Setting up a GmbH or UG in Germany

A GmbH needs €25,000 of share capital, and at least €12,500 of it must be paid in before the company is registered. A UG, the "mini-GmbH", can start with as little as €1, paid in full, but has to set aside a quarter of each year's profit until it can become a full GmbH. Either way a notary records the founding, the company exists as a limited company only once it is entered in the commercial register (Handelsregister), and it then registers with the tax office within a month. Notary and court fees come to roughly €450 for a one-person UG on the standard form, and roughly €1,100 for a two-shareholder GmbH with its own articles.

1. GmbH or UG: what actually differs

A GmbH (Gesellschaft mit beschränkter Haftung) is a limited liability company: a legal person of its own, whose creditors can reach only the company's assets (§ 13 GmbHG). A UG (Unternehmergesellschaft) is not a separate legal form. It is a GmbH with less than the minimum capital, plus a few extra rules (§ 5a GmbHG). Liability, taxes and bookkeeping are the same for both.

The UG's reserve can only be used to convert it into share capital, or to cover a loss. Once the share capital has been raised to €25,000, the UG rules stop applying, and the company may keep its UG name or change it to GmbH (§ 5a(3), (5) GmbHG).

The practical difference is cash. A GmbH ties up at least €12,500 from the start; that money belongs to the company and can be spent on its business, but the assets needed to cover the share capital may not be paid back to the shareholders (§ 30(1) GmbHG). A UG costs almost nothing to capitalise, which is also its weakness: with €1 of capital, the notary and court bills alone exceed the company's capital on day one, and suppliers, landlords and banks know it. Many founders choose a capital somewhere in between.

2. The notary: standard form or your own articles

The articles of association (Gesellschaftsvertrag or Satzung) have to be notarised (§ 2(1) GmbHG). There are two ways to do it.

• The standard form (Musterprotokoll). A one-page template set out in the law, for a company with at most three shareholders and one managing director. Nothing may be added or changed beyond what the law provides, and the form doubles as the list of shareholders (§ 2(1a) GmbHG). It is the cheapest route because the notary's fee is then based on the actual capital, not a minimum value.
• Individual articles. Needed for more shareholders or directors, and useful whenever the founders want rules of their own: what happens when someone leaves or dies, who may buy shares, how decisions are taken, how deadlocks are broken. The notary's fee is based on a value of at least €30,000 (§ 107(1) GNotKG).

Notary fees are fixed by law in the Court and Notary Fees Act (GNotKG), and a notary may not agree a different fee (§ 125 GNotKG). What differs between notaries is availability, and whether they work in English. Deeds are written in German unless the notary is asked to use another language they know well (§ 5 BeurkG). A founder who doesn't speak German well enough has the deed translated aloud instead of read out, by the notary or an interpreter (§ 16 BeurkG).

Founding online, by video, has been possible since 1 August 2022 for cash formations, and since 1 August 2023 also with contributions in kind (Bundesnotarkammer). It runs through the notaries' own video system and app (notar.de). Each founder identifies with an electronic ID: the online function of a German ID card or residence permit, or an eID from another EU or EEA country that is recognised at the highest assurance level (§ 16c BeurkG). Founders without one go to a notary in person.

For the appointment, the notary will need the company's name, registered seat and business address, the purpose of the business (Unternehmensgegenstand), each shareholder's share, the managing director, and ID for everyone signing. Any adult can be managing director unless barred by certain convictions, a professional ban or a court-ordered guardianship; German law sets no residence or nationality requirement (§ 6(2) GmbHG).

3. The business account and paying in the capital

After the notary appointment, the managing director opens a business account in the name of the company in formation, usually written "GmbH i.G." or "UG (haftungsbeschränkt) i.G.", and the shareholders pay their contributions into it. Banks need the notarised deed for this and must identify the managing director and the beneficial owners first, so it pays to start early.

When the company is filed for registration, the managing director declares that the contributions have been paid and are at the director's free disposal (§ 8(2) GmbHG). The court may ask for proof, such as the bank's confirmation. A false declaration is a criminal offence, punishable by up to three years in prison (§ 82(1) GmbHG).

4. The Handelsregister, and the time before it

The notary files the registration electronically with the commercial register at the local court (Amtsgericht). The court checks it and makes the entry, which then appears on the joint register portal, handelsregister.de. Anyone can look up register entries there free of charge (IHK Frankfurt), including the names of shareholders and directors.

Until it is registered, the GmbH does not exist as such. Anyone who acts in the company's name before then is personally and jointly liable for it (§ 11 GmbHG). Signing a lease, hiring staff or taking on clients between the notary and the register entry is possible, but the limited liability is not yet there to protect the person who signs.

5. The Transparenzregister

Separately from the Handelsregister, every GmbH and UG must itself report its beneficial owners (wirtschaftlich Berechtigte) to the transparency register without delay (§ 20(1) GwG). A beneficial owner is any individual who holds more than 25% of the capital or votes, or controls the company in a comparable way (§ 3(2) GwG). Until 31 July 2021 the Handelsregister entry often counted as the report; that rule has gone, so a new company has to file the report itself. The register charges an annual fee of €19.80 (TrGebV), unchanged since 2024.

6. The tax office, the Gewerbeamt and the IHK

The tax office. Within one month of starting, the company must send the tax office the tax registration questionnaire electronically through ELSTER (§ 138(1b), (4) AO). For companies it is a form of its own, the "Fragebogen zur steuerlichen Erfassung bei Gründung einer Kapitalgesellschaft / Genossenschaft", and it centres on the company rather than a person: its activity, premises, bank account, financial year, whether it will employ people, expected turnover and VAT, and whether it wants a VAT ID number (ELSTER). The notary also sends the tax office a copy of the founding deed within two weeks (§ 54 EStDV), so the tax office knows the company exists either way; the questionnaire is still required. The company then receives its own tax number. Companies subject to corporation tax are also being given a business identification number (Wirtschafts-Identifikationsnummer) automatically from the fourth quarter of 2026, without applying (BZSt).

One VAT rule changes for new businesses. For 2021 to 2026, a new business files VAT returns monthly or quarterly depending on the tax it expects. From 2027, as the law stands on 22 October 2026, a new business again files monthly in the year it starts and the year after (§ 18(2) UStG). See VAT returns.

The Gewerbeamt. A company that starts a trade business must register it with the local trade office at the same time (§ 14 GewO). The fee is set locally: in Berlin it is €31 for a company with one managing director, or €15 for a registration filed online (service.berlin.de).

The IHK. A GmbH or UG becomes a member of its local Chamber of Industry and Commerce automatically, and pays an annual contribution set by that chamber (§ 2 IHKG, § 3). The exemption for very small businesses applies to individuals and partnerships only, not to companies. A craft business belongs to the Chamber of Crafts (Handwerkskammer), and to the IHK only with any non-craft part of its business.

7. What it costs

The fees for the notary and the court are fixed by law. The Federal Chamber of Notaries gives two examples, and the court fees were raised by half on 1 June 2025 (IHK Hannover):

If any contribution is made in assets rather than cash, the court fee is €360 plus €120. On top come the trade registration (see above), the transparency register's €19.80 a year, and the IHK contribution. Not included: advice from a lawyer on individual articles, or from a tax advisor on the set-up, where founders want it. Those fees depend on the work.

The share capital is not a cost. It stays the company's money, to be spent on the business.

8. The order of steps, and how long they take

Any query from the court, a missing document or a slow bank adds time. A formation where the notary has everything on the first day can be on the register within a couple of weeks; one that starts with an open question about the shareholders cannot.

9. What changes compared with working on your own account

Many people found a GmbH or UG after some years as a freelancer or sole trader. What changes:

• Liability. Creditors can reach only the company's assets. Limits remain: a managing director who breaches their duties is personally liable for the company's unpaid taxes (§ 69 AO), and must file for insolvency no later than three weeks after the company can no longer pay its debts, or six weeks after it becomes over-indebted (§ 15a InsO). Banks and landlords may still ask for personal guarantees.
• Bookkeeping. A GmbH counts as a merchant by law (§ 13(3) GmbHG, § 6 HGB): double-entry books from day one, an opening balance sheet (§ 242(1) HGB) and a balance sheet every year. The simple cash-basis accounts (EÜR) that freelancers use are not available, and the size exemption in § 241a HGB is for sole traders only. See bookkeeping requirements.
• Taxes. The company pays corporation tax and trade tax on its profit, with no allowance. Work that is freelance (freiberuflich) for an individual becomes a trade in a GmbH, so trade tax applies to it (§ 2(2) GewStG). See how a GmbH or UG is taxed.
• Getting money out. The money is the company's. Shareholders receive a salary as managing director or a distribution of profit, each taxed in its own way. Simply taking money from the account, as a sole trader can, risks being treated as a hidden profit distribution.
• Publicity. Shareholders, directors and the annual accounts are on public registers.
• An existing business. Moving a running sole-trader business, with its contracts, equipment and clients, into a new company has tax consequences of its own and is usually planned with a tax advisor before the notary appointment.

10. The duties that come every year

• Annual accounts (Jahresabschluss) within three months of the year end, or six months for a small company (§ 264(1) HGB), approved by the shareholders within eight months, or eleven for a small company (§ 42a(2) GmbHG).
• Publication. The accounts go to the company register (Unternehmensregister) no later than one year after the year end (§ 325 HGB). A micro company files only its balance sheet and can have it deposited instead of published, so it is available only on request (§ 326(2) HGB). Late filing brings fines from the Federal Office of Justice of at least €2,500, reduced to €500 for a micro company and €1,000 for a small one that files after the six-week warning period (§ 335 HGB).
• The UG reserve: a quarter of the year's surplus, every year, until the capital is raised to €25,000.
• Tax returns: corporation tax, trade tax and VAT, plus the balance sheet as data (E-Bilanz). The deadlines are in the guide on company taxes.
• Keeping the registers right: a new shareholder list whenever shares change hands (§ 40 GmbHG), and an update to the transparency register when the beneficial owners change.

Size classes for the accounts, after the increase in 2024. A company falls into a class if it stays within at least two of the three limits on two consecutive year ends; a newly founded company, already on its first year end (§ 267(4) HGB):

The rules above are the general picture. How a specific company is set up, capitalised and run is what a tax advisor (Steuerberater) and, for the articles, a lawyer look at.

Before the notary appointment