If you want to start a business with limited liability, you quickly arrive at two names: UG (haftungsbeschränkt) and GmbH. Both separate your personal assets from your business risk, both need a notary and the commercial register (Handelsregister), and yet they're two different paths. Since 2019 I've guided founders here in Bremen through exactly this decision. In this post I compare the two honestly, on the points that really count in practice: share capital, liability, image and ongoing costs.
The core: limited liability, twice over
The UG and the GmbH are both limited-liability companies (Kapitalgesellschaften). That means: if something goes wrong, in principle only the company's assets are liable, not your house or your savings. Strictly speaking, the UG isn't a legal form in its own right but a variant of the GmbH with lower start-up capital, often called the “mini-GmbH”. So the decisive difference isn't the liability protection, which is the same for both, but the capital you have to put up at the start and the obligations that follow from it.
The share capital: €1 versus €25,000
This is the biggest difference. A GmbH needs €25,000 in share capital (Stammkapital), of which at least €12,500 generally has to be paid in at registration. The UG, by contrast, starts from as little as €1. That sounds like a clear point for the UG, but there's a catch: the UG has to set aside a quarter of its annual profit as a statutory reserve until it reaches €25,000. This mandatory profit-retention requirement (Thesaurierungspflicht) ties up capital that would otherwise be available to you. Once the reserve is in place, the UG can be converted into a GmbH.
An important thing to understand: the share capital isn't money lost. It stays your business assets and can be used for investments, rent or materials. In just a few clicks, you can compare both paths directly in the legal form finder.
Image: what banks and clients see
In terms of outward image, the GmbH comes out ahead. It signals substance and usually has the better creditworthiness, because the higher share capital suggests a financial cushion. Banks, landlords and larger business clients often take a GmbH more seriously. The addition “haftungsbeschränkt” (limited liability), which the UG must always carry in its name, makes some business partners aware that only little capital is backing it. For a cautious start on a small budget, that's no deal-breaker; for a capital-intensive venture with large contracts, it can be a disadvantage.
The costs: formation and ongoing operation
At formation, the two are more alike than many people think. The notary costs are based on the share capital, which is why the UG, with its low capital, is somewhat cheaper here. Since 1 June 2025, the initial registration in the commercial register costs a flat €225, the same for both. On top of that comes the trade registration (Gewerbeanmeldung) in Bremen at currently €32. In ongoing operation, the UG and GmbH are practically identical: both must keep double-entry accounts, prepare annual financial statements and publish them. So the UG's supposed savings effect is limited mainly to the start-up capital, not to the ongoing costs.
What your formation costs in concrete terms depends on the form, the contract and the share capital. You can get a transparent estimate for your case in seconds with the formation cost calculator.
Which one fits whom?
- UG (haftungsbeschränkt): for founders with little start-up capital who still want to protect their personal assets, for example in services with low capital needs.
- GmbH: for founders who can raise the capital and who value credibility, creditworthiness and a strong standing with banks and clients.
A common route is to start with the UG and later convert it into a GmbH, once the reserve is in place or the business grows. I describe the exact process of setting up a GmbH, with every step from the notary to the commercial register, in my post GmbH formation in Germany. You'll also find a detailed side-by-side comparison on my UG vs GmbH page.
Can the consulting be funded?
Yes. In Bremen, professional start-up consulting can be subsidised by up to 80% through the Starthaus of the Bremer Aufbau-Bank, capped at €2,800 per applicant. That makes the clean preparation of your legal-form choice affordable. To see which programmes fit you, read my post Startup grants in Germany, or check directly with the funding check. You'll find more answers on legal form and costs in my FAQ.
For orientation only, not legal or tax advice. All information is as of 2025/2026 and without guarantee. What's decisive is always your individual case. If you'd like to talk it through personally and with no obligation, just reach out via the contact form.