Before Germany had the concept of UG we only had GmbH. For a GmbH you need to bank at least 12.500 EUR. Quite a sum if you wanted to start a business. So it was better to create a Limited in the UK and work in Germany. That construct was totally legal, but not really cheap since all the paperwork was for the UK and you ended up paying someone who knew what to do. The German government then created the UG. At grants you liability like the GmbH but you need only 1 EUR to start with.