Business registration in Germany: GmbH or UG

The UG is not a separate legal form but the entrepreneurial variant of the GmbH, founded the same way by notarial deed, so the choice of legal structure turns on timing: the UG's low entry point is paid for later, out of the business. Civil law partnerships belong to a different comparison of business risk. That makes the UG the natural entry for a founder testing the German market with little at stake, and a weaker fit for one who needs money out of the company early, because part of what the business generates stays tied up until the company reaches the GmbH level.

The notary who records the deed does more than write down what the founders say. Under EU anti-money-laundering law, notaries are obliged entities alongside company service providers, accountants and tax advisers, so establishing who stands behind a new company is a legal duty of their own. Once formed, the company must obtain and hold adequate, accurate and current information on its beneficial owners, and in Germany that information goes into the transparency register. The beneficial-ownership test follows any corporate shareholder up the chain to the natural persons at its end, which is why a holding structure lengthens the file while shares held personally keep it short. Choosing the UG over the GmbH changes none of this.

Both forms answer the same list. A step that is easy to misjudge is one the list does not show: the notary. German company law requires the articles of association to be in notarial form, and the EU rules on online formation did not remove that step; in Germany the notarial recording can also be taken by videoconference. Whether a founder attends in person, by video or through a representative, a notary still records the deed, and under the EU directive on online company formation attendance in person can be demanded only case by case, on suspicion of a false identity or of a problem with legal capacity or authority to represent.

Of the taxes in this brief, VAT is usually the first to produce a filing, because its preliminary returns run through the year while the corporation tax return follows the year end. The corporation tax figure is also only part of the charge on profit: because trade tax follows the municipality, two German companies with identical profits can carry different tax bills. For a corporate owner, the dividend withholding shown for non-residents is not always the last word: the EU Parent-Subsidiary Directive exempts dividends paid to a parent in another member state that holds at least 10% of the capital, subject to anti-abuse rules.