Self-employment
Review your business idea
Prepare a business plan
Financing & public support
Business or liberal profession
Legal structure
Taxes & Accounting
Company insurance
Social insurance
Networks & contacts
Choice of legal structure
You want to start a business and need to decide which legal structure to adopt:
- Which legal structure fits best your plans?
- How does the choice of legal structure affect you and your business?
More information
Business start-up portal of the Federal Ministry for Economic Affairs (BMWi)
www.existenzgruender.de/ENUnincorporated firm (excerpt)
- Sole proprietorship (1 person)
- Civil-law partnership (GbR) (2 or more people)
Liability
Partners in unincorporated firms are fully liable with all the private and company assets.
Start-up expenses
Registering your business with the trade office costs about EUR 50 per founder. In the case of civil-law partnerships (GbR), it is advisable to prepare a written partnership agreement.
Accounting
Single-entry bookkeeping (i.e. preparing a net income statement) is sufficient up to annual revenues of EUR 600,000 and annual profits of EUR 60,000. However, if your business exceeds either of these limits, the tax office will notify you that you must use double-entry bookkeeping (with annual balance sheet and income statement) and prepare a balance sheet. Single-entry bookkeeping is easier and less expensive, whereas double-entry incurs much higher running costs for tax consultation and accounting.
Good to know:
Even as a sole proprietor you can employ staff.
More information:
Chamber of Commerce and Industry (IHK) for Munich and Upper Bavaria: Choice of legal structure
www.ihk-muenchen.deIHK guide: setting up a GbR
www.ihk-muenchen.deInstitute of Liberal Professions (IFB): Information for start-ups
ifb.uni-erlangen.deIHK Ratgeber: Musterverträge für Unternehmen
www.ihk-muenchen.deBusiness start-up portal of the Federal Ministry for Economic Affairs (BMWi): accounting
www.existenzgruender.deIncorporated firms (excerpt)
- Limited liability company (GmbH) (1 or more persons)
- Provisional company with limited liability (Unternehmergesellschaft haftungsbeschränkt, UG) (1 or more persons)
Liability
At incorporated firms, liability is limited to the company assets. However, if due diligence requirements are violated, liability is no longer limited and and recourse can be made to the manager’s private assets, too. One issue is frequently underestimated: Where bank loans are taken out, the need for collateral often leads to personal liability, e.g. if the partner gives personal guarantees. This can also apply to rental contracts.
Start-up expenses
Compared to an unincorporated firm, the cost of setting up a limited liability company (GmbH/UG) is relatively high. The costs include notarial certification of the partnership agreement and entry in the commercial register, plus any fees paid to lawyers to draft the partnership agreement. A limited liability company also requires capital stock of at least EUR 25,000, of which at least 50% (i.e. EUR 12,500) must be paid in when the entry is made in the commercial register. Once this entry has been made, you are free to work with this capital.
Accounting
Double-entry bookkeeping (with an annual balance sheet and income statement) is always compulsory for incorporated firms, regardless of their revenue and profit levels. That means higher running costs (e.g. for accounting and tax advice) on top of higher start-up expenses.
More information
Chamber of Commerce and Industry (IHK) for Munich and Upper Bavaria – Information on founding a GmbH
www.ihk-muenchen.deChamber of Commerce and Industry (IHK) for Munich and Upper Bavaria – Information on founding a UG (haftungsbeschränkt)
www.ihk-muenchen.deBayerischer Notarverein e.V. [Bavarian notary association] – Notary search
www.notare.bayern.de