Hub Legal at IBA Annual Conference 2026

UAB or MB: Incorporation, Key Differences and What to Consider

When establishing a legal entity in Lithuania, the choice of legal form determines not only the incorporation formalities but also the governance structure, the rights of participants, the capital requirements and the company's further development. Below are the key aspects of incorporating a private limited liability company (UAB) and a small partnership (MB), and the practical differences between them.

1. Incorporating a Private Limited Liability Company (UAB) in Lithuania: Key Steps

A private limited liability company (UAB) is a private legal entity with limited civil liability and one of the most commonly chosen forms of business organisation in Lithuania. Shareholders are liable for the company's obligations only up to the amount they are required to pay for their shares, while the company itself enters into transactions independently and is liable for its own obligations.

How Does the Incorporation Process Begin?

First, the founders must determine the company's name, registered office address, the amount of share capital and how it is divided among the founders, the manager and the governance structure. Founders of a company may be both natural persons and legal entities, and the number of shareholders is not limited.

The company's name must include the words “uždaroji akcinė bendrovė” (private limited liability company) or the abbreviation “UAB”.

If the registered office is located in premises that do not belong to the founder, the consent of the premises' owner is required, and if the premises are owned by several persons, the consent of all co-owners. If the owner of the premises is a natural person, consent in notarial form may be required. If the premises are mortgaged, the creditor's consent may also be needed.

The minimum share capital of the company is EUR 1,000. Before the company is registered, each founder must pay in cash an initial contribution of at least 1/4 of the nominal value of the shares they have subscribed for plus the share premium, and the total of all initial contributions paid must be no less than EUR 1,000. Initial contributions are paid into an share capital deposit account, which may be opened with a bank or an electronic money institution. All shares must be paid up within the period set in the incorporation documents, which may not exceed 12 months. The remaining part of the price of the shares may also be paid by non-monetary contributions, which must be valued by an independent asset valuer.

The mandatory bodies of the company are the general meeting of shareholders and a single-person management body – the company's manager. A collegial management body (the management board) and a collegial supervisory body (the supervisory board) may be formed optionally.

Key Steps in the Incorporation Process

The company's name is chosen (it can be reserved with the Centre of Registers if desired) and the governance model is selected.
A deed of incorporation (where there is a sole founder) or an incorporation agreement (where there are several founders) and the company's articles of association are prepared.
The incorporation documents are signed.
A share capital deposit account is opened and the initial cash contributions for the shares are paid into it.
If the company is not incorporated electronically, a notary certifies that the incorporation documents comply with legal requirements.
The company is registered in the Register of Legal Entities.

A company can also be incorporated electronically through the Centre of Registers' self-service portal, provided the conditions for electronic incorporation are met (for example, model articles of association are used and contributions for shares are paid in cash only) and the founders are able to use a qualified electronic signature.

What matters after the company is registered?

Formalities do not end once the company is registered. The most important next steps are to submit data on shareholders to the Information System of Members of Legal Entities (JADIS) and on beneficial owners to the Information System of Beneficial Owners of Legal Entities (JANGIS), to conclude an employment contract with the manager, to arrange bookkeeping, and to convert the share capital deposit account into a current account. If only part of the contributions was paid before registration, the remaining part of the share price must be paid within the period set in the incorporation documents.

2. Incorporating a Small Partnership (MB): A Simpler Form for Small Businesses

A small partnership (MB) is a private legal entity with limited civil liability, all of whose members are natural persons. It is one of the most popular legal entity forms in Lithuania, especially when starting a small business.

One of the most important differences between an MB and a UAB is that no minimum share capital needs to be formed when establishing it. Members pay contributions, the amount and payment procedure of which they determine themselves. For this reason, an MB is often chosen at the start of a small business, when a simpler structure and fewer initial formalities matter.

What should you know about MB members?

Only natural persons can be founders and members of an MB – a legal entity cannot become a member of an MB.
An MB may have no more than 10 members. This limit applies both to the founders and to members admitted later.
An MB member may not have an employment relationship with the small partnership. Members may work in the partnership, but not under an employment contract. Employment contracts may be concluded with persons who are not MB members.
New members are admitted by a decision of the members' meeting, which is adopted unanimously.
Each member has one vote at the members' meeting, unless the MB has a manager and the MB’s articles of association provide for a different distribution of votes.
A member may transfer their membership rights to another natural person or withdraw from the MB and take back their contribution in accordance with the procedure set out in the MB’s articles of association.
Members may receive the MB's annual and interim profit and may also take funds for personal needs. Profit is distributed in proportion to members' contributions, unless the MB’s articles of association provide otherwise. If it turns out at the end of the year that the MB operated at a loss, members may have to return amounts withdrawn in advance.

How is an MB incorporated?

Incorporating an MB begins with choosing the name, registered office, members and governance model. The partnership's name must include the words “mažoji bendrija” (small partnership) or the abbreviation “MB”. Where there is a sole founder, a deed of incorporation is drawn up, and where there are several founders, an incorporation agreement. The MB’s articles of association are also prepared – the main document governing the partnership's activities, which sets out the partnership's bodies, their competence, the procedure for convening the members' meeting and other important matters. An MB is considered established from the date of its registration in the Register of Legal Entities. Since there is no minimum capital requirement, there is no need to open an accumulation account before registration. Contributions may also be non-monetary – their value is determined by a unanimous decision of the members' meeting, and an independent asset valuer is not required.

When choosing a governance model, there are two options: the partnership's only body may be the members' meeting (in which case it is also the management body, and where there are two or more members, a representative of the MB is indicated in the Register of Legal Entities), or a members' meeting and a single-person management body – the MB manager. The manager may be either an MB member or another natural person; a civil law (services) agreement, rather than an employment contract, is concluded with the manager.

As with a UAB, an MB can be incorporated electronically through the Centre of Registers' self-service portal, using a qualified electronic signature and complying with the conditions for electronic incorporation. After the MB is registered, data on beneficial owners must be submitted to JANGIS and bookkeeping must be arranged.

When might an MB Be an Attractive Option?

An MB can be a practical choice when several individuals establish a business and work in it themselves, do not need a share structure and want a simpler start. Nevertheless, before incorporating it is worth assessing the planned business growth and the circle of future investors: if you plan in future to bring in a legal entity (for example, another company or an investment fund) or more than 10 participants, an MB will not suit such a model and would have to be restructured, for example into a UAB. In addition, because an MB member cannot work in the partnership under an employment contract, it is more difficult to motivate employees by giving them a share of the business (as in a UAB – through shares or share options).

Practical Choice

An MB is usually more attractive when the business is small, is established and operated by individuals, and a complex ownership structure is not needed. A UAB is more often chosen when expansion is planned, investors (especially legal entities) are to be attracted, collegial management bodies are to be formed, or shares are to be transferred. In every case it is worth assessing not only the cost and speed of incorporation, but also how the chosen form will work in one or several years' time.

Important: the legal form should be chosen taking into account not only the simplicity of incorporation, but also the planned size of the business, the participant structure, the need for investment and long-term business plans.

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