MB or UAB in 2026: which legal form to choose and where people most often go wrong

Before setting up a company, most people ask the same question: MB or UAB? The answer seems simple – “everyone sets up an MB because it is cheaper”. In practice, however, we often see the form chosen on a friend's advice rather than according to one's own business plan. A year later it turns out that an investor, a partner company or a higher salary for yourself is needed – and costly reorganisations begin.

In short: how an MB differs from a UAB

• Capital. An MB has no share capital. Since 1 May 2023, the minimum share capital of a UAB is EUR 1,000.
• Who can be owners. Only natural persons can be members of an MB (up to 10 members). UAB shareholders can be both natural and legal persons – this matters if you plan to bring in an investor or build a group of companies.
• How money is paid out. An MB member can receive payouts without an employment contract. A UAB owner usually receives money as a salary under an employment contract or as dividends.
• Corporate income tax. In 2026 the same rules apply to both forms: the standard rate is 17%, the reduced rate is 7% if income does not exceed EUR 300,000, and newly established entities may apply 0% for their first two tax periods (subject to additional conditions). From 2026, the requirement to have no more than 10 employees no longer applies.
• Liability. Both MBs and UABs are limited liability legal entities – as a rule, the owner is liable for the company's debts only with the company's assets.

When an MB is a good choice

An MB usually suits a business created by one or a few people who work in their own company and don't plan to bring in corporate investors – service providers, consultants, IT specialists, tradespeople and small trading companies. The advantage of an MB is flexibility: a member can receive payouts without an employment contract, and management is simpler.

When a UAB is the better choice

• you plan to bring in a corporate investor or build a group of companies;
• you take part in public procurement or work with large foreign partners for whom a UAB looks more reliable;
• you want a clear separation between owners, managers and employees;
• you are considering selling part of the business in future – shares are easier to transfer.

The most common mistakes we see in practice

1. The form is chosen only on the basis of taxes. Taxes change every few years – the 2026 reform showed this clearly. The form should fit the business model, not just this year's rates.
2. An MB member “takes out” money without documents. Moving money from the company account to a personal account without a decision or bookkeeping later turns into a tax reassessment.
3. Sodra contributions are overlooked. In 2026 the contribution base for MB members grows: from January to June it is 50% of the amounts paid, and from 1 July – 90%. This must be factored in when planning payouts.
4. An accountant is only found after the first enquiry from VMI. Setting up the books from day one is always cheaper than reconstructing them.

Advice from Ana Baranova, director of Patikima buhalterė: “Before setting up a company, answer three questions: how much money do you plan to pay yourself each year, will you have employees, and will a partner or investor come on board within the next three years? These answers alone usually make it clear whether an MB or a UAB suits you. We can run the numbers with real figures in a single consultation.”

What to do now

If you are still deciding which form to choose, or have already set up a company and are unsure you made the right choice – let's talk. We will assess your plans, calculate the taxes for both options and help you set up the company so that nothing needs fixing a year later.

Book a free consultation or call +370 635 87770.

Information valid for 2026. Every case is different, so consult an accountant before making a decision.