Laws and contracts

Entrepreneurs conclude numerous contracts on the path to starting a business. General Standard Terms and Conditions are often part of contracts. They contain important provisions that would otherwise have to be individually adapted for every contract. In addition to contract law, other areas of law can play an important role in setting up and running a business. These include, for example, employment law, data protection law, internet law, trademark law and liability law issues.

Please note: The information in this document is not legally binding and cannot replace professional legal or tax advice! Please address detailed questions on tax or legal matters to a tax adviser or a lawyer.

Contracts

Entrepreneurs conclude numerous contracts on the path to starting a business. For example, the partners in a GbR can define their rights and obligations in a partnership agreement. However, Articles of Association are obligatory when setting up limited liability company GmbH or UG (haftungsbeschränkt).  Contracts also define the relationship between you and your customers, employees, suppliers, property lessors, and other business partners. Examples are purchase agreements (Kaufverträge), service contracts (Werkverträge) and employment contracts (Arbeitsverträge).

The federal business startup portal suggests to research template contracts and have them adapted to your specific needs by an attorney or notary. Template contracts are, for instance, available on the websites of the Chambers of Commerce and Industry (IHK).

General Standard Terms and Conditions (GTC)

General Standard Terms and Conditions (GTC), called Allgemeine Geschäftsbedingungen – AGB, are pre-formulated contract conditions that you specify to your contract partners. They contain important provisions that would otherwise have to be individually adapted for every contract. The aim is often to reduce liability and risks as far as possible. The admissibility of individual provisions in the GTC depends on the industry and the contracting partners, for example. Some industry associations and publishing houses provide sample GTCs. Lawyers specializing in contract law create individual GTC. GTC are only effective if they are included in the respective contract and for this there are various rules for end consumers, corporate clients or for online trade.

You can research template contracts and have them adapted to your specific needs by an attorney or notary. Template contracts are, for instance, available on the websites of the Chambers of Commerce and Industry (IHK).

Warranty, guarantees, and product liability

Your customers have rights in the case of faulty or unsatisfactory products and services. They are based on the warranty you are legally obliged to provide as well as voluntary guarantees and product liability, the legal liability of the manufacturer, importer, and, if applicable, seller or supplier. Make sure you have a good overview of basic contract and liability law so that your business can develop as planned and liability risks are avoided. The Chambers of Commerce and Industry (IHK) provide an overview and initial advice.

Internet legislation

Internet legislation is a broad topic which website and internet shop owners must address. It includes areas such as:

  • Legally compliant websites and website information in the Impressum
  • Online trade and e-commerce: ranging from GTC, to product liability and consumer rights such as right of revocation
  • product liability through to disclaimers
  • Marketing and advertising on the internet

Find out which regulations and information obligations must be followed on the internet, which pitfalls can be avoided and who is liable for them. The Chambers of Commerce and Industry (IHK) provide an overview and initial advice.

The EU General Data Protection Regulation (GDPR)

The EU General Data Protection Regulation (GDPR), in German “EU Datenschutz-Grundverordnung | DSGVO” specifies clear rules for the processing of personal data within the European Union. Everyone dealing with customers and employers must be aware of and implement these rules. Expensive warnings and fines can be avoided by doing so.

This also applies to entrepreneurs who, for example, only run their own website.

The Chambers of Commerce and Industry (IHK) provide an overview and initial advice.

Protecting brand names and logos

Prerequisite is that they do not infringe on any existing trademark rights and brand names. An internet domain name or your company name can be protected by use in a business context – limited to your company’s geographical area of activity. The local Chamber of Commerce and Industry (IHK), the Patent Center Bavaria and the German Patent and Trade Mark Office offer information and free initial consulting. For further services you can turn to a lawyer specialized in matters for patents, designs, and trademarks.

 

Employment law

Regardless of legal structure, entrepreneurs can employ staff. You need to consider various factors, from the nature of the employment contract and registration obligations to social security contributions. It is also important to note differences to service contracts for freelance workers (“freie Mitarbeiter”) and the hiring of temporary staff (“Leih- oder Zeitarbeitern”). Issues such as working hours, holidays and sick leave, parental leave, references and employment termination also play a role later on.

The Chambers of Commerce and Industry (IHK) provide an overview and initial advice.

Special feature: “False” self-employment and employee-like employment

False employment or “Scheinselbstständigkeit”
What is known as “false” or “bogus” self-employment (“Scheinselbständigkeit“) may exist if someone claims to be self-employed, although their relationship to the client points to dependent employment. It is often difficult to distinguish between genuine self-employment and regular employment. Multiple factors from several fields of law need to be taken in account: employment law, social security law and tax law. An English language example is available from the Office for the Equal Treatment of EU Workers.

Employee-like employment or “arbeitnehmerähnlichen Selbstständigkeit”
Are you are legitimately self-employed but work only for one client? Then you might have to join statutory pension insurance. Statutory pension insurance is compulsory for certain occupational groups such as teachers, artists, nurses, licensed craftsmen and those who have mainly only one client. In the statutory pension they are known as “Selbstständige mit einem Auftraggeber“. Learn more about pension insurance and who to contact for professional advice.

Beware: False self-employment and employee-like employment can lead to unpleasant consequences for both the client as well as the entrepreneur.

Guidance and advice:

  • Entrepreneurs who registered a trade are automatically member with the local Chamber of Commerce and Industry or Chamber of Skilled Crafts. They can turn to their respective chamber for initial advice on legal and tax related matters.
  • Entrepreneurs who did not register a trade but have started in the liberal professions can contact the Institute of liberal professions.
  • Practical knowledge is also provided by (industry) associations.
  • The clearing office of the Deutschen Rentenversicherung Bund (German Statutory Pension Insurance Scheme) can be contacted for a decision on the respective employment status (self-employed or employed).
  • You can obtain individual legal advice from a specialist lawyer of your choice.

Helpful hints

There are all kinds of special cases and exceptions relating to legal and tax issues. Please contact a lawyer to find out about them!