The German government introduced the UG primarily to act as an alternative to establishing a traditional corporation.
[1] A UG established under German law is not a new type of legal entity; rather, it is a limited liability company similar to a GmbH, with the exception that, unlike the GmbH, it is not required to meet the legally mandated €25,000 share capital required of a GmbH—a UG can be established with as little as one euro of paid-in capital.
However, a UG is still a separate legal entity from its owners and is fully liable for paying corporation taxes and publishing annual financial statements.
Since then, traditional corporations have been reduced in importance, having largely been supplanted by the UG (and also the GmbH) among new companies being formed.
If the total amount of share capital exceeds EUR 25,000, then a GmbH is usually formed instead of a UG.