MB or UAB – What to Choose in 2025?

When choosing between a Small Partnership (MB) and a Private Limited Company (UAB), the key is not “what’s cheaper,” but how you plan to earn money, how many people will be on your team, whether you plan to have employees, investors, and VAT.

In 2025, several important tax changes have been introduced that affect the calculations, especially regarding UAB profit tax.

Quick Decision in 30 Seconds

Choose MB if:

• you are 1–2 founders, want simplicity and less administration,
• the business is small / you are testing an idea,
• you are not planning investors and share structure for now,
• you want a more flexible money withdrawal model (depends on the situation).

Choose UAB if:

• you plan growth, employees, partners, investors,
• you want a clear “shareholders–director–employees” model,
• you need credibility (suppliers, banks, tenders),
• you want to separate personal and company finances more clearly. (Common practical argument, depends on the situation.)

Key Differences (Essentials)

1) Share Capital

• UAB: minimum share capital is generally considered €2,500.
• MB: there is no minimum share capital requirement (contributions are possible, but there is no “mandatory” threshold).

Note: your previous wording “MB share capital is less than €2,500” is not accurate – MB has no mandatory minimum capital at all.

2) Profit Tax (2025 Change)

In 2025, profit tax rates have changed:

• standard profit tax for the 2025 tax period – 16% (clearly stated by the STI).
• reduced rate for small entities – 6% (if conditions are met, e.g., up to 10 employees and revenue up to €300,000, with additional restrictions for related entities).

This applies to both MB and UAB, as both are legal entities and pay profit tax on taxable profit (when it arises).

3) VAT Threshold and 2025-05-01 Rules

If your business is approaching the VAT threshold, it is important to know that the €45,000 threshold (value of taxable transactions in Lithuania) is critical, and in 2025 it was emphasized that the VAT obligation arises from the transaction that exceeds the threshold (the STI provides examples).

Taxes in 2025: What Really Matters for the Choice?

A) UAB / MB Profit Tax: 16% vs 6%

If your company is small and meets the conditions, the 6% profit tax can be a significant argument (regardless of whether it is MB or UAB).

B) Dividends (to Owners)

Dividend taxation for individuals is most commonly discussed as 15% PIT (in practice, this is the most common base if there are no specific exceptions).

C) Personal Income Tax (PIT) Changes in 2025

The STI has prepared material on 2025 PIT changes (e.g., regarding progressive rates for higher income, etc.). This is important if the owner’s income is high and comes from multiple sources.

Accounting: Is MB “Easier” Than UAB?

In short: the illusion of MB simplicity is common.
Yes, MB is often smaller and simpler in practice, but:

• accounting is still mandatory,
• declarations are mandatory,
• document discipline is mandatory,
• and mistakes are costly (fines, corrections, STI inquiries).

Moreover, MB member payments / management models often raise more questions than the standard UAB “salary + dividends” model. The STI has prepared separate material specifically on MB member taxes and situations.

“Sodra” also has a separate page for MB members on contribution payment procedures and deadlines.

When Does MB Become “Too Tight”?

MB is often “outgrown” when:

• more partners arrive / you want a clear share structure,
• investors appear,
• you want clearer management (director + shareholders),
• the number of employees and processes grows,
• international transactions arise (VAT, OSS, etc. – depends on the model).

Practical Recommendation (How to Choose Correctly)

1. If you are testing an idea for 6–12 months and want simplicity → MB.
2. If you plan growth, a team, investors, or reputational weight from the start → UAB.
3. If revenue is approaching the €45,000 threshold – plan the VAT regime immediately (do not delay).
4. In any case, the 2025 profit tax rate change (16% / 6%) is an argument to calculate profit tax in advance (especially if profitability is high).

Finally: What to Do If You Are Still Unsure?

If you want, prepare 5 numbers, and the decision can be made quickly:

• planned annual revenue,
• planned profitability (%),
• whether you will be a VAT payer,
• number of employees in 12 months,
• whether you plan an investor / partner.

CTA (SmartAccountAI)

If you want MB or UAB accounting to be managed professionally, and you see purchases, sales, debts, bank, and cashflow in one place, SmartAccountAI can become the foundation of your financial management – from startup to growth.

MB and UAB Tax Comparison in 2025

Important: profit tax depends not on turnover, but on taxable profit, but the reduced rate is only applied if you meet the conditions, including revenue (turnover) and employee limits.

1) Main Tax Table (MB vs UAB)

Profit Tax in 2025: Rates and “Dependence on Turnover”

2) Profit Tax Rates in 2025

• Standard profit tax for the 2025 tax period: 16%.
• Reduced rate: 6% (when specified conditions apply).

3) Where Is “Turnover” Here?

Profit tax is calculated on taxable profit, but the reduction (6%) is usually associated with criteria, including:

• revenue (turnover) limit (often mentioned as €300,000)
• number of employees (often up to 10)
• and other restrictions (e.g., related persons / participants, etc.).

UAB Salaries: How Money Is Withdrawn and How It Is Taxed

A UAB owner usually withdraws money through two “clean” channels:

A) Salary (if you work in the company)

• PIT + NPD applied according to employment relationship rules (the STI provides 2025 NPD logic and formulas).
• Employee social insurance contributions (VSD/PSD) – “Sodra” provides rates; in 2025, the total employee rate in documents is stated as 19.5% (without additional pension accumulation).

Practical logic: salary = stable, “bank-understandable” method, but usually more expensive than dividends if the goal is to maximize withdrawal optimization.

B) Dividends

• Dividends are taxed at 15% PIT (withheld by the paying company).
  Practical logic: dividends are often used as “profit withdrawal” after annual results.

MB Money Withdrawal Methods and Taxation (Most Important Part)

An MB member can receive income in several different ways (the STI clearly distinguishes this):

1) Payments Equated to Employment-Related Income (code 02)

• The STI states that an MB member can receive employment-related income (code 02).
• Such income is taxed as “employment-type” income (PIT, NPD application in the annual declaration – depending on the situation).

When this is useful: when you want regular payments and social guarantee logic, but you need to set up bases and declarations very neatly.

2) Funds Withdrawn for Personal Needs (social contributions on 50% base)

• “Sodra” explains that for MB members, the VSD/PSD base is 50% of funds withdrawn for personal needs.
• Rates depend on insurance types and (if applicable) additional pension accumulation; “Sodra” provides structure and rates.

What this means in practice: MB allows more flexible withdrawals, but social contributions can be significant, especially when withdrawals are large.

3) Civil Service Contract with MB (including management) (code 77, limit up to €100,000/year)

• The STI states that from 2020-11-19, an MB member can receive income under a civil service contract (code 77), including management, with a €100,000 annual limit.

When this is useful: when the MB member actually provides services (or manages) and you want to separate these payments from others.

4) Dividends (distributed profit) (code 26)

• Dividends are taxed at 15% PIT.

Mini Conclusion: What Is “Cheaper” in Tax Terms?

• If you want simplicity and startup speed – MB often wins in organizational terms, but taxes depend on how you withdraw money.
• If you want a clear “salary + dividends” model and growth/partner logic – UAB is often more convenient. (Practical conclusion; calculation depends on the situation.)

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