Sole proprietorship (Germany)
A sole proprietorship in Germany is
- in the broader sense, any independent activity of a single natural person as a farmer , trader or freelancer , regardless of whether the person employs an employee ,
- in the narrower sense, the company of a registered businessman / businesswoman (sole trader / sole trader ) within the meaning of the German Commercial Code (HGB).
A sole proprietorship is a business entity that can be founded by a single natural person without large financial reserves . The operator of a sole proprietorship is called the owner . He is a single organ .
Insofar as the sole proprietorship is a businessman within the meaning of the Commercial Code (HGB), he is legally obliged to keep books and to make his commercial transactions and the position of his assets evident in these according to the principles of proper accounting (GoB) ( accounting ). This means that the registered trader (e. K.) is obliged to draw up a balance sheet .
In 2015, according to sales tax statistics, there were 2,181,285 sole proprietorships in Germany (67% of all legal forms ), which provided around 9.6% of all deliveries and services (around 575 billion euros).
A minimum capital contribution is not provided for by law. Occasionally it happens, however, that another person participates financially, but does not appear externally ( silent partner ), then the sole proprietorship becomes a silent company , which is not externally recognizable. For the outsider, it is still a sole proprietorship.
Company or business name
The free choice of company name, i.e. running a company , is reserved in Germany for sole proprietorships who are entered in the commercial register and are therefore subject to the provisions of the HGB . This entry is required for businesspeople ( actual merchants ) within the meaning of the HGB in accordance with HGB. For other traders, it is voluntary (optional merchant ). In any case, the company name must be supplemented with “registered businessman” or “registered business woman” or “e. K. "," e. Kfm "or" e. Kfr ”( HGB). The name including the addition forms the legally binding designation in business dealings - the company.
On the other hand, a sole trader or small business owner in Germany who is not entered in the commercial register usually takes part in business transactions under his personal, civil surname and at least one full first name. References to the activity or the industry are permitted, for example "Hairdressing salon Iris Schmitt". In the past, this resulted directly from b GewO , which was however repealed in March 2009 without replacement, so that today it is only a matter of recommendations that are useful for further legal considerations. Running a company in the sense of commercial law is not permitted without an entry in the commercial register. At the same time, however, the provisions of the HGB do not apply to such entrepreneurs, only those of the BGB .
A distinction is to be made between the company and - within the framework of other legal restrictions such as B. the trademark law - freely selectable business name or establishment name . This is of major economic importance. However, it must not mislead about relevant circumstances and, for example, give the impression of a size or importance that the company does not have at all. It must also not give the impression that the company is registered in the commercial register if this is not the case, so that in such cases the addition "owner" should generally be avoided, unless it is about the takeover (successor) of a long-established business.
In Germany it is customary for the business name to contain the (full) name of the owner, often combined with the business content : Manfred Mustermann Holz- & Bautenschutz, Trockenbau Mustermann, Elektrowaren Mustermann, Owner Manfred Mustermann . The entrepreneur is allowed to choose any admissible name, as is common in the restaurant and catering trade ( Restaurant Rose, owner Manfred Mustermann ).
Management / external representation
The sole proprietorship conducts business under his name or that of his company, for his own account and risk. However, he can also have the business conducted by an employee or a third party by granting power of attorney or powers of attorney to authorize the conduct of business.
Determination of profit
If a sole proprietorship is not entered in the commercial register, the accounting regulations of the tax code ( AO) apply , which means that the entrepreneur is exempt from accounting up to an annual tax profit of € 60,000 or an annual turnover of € 600,000 and his profit through May determine income surplus calculation. Only after this limit has been exceeded once, the owner of the sole proprietorship will be requested by the tax office for accounting within the meaning of Section 141 AO in conjunction with Section 4 (1) EStG.
Sole proprietorships who are merchants within the meaning of the German Commercial Code were obliged to keep books in accordance with commercial law until the Accounting Law Modernization Act came into force and to make their commercial transactions and the position of their assets apparent in these according to the principles of proper accounting ( GoB ) (accounting). By HGB also registered merchants are now exempt under the above conditions, from the obligation to keep accounts and to your profit by net income method determined.
Legal capacity of the sole proprietorship
A sole proprietorship can acquire rights and enter into liabilities; he can acquire property and other real rights to land and sue and be sued in court.
Sole proprietorship liability
The sole proprietorship is liable with all his assets for all debts of his company. With regard to liability, there is no distinction between private and business assets.
Dissolution of a sole proprietorship
A sole proprietorship can be dissolved voluntarily by the owner if the entrepreneur sells the essential operating bases or transfers them to private assets. A change in legal form also formally ends the sole proprietorship. It is compulsory to dissolve the sole proprietorship through bankruptcy or the death of the owner.
Tax treatment of a sole proprietorship
The sole trader is liable for trade tax if he carries out an activity within the meaning of the Trade Tax Act ( GewStG). The trade tax that may be payable by the individual entrepreneur is partially offset against his income tax.
A sole trader can earn income from commercial operations , but also income from self-employed work or income from agriculture and forestry with his company . It is not the company that is liable to income tax , but the owner of the sole proprietorship. The income - regardless of whether the profit has been withdrawn - is subject to taxation in the year in which it arises.
value added tax
A sole proprietorship is an entrepreneur within the meaning of the Value Added Tax Act . An entrepreneur is obliged to make records in order to determine the sales tax and the basis for its calculation ( UStG). If a sole proprietorship runs several sole proprietorships at the same time (for example a hairdresser and a baker's business), the sales tax for both businesses must be reported in a sales tax return to the tax office in whose district the first sole proprietorship was opened (tax office of the first involvement; see also §§ 18 ff AO) . Entrepreneurs whose total annual turnover (including applicable sales tax) does not exceed € 22,000 can make use of the small business regulation , but then also cannot claim input tax ( UStG).
When transmitting an operation by gift or inheritance to a successor in the inheritance tax , a special tax allowance for business assets granted ( Inheritance Tax).
Advantages and disadvantages of sole proprietorship
- Full freedom of choice and power of disposal over business assets and business policy
- no minimum capital
- Formation is informal, uncomplicated and inexpensive
- Profit belongs to the business owner alone
- Good reputation, as the owner is fully liable → good negotiating position with banks and creditors
- The business risk lies solely with the owner of the sole proprietorship, who is liable with all of his private assets.
- Federal Statistical Office , Fachserie 14, Reihe 8.1 , 2016
- Business names of (...) small businesses ( Memento of February 18, 2015 in the Internet Archive ) Brochure of the Regensburg Chamber of Commerce, (PDF; 109 kB.)
- Businessof companies that are not entered in the commercial register. (PDF) on ihk-bonn.de