From the business idea to founding a company: The legal form for your own business is well thought out. Tax and liability issues are of great importance when choosing the right one organizational form in small business.
When a small business can be interesting – uncomplicated option for self-employment
A business idea often leads to the desire to “make it your own”. Realizing the step into self-employment, however, requires courage and the clarification of a few formalities. Small business is a wonderful way to project unproblematic implement. This type of foundation is also suitable for founders who want to start out as a part-time business. Even if only little equity is available, the commercial mini format lures with promising advantages. Instead of a company name, your own name should be mentioned and can be supplemented by the name of the industry or a fantasy name.
First steps into self-employment – rights and obligations
Anyone who decides to set up a small business must register with the city and usually receive one on their first visit business license. This alone entitles you to exercise commercial activity. This type of company does not require an entry in the commercial register. Depending on the purpose of the company (e.g. when founding a master craftsman’s company), certain professional or personal ones are involved qualifications to show. It is essential to find out this before registering a small business.
In contrast to a classic tradesman, the bookkeeping can be carried out using an income surplus calculation. A small trader is not subject to the Accounting obligation. In addition, he does not have to create an inventory. Receivables and liabilities do not have to be delimited annually and publication of the company’s annual financial statements in the Federal Gazette is not obligatory. This not only eliminates an immense accounting effort, but also the costs for hiring a tax consultant (service: find a tax consultant) are significantly lower due to the reduced effort.
Tradesman vs. Freelancer – Sales of products or specialist skills
Basically, she decides tax authoritywhether the start-up is to be classified as a trade or as a freelance activity. Put simply, the difference can be named with the object to be sold. Commercial activity therefore includes all forms of business that see themselves as manufacturing or trade. Liberal professions “sell” services that are mostly of an artistic nature or require special expertise – such as that which can be acquired at universities, among other things.
freelancer can therefore be doctors, lawyers, writers, translators, but also architects, designers, musicians and other freelancers in the entertainment industry. Unlike a trader, freelancers only have to register with the tax office. There is no need to register a trade or small business with the trade office and trade tax is also not payable. Earned income must be proven in an income surplus calculation. tradesmen on the other hand, are also required to be members of a chamber. The Chamber of Industry and Commerce should be mentioned here. You also pay trade tax on annual profits of EUR 24,500 or more.
Solo entrepreneurs vs. founding a company as a team – focus on liability
Incorporation as a single natural person
The basis for founding as a single person is initially the sole proprietorship. No start-up capital and no registration in the commercial register are required for this. The business license is sufficient. Entrepreneurial obligations and possible damages that are responsible within the business activity fall under the full liability with private wealth. If you want to free yourself from this personal liability, you can do so with the legal form of a UG and a starting capital of just 1 EUR. However, reserves must be built up immediately after founding a company until a share capital of at least EUR 25,000 is reached. These must amount to at least 25% of the annual surplus. However, this form of foundation has two significant disadvantages. On the one hand, double-entry bookkeeping must be carried out and, on the other hand, an entry in the commercial register must be made.
Foundation with several natural persons
The counterpart to the sole proprietorship is founding a GbR (civil law partnership). Here, all partners have their own, but also mutual liability with their entire private assets. By a possible partner’s mistake everyone can be held accountable. Here, too, neither a minimum capital nor an application to the commercial register are required. Although it is not mandatory, drawing up a partnership agreement is recommended. Here, too, a UG or GmbH can be selected as the legal form – limited liability with double-entry bookkeeping.
Is a small business the same as a small business owner?
In short: no. If the annual turnover is less than EUR 22,000, regardless of the form of foundation, the small business regulation can be applied. It is then not necessary to submit an advance sales tax return to the tax office, nor do trade tax or sales tax have to be paid.
Even with a small business, the topic of “creating a business plan” should not be forgotten (reading tip: Why create a business plan?). This is required at the latest when subsidies or promotional loans are applied for or investors are sought. Whether a state subsidy is possible for a small business depends on many factors and can be found out using our subsidy check.