GmbH or UG: Which German Company Form for Cross-border Sellers

When registering a company in Germany, cross-border sellers almost always hesitate between the GmbH and the UG. Both offer limited liability and can bear company debts independently; the difference lies in the entry threshold, market trust and the stage each one suits. Choosing wrong is not fatal, but it costs you later. This guide makes the choice clear before you incorporate.

First, a key premise: both are limited liability companies

The GmbH (Gesellschaft mit beschränkter Haftung) and the UG (Unternehmergesellschaft) are, in legal essence, the same type of entity — limited liability companies where shareholders are liable only up to their capital contribution, keeping personal assets separate from company debts. The UG is, strictly speaking, a "mini" or "starter" version of the GmbH under section 5a of the German Limited Liability Companies Act (GmbHG).

In other words, the UG is not a separate company type but a "low-capital GmbH". That framing explains all their differences: not tax, not liability structure, but the threshold and external trust.

Share capital: the most visible difference

The GmbH has a statutory minimum share capital of EUR 25,000, of which at least half (EUR 12,500) must be paid in at registration; the rest can follow later. This money is not paid to the government — it goes into the company account as start-up funds you can use for operations.

The UG can be founded with as little as EUR 1 — in theory. In practice we usually advise clients to subscribe EUR 300 to 1,000 to cover early notary fees, bank account opening and basic operations. The UG capital must be paid in full at once, no instalments.

Item	UG	GmbH
Minimum share capital	EUR 1 (we suggest 300–1,000)	EUR 25,000
Paid-in requirement	Full amount at once	At least 50% (12,500)
Mandatory profit reserve	25% of annual net profit	None
Corporate income tax	~15% (same as GmbH)	~15%
Market trust	Lower (name carries UG)	High (standard German form)
Name suffix	UG (haftungsbeschränkt)	GmbH

The UG "forced savings" mechanism many overlook

This is the most overlooked point about the UG, and it directly affects cash flow: the law requires a UG to retain 25% of its annual net profit as a legal reserve, which cannot be distributed to shareholders, until accumulated capital reaches EUR 25,000 — at which point it can (and should) convert to a full GmbH.

So if your UG takes off and turns a profit, a quarter of that profit each year is "locked" inside the company. For cash-strapped startups this is both a constraint and a good thing — it forces you to build up capital and naturally graduate to a GmbH.

Market trust: an easily underestimated hidden cost

A UG name must carry "UG (haftungsbeschränkt)", so local German suppliers, banks and large B2B clients immediately see a "mini-capital company". In some situations this creates real friction:

• Bank account opening: some local German banks scrutinise UG applications more, or decline them, which can stall later VAT registration and marketplace onboarding.
• B2B procurement and credit terms: German wholesalers supplying you may refuse payment terms to a UG and require payment upfront.
• Platforms and partners: some premium B2B channels prefer working with a GmbH.

If your German business is mainly platform B2C (Amazon, eBay) with little deep local supplier work, a UG is fine. But if you plan local procurement, offline distribution or brand building, a GmbH better carries your commercial identity.

Tax and compliance: almost identical here

A common myth to clear up: the GmbH and UG carry almost identical tax burdens. Both pay Germany's corporate income tax (Körperschaftsteuer, ~15%) plus solidarity surcharge and trade tax (Gewerbesteuer, varying by city), landing the combined rate around 30%. Standard VAT is 19% for both. The UG is not a "tax-saving company" — it just has a lower capital threshold. What you save is start-up capital, not tax.

The real path from UG to GmbH

Converting a UG to a GmbH is not a re-registration but a form change via capital increase (Kapitalerhöhung). When the UG's legal reserve plus new capital reaches EUR 25,000, you can:

1. Hold a shareholders' meeting and resolve on the increase and form change
2. Have a notary (Notar) handle the capital increase and articles amendment
3. File the change with the local commercial register (Handelsregister)
4. Once registered, the name changes from "UG (haftungsbeschränkt)" to "GmbH"

The company entity continues, the tax number stays, and bank accounts and marketplace stores need no re-application — nearly seamless for a running business.

A decision checklist for cross-border sellers

1. Assess your budget: below EUR 12,500 in start-up capital, the UG is the realistic starting point.
2. Judge your model: pure platform B2C, UG is enough; local procurement, credit terms or offline channels lean GmbH.
3. Consider brand and funding plans: if you plan to bring in investors or build a brand long term, the GmbH's structure and trust help.
4. Estimate profitability: a profitable UG retains 25% each year, essentially saving up your conversion capital.

Choosing a company form is a trade-off between "start-up cost" and "market trust" — there is no absolute right or wrong, only what fits your current stage.

FAQ

Can a UG sell on Amazon Germany directly?

Yes. Amazon treats UG and GmbH the same; with a valid German VAT number and EPR (LUCID) registration, you can list and sell normally. The platform does not distinguish between the two forms.

Can one person register a UG or GmbH?

Yes. Both allow a single shareholder (Ein-Personen-Gesellschaft), who can also serve as managing director (Geschäftsführer). Single ownership is common among cross-border sellers.

What compliance steps follow registration?

Registration is only the first step. You typically still need a VAT number, EPR (LUCID) registration, an EORI customs number, OSS if you sell across multiple countries, and ongoing tax filings.

Choosing UG or GmbH is only the starting point of going to market in Germany. Registration is step one; the VAT number, OSS filing, EPR packaging compliance and EORI customs number are what make the business truly compliant and able to run.

Further reading • Landing guideGermany company registration • GmbH / UGThe full path from registration to VAT / EPR compliance→