can legally be founded with €1 of capital, one euro per share (§ 5a Abs. 2 GmbHG). In practice, founding on €1 is a mistake. The Musterprotokoll caps deductible formation costs at €300, so a UG started with €1 is insolvent on paper the moment it pays its own notary. Advisers generally suggest starting with at least €500 to €1,000 so the company can cover its formation and early costs. Contributions in kind are not allowed for a UG; the capital must be paid in cash.

The 25% rule: the UG's real running cost

This is the line no formation page prices, because it is not a fee. A UG must place one quarter of its annual net profit into a statutory reserve every year until the reserve plus the paid-in capital reaches €25,000 (§ 5a Abs. 3 GmbHG). Until then, up to 25% of what the company earns cannot be paid out to the shareholders. It stays in the company.

That is the trade for the low capital. A GmbH founder puts €25,000 in at the start (of which €12,500 is their own money paid up front); a UG founder puts in almost nothing but then builds the same buffer out of retained profit, on the company's schedule rather than their own. For a profitable UG, the 25% lock is a real constraint on distributions in the early years.

Reaching €25,000 does not automatically turn the UG into a GmbH. Under § 5a Abs. 5 GmbHG the company may keep the UG name and status indefinitely; converting is a choice, covered below.

What a UG costs every year

Here the "mini" in mini-GmbH disappears. A UG is a Kapitalgesellschaft, so it carries the same accounting and filing duties as a GmbH: double-entry books (§ 238 HGB), an annual financial statement, corporate and trade tax returns, and disclosure through the Unternehmensregister (§ 325 HGB).

Two points matter here. First, a small UG usually qualifies as a micro-entity (Kleinstkapitalgesellschaft) under the § 267a HGB thresholds (balance sheet €450,000, revenue €900,000, 10 employees), which lets it merely deposit (hinterlegen) its balance sheet with the Unternehmensregister under § 326 Abs. 2 HGB rather than publish a full set. Second, a UG gets no first-year IHK exemption: because it is entered in the commercial register, the Existenzgründer relief does not apply, and it pays the chamber base contribution from year one, exactly like a GmbH.

Converting a UG to a GmbH

When the reserve reaches €25,000, a UG can convert to a full GmbH, but it is a deliberate act, not an automatic upgrade. It requires a shareholder resolution (a three-quarters majority), a notarised capital increase to at least €25,000, and a new commercial register entry. Where the increase comes from the company's own retained reserves rather than fresh cash, an auditor must review the figures.

The point worth keeping is that the UG's low-capital start is not free. It defers the €25,000, locks a share of profit to build it, and then charges a four-figure conversion cost to formalise what a GmbH had from day one.

UG or GmbH: the honest cost difference

Put the two side by side and most of the "UG is far cheaper" story falls away.

The UG's genuine advantage is that you do not need the capital up front. But remember that a GmbH's €12,500 is the founders' own money, not a fee; it stays in the company as working capital. So the real gap is a cash-flow timing difference plus about €500 in notary, set against the UG's 25% profit lock, its weaker standing with banks and investors, and the eventual conversion cost. You can model the GmbH side of that in our GmbH cost breakdown or the cost calculator.

What the proposed EU Inc would change

Both the UG's capital workaround and its 25% retention rule exist to solve a problem the proposed EU Inc removes at the source. Under the Commission's proposal COM(2026) 321, the new form would have no minimum capital at all, no notary when standard templates are used, and no statutory profit-retention rule, with formation targeted at a maximum of €100 within 48 hours online.

Two honest qualifications. EU Inc is a proposal, not law: the European Parliament backed the concept 492 to 144 with 28 abstentions in January 2026, and the file is still in committee and Council. And, as with the GmbH, EU Inc would cut the formation friction, not the annual one: a company operating in Germany would still file German returns and, in practice, still pay a tax adviser.

Frequently asked

How much does it cost to start a UG in Germany? Around €350 to €500 in fees for a single-founder UG using the Musterprotokoll (notary about €170, the €225 register entry, and the trade-office fee), plus at least a few hundred euros of starting capital so the company can cover its own costs.

Can I really start a UG with 1 euro? Legally yes, but it is unwise. The formation costs alone exceed €1, so a UG founded on €1 is immediately over-indebted on paper. Start with €500 to €1,000.

What is the 25% rule? A UG must put a quarter of its annual net profit into a statutory reserve until the reserve plus capital reaches €25,000 (§ 5a Abs. 3 GmbHG). Until then, that share of profit cannot be distributed.

Is a UG or a GmbH cheaper? The UG is cheaper to start (no €25,000, about €500 less in notary), but its annual costs are identical and it locks 25% of profit. Over the life of the company the difference is smaller than it looks, because the GmbH's capital is the founders' own money.

When should I convert a UG to a GmbH? When the reserve reaches €25,000 and you want the full GmbH standing with banks and investors. It is not automatic and costs roughly €1,000 to €3,500.

Bottom line

A UG is the right choice when you cannot or do not want to commit the GmbH capital at the start. That is a real advantage, and for many founders a decisive one. But it is the only structural saving: the register fee, the accounting, the tax filings and the chamber dues are all identical to a GmbH, and the 25% profit lock plus a later conversion cost claw back part of the upfront saving. Price the whole life of the company, not just day one.

See how every form compares in our comparison table, estimate a full GmbH with the cost calculator, or check your own situation with the assessment tool.