Choosing a Legal Form in Lithuania: UAB, MB, Branch or Something Else

Most guidance about doing business in Lithuania names the private limited company in the first sentence and never revisits the question. That shortcut is defensible — the UAB genuinely suits the majority of foreign-founded ventures — but it conceals a decision with consequences that run for years. The form you choose determines who is exposed to the company's debts, how easily an investor can be brought in, how profit is taxed on its way to you, whether a bank's onboarding team treats you as a normal commercial client, and how expensive it will be to sell the business or close it. Reversing the choice later is possible, but it always costs more than thinking about it properly at the outset.

The right way to approach the question is not "which form is best" but "what will this entity be doing in three years, and who will need to look at it". A consultancy invoicing two clients from abroad, a product company that intends to raise a seed round, and a manufacturer opening a Lithuanian arm of an existing German group are three different problems with three different answers.

Founders who are weighing these options usually discover that the practical differences show up long after the register entry — in accounting, in payroll, in how a counterparty reads the company's name. Anyone comparing structures before setting up a UAB in Lithuania should test each candidate form against financing plans and exit plans rather than against incorporation cost alone, because the cheapest entity to create is frequently the most awkward one to live with.

The two workhorses: UAB and MB

The UAB (uždaroji akcinė bendrovė) is a private limited liability company with share capital, shareholders, and a director who is a natural person. Liability is limited to contributed capital. Shares are transferable instruments, which means they can be sold, pledged, split between founders on a vesting schedule, or issued to an investor. Every professional counterparty in the EU understands what a UAB is without needing it explained. The minimum share capital is modest — currently in the low four figures in euros, with only part of it required before filing — and you should confirm the exact current figure, since it has been amended.

The MB (mažoji bendrija, usually translated as "small partnership") is a hybrid form created for small owner-operated businesses. It has members rather than shareholders, no minimum capital requirement, and a stripped-down management structure: it can be run by a representative member or by a meeting of members. Members can draw funds as "withdrawals for personal needs" during the year, which suits a solo operator's cash flow, and the social insurance treatment of an active member differs from that of an employed director. Membership is limited to natural persons and to a small maximum number of members.

The MB's weaknesses are structural rather than fiscal. It has no shares, so it cannot issue equity to an investor in the ordinary way. Foreign banks, payment providers and large corporate procurement departments are less familiar with it. And because the form is designed for people who both own and work in the business, it does not model a passive shareholder cleanly.

Branches, representative offices and the sole trader

• Branch (filialas) — not a separate legal person but a registered part of a foreign company. It may trade and invoice, but the parent carries full liability for everything it does. There is no new share capital, and no separate shareholders. A branch keeps its own accounts and has a designated head. It suits an existing group extending into Lithuania where the parent's balance sheet is an asset rather than a risk.
• Representative office (atstovybė) — may promote, market and represent the parent, but may not conduct commercial activity or generate revenue. Useful for market entry and liaison work; useless as a trading vehicle.
• Individual activity / individual enterprise — the sole-trader routes. Cheap and simple, but the individual is personally liable, and for a non-resident these forms interact awkwardly with residence and tax-residence rules.
• TUB and KUB partnerships — general and limited partnerships, occasionally used by professional practices and investment structures, but rare among foreign founders.

Structuring ownership and management as a non-resident

Lithuania does not require shareholders or directors to be Lithuanian citizens or residents. A UAB may be wholly foreign-owned and may be founded by a single shareholder — a natural person or another company. A single-member UAB is entirely ordinary; the sole shareholder simply exercises the powers that a general meeting would otherwise exercise, and decisions are recorded as written resolutions rather than minutes.

Two structural points recur for non-residents. First, the director is a real office with real duties: signing the annual financial statements, acting on the company's behalf, and answering for filing failures personally. If the director is a third-country national who will actually work in and from Lithuania, they need their own legal basis to do so. Second, a corporate shareholder does not remove the beneficial ownership question. The ultimate beneficial owners must be identified up the chain and reported to the state's beneficial ownership subsystem, and banks will independently reconstruct the same chain during onboarding.

Frequently asked questions

Can I convert an MB into a UAB later? Lithuanian law provides for reorganisation and change of legal form, and MB-to-UAB conversion is a recognised route. It is a formal process involving new constitutional documents, capital formation and a register filing — cheaper than starting again, but not trivial.

Is a branch taxed more lightly than a subsidiary? Not as a rule. A branch is generally treated as a permanent establishment and taxed on the profit attributable to it. The real difference is liability and perception, not headline rate.

Can one person be sole shareholder and sole director? Yes. This is common. It does mean the same person signs on both sides of certain decisions, so keep resolutions and any related-party transactions clearly documented.

Do nominee directors solve the residency problem? They create more problems than they solve. A nominee who does not genuinely manage the company undermines any claim to local substance, and banks and tax authorities both probe for it. If you need a local decision-maker, appoint someone with actual authority and actual involvement.

Which form do investors expect? A UAB, in practice. Convertible instruments, share classes and standard shareholder agreements all assume shares exist.

How the choice follows through

Think of the form as a set of default answers to questions you have not been asked yet. A UAB answers "how do we bring in a co-founder", "how do we pay a dividend", and "how do we sell" with well-worn mechanics. An MB answers them awkwardly but keeps the running costs and formality low. A branch answers "how do we open in Lithuania without creating a new balance sheet" and accepts parent-level exposure in return.

Choose against the version of the business that exists after your first big commercial success, not the one that exists on incorporation day. If you genuinely do not know — and many founders do not — the UAB is the form that closes the fewest doors.