MB vs UAB in Lithuania: Which Company Type Is Right for You?

If you're planning to register a company in Lithuania, the first decision you'll face is choosing between two main business structures: MB (Mažoji bendrija / Small Partnership) and UAB (Uždaroji akcinė bendrovė / Private Limited Company). Both are legitimate, widely used business forms — but they serve very different needs.

The short answer: for most people, MB is the better choice. But let's break down exactly why, and when UAB makes more sense.

What Is an MB?

An MB (Small Partnership) is a flexible, lightweight business structure designed for small businesses, freelancers, and entrepreneurs. It has minimal administrative requirements, low setup costs, and no mandatory director salary — making it highly cost-effective for individuals and small teams.

Key facts about MB:

• Can have up to 10 owners;

• No mandatory director — owners manage the company directly;

• Faster and cheaper to register than a UAB;

• Ideal for freelancers, service providers, e-commerce businesses, and small teams;

• Limited liability.

What Is a UAB?

A UAB (Uždaroji akcinė bendrovė / Private Limited Company) is Lithuania's equivalent of a standard limited liability company. It's a more formal corporate structure, better suited for businesses that plan to scale, hire staff, or attract outside investment.

Key facts about UAB:

• Can have up to 249 shareholders;

• Requires a director — the owner can appoint themselves as director, so no need to hire a separate or local person;

• Has a share-based structure, allowing owners to raise capital from private investors;

• Better suited for larger businesses, startups seeking investment, or companies in regulated industries (finance, fintech, etc.);

• Limited liability.

The director requirement doesn't mean you need to find a Lithuanian resident or hire someone externally. As the owner, you can simply take on the director role yourself — but you will still need to be formally employed by the company, which means social taxes apply regardless of how many hours you actually work.

The Hidden Cost of a UAB: The Director Salary Requirement

This is the most important difference that many people overlook when choosing between MB and UAB.

With a UAB, a director must be officially hired — sooner or later. This can be the owner themselves or another person, but there is no way around it under Lithuanian law. And here's where it gets expensive: even if the director is hired for just a quarter-shift (1/4 of a full working week), social taxes are calculated from the full minimum wage, not the fraction of it.

In practice, this means:

±€350/month in mandatory taxes, regardless of whether the director works full-time or part-time.

For a small business or solo entrepreneur, this adds up to over €4,000 per year in unavoidable overhead — before you've paid yourself a single euro in salary or profit.

With an MB, there is no such requirement. Owners run the company without the obligation to hire a director or pay these taxes. This alone makes MB the more economical choice for the vast majority of small businesses.

Registration Costs

MB Registration Prices

UAB Registration Prices

All prices include:

• Business registration address in Lithuania for unlimited time

• All government and state fees

• Full registration handled on your behalf

The Registration Process: How It Works

The fastest and most convenient way to register your company — whether MB or UAB — is through our transfer method:

1. We register the company under our name

2. Once it's fully set up, we transfer full ownership to you

3. You never need to travel to Lithuania or deal with notaries, translations, or paperwork

This approach works for 99% of our clients and is the smoothest, most hassle-free option available.

What About the 0% Tax Holiday?

Lithuania offers a 0% corporate income tax rate for qualifying new companies in their first two years of operation. After that, a reduced 7% rate applies (or 17% if annual revenue exceeds €300,000).

There is one important catch: companies registered via transfer do not qualify for the 0% tax holiday. If you receive your company through a transfer, your applicable rate starts at 7% from day one.

If you specifically want the 0% holiday, the company must be registered directly in your name through a notary — a slightly more involved process, but possible.

That said, for most clients the convenience and cost savings of the transfer method outweigh the tax benefit — particularly for businesses that are still finding their footing in the first year.

When Should You Choose an MB?

Choose an MB if you:

• Are a freelancer or solo entrepreneur

• Run or plan to run a small service business

• Operate an e-commerce or online business

• Work in a small team (up to 10 people)

• Want to minimize overhead and administrative costs

• Don't need to raise capital from outside investors

When Should You Choose a UAB?

Choose a UAB if you:

• Plan to raise investment by selling shares to private investors

• Expect to grow quickly and need a scalable corporate structure

• Are starting a business in a regulated industry (fintech, financial services, lending, etc.)

• Will have more than 10 shareholders

• Need a structure that international investors or banks will recognize

Final Verdict

For the vast majority of entrepreneurs, freelancers, and small business owners, MB is the smarter choice. It's cheaper to register, faster to set up, and — critically — avoids the €350+/month mandatory director tax burden that comes with a UAB.

UAB has its place, but it's best suited for businesses with genuine ambitions to raise capital, scale significantly, or operate in industries that require the structure.

If you're unsure which one is right for your specific situation, we're happy to help. Book a free consultation and we'll walk you through the decision in minutes.