Registered traders (e. K.) – foundation, financing, liability & Co.

With regard to the legal form of sole proprietorships, a distinction is made between freelancers, small traders and registered merchants, with the latter being the only legal form variant that must be registered in the commercial register. However, the obligation to register only applies to merchants who are actively engaged in commercial trading – the so-called “gewerbetreibende Kaufleute”. They are also referred to as “actual merchants” and are generally assessed according to the German Commercial Code (HGB).

If you are a sole trader and own a business but do not trade in it, you are considered an “optional trader” and have the choice of whether or not to have your business registered in the commercial register. If you decide not to register, you are subject to the German Civil Code (BGB) as normal. Typical “Kannkaufleute” are, for example, small traders and freelancers.

You can find out more about the individual legal forms here:

• Sole proprietorship (EU)

Foundation & Company Name

In comparison to the other two legal forms, the strictest requirements apply to the establishment of a company for commercial traders: In addition to applying for a tax identification number (tax ID) at your tax office and registering your company at the trade office, you are also required to have an entry made in the commercial register by a notary. At a cost of around 200 to 300 euros, you can thus secure the title of actual businessman or businesswoman. Only after completing this public registration do you have your own company in the legal sense.

You are free to choose the type of company name in many respects, but it must provide information about your commercial status and also be distinguishable from the companies of other traders. You can form a personal company, which describes you as the owner in more detail, or a material company, which reveals more about your business purpose and the associated services, or even a fancy company… It is obligatory that you add the gender-neutral suffix “e. K.” – or alternatively “e. Kfr.” for registered businesswomen or “e. Kfm.” for registered businessmen – to the contingent liabilities of your sole proprietorship. In addition, you can consider registering your company and/or your business name as a trademark to protect your name or your company.

Financing & profit distribution

No minimum capital is required to set up a business as a registered trader. Of course, it is still advisable to have some reserves and to draw up a financing plan in order to be financially prepared in case of unpleasant surprises. In addition, you will incur some costs for the start-up alone, before you have even begun to make a profit with your company. The positive aspect: Your profits are 100 percent yours and you don’t have to share them with anyone!

Liability, accounting & taxes for registered traders

As a sole trader, you have unlimited liability, i.e. with your business assets as well as with your personal assets. By registering, you are obliged to keep accounts and regularly prepare balance sheets and inventories for your business. However, you are exempt from the obligation to publish your business figures and books. Unless you achieve an annual turnover of more than 130 million euros…

A sole trader is always a natural person at the same time. Consequently, registered traders are, of course, first and foremost subject to income tax. In addition, according to tax law, further levies are provided for turnover tax and trade tax.

• Income tax (ESt)
• Value added tax (VAT)
• Trade tax (GewSt)

Registered trader (e. K.) – For whom is it worthwhile?

Do you love the idea of being your own boss and not having to coordinate decisions with other shareholders or managing directors? Then the legal form of a trader could be just right for you! Uncomplicated formation process, zero minimum capital required and no partners, co-founders or shareholder teams to nag you or interfere…. You take the risk and you reap the rewards – 100%.

Why should you register as a merchant? The legal form of a registered businessman (e. Kfm.) or registered businesswoman (e. Kfr.) is worthwhile for those who are prepared to take manageable risks in order to start their own business quickly and easily. You do not need enormous financial reserves and also pay relatively little tax on your profits. A sole proprietorship is therefore ideally suited for young entrepreneurs who not only dream of self-realization, but also want to take their lives into their own hands.

Alternatives to the e.K.: Legal forms in Germany

Legal forms – What types of company are there? If you want to start your first company, then choosing the ideal legal form is one of the first steps in the process of setting up a company. Whether it’s a special real estate company or a start-up, I’ve summarized all the types of companies in Germany for you here.

• Legal forms: List

Company types in detail:

• Sole proprietorship
• Civil law partnership (GbR)
• General partnership (OHG)
• Limited partnership (KG)
• Entrepreneurial company (UG)
• GmbH: Limited liability company
• Real estate GmbH / Asset management GmbH
• Stock corporation (AG)
• Real estate stock corporation (REIT-AG)
• Societas Europaea (SE)
• Foundation / Family Foundation

One-person limited liability company: corporation for 1 person

The formation of a limited liability company requires at least one person. One-person companies tend to be the exception, but from a purely legal point of view, mono-corporate one-person companies are certainly permissible in the case of the GmbH as well as the Aktiengesellschaft (AG). In the case of a limited liability company, the term “one-person GmbH” – alternatively also “one-man GmbH” or “Einmann-GmbH” – is often used.

Other GmbH models with special features:

• Two-person limited liability company
• No-Person-GmbH

Emergence of solo founders – self-decision, exit & e. K.

The one-person GmbH can come into being in three ways: Either you consciously decide to become a solo founder, or you were originally in a two-person GmbH or multi-person GmbH and have been reduced to a one-person company by the withdrawal of the other shareholder(s). Alternatively, you are a registered trader and have the necessary share capital to change your legal form to a one-person GmbH.

Tip: If you basically do not want to manage your GmbH alone and divide the capital burden among several heads, but still want to decide alone on the structure and wording of the articles of association, you can form a one-man GmbH in the first step and take on any number of additional shareholders in the second step. The decisions you make in the pre-incorporation phase then automatically apply to the new shareholders as well.

Special features of the one-person GmbH: § 181 BGB and § 3 GmbHG

With a one-man limited liability company, you are automatically the sole shareholder and take the position of managing director. You also participate in the shareholders’ meetings in a so-called personal union. Apart from that, the same rules and laws apply to you as to companies with several shareholders. This also means that you must form all the corporate bodies prescribed for a GmbH – for example, the supervisory board. For this reason, it is particularly important that as sole managing director of a single-member company, you exempt yourself from the single standard “insichgeschäft” (section 181, see above) laid down in the German Civil Code.

In the case of a one-person GmbH, the shareholders’ agreement does not have to be notarised prior to registration in the commercial register and is therefore usually quite short, taking into account the minimum content required by the Limited Liability Companies Act (GmbHG). However, you need a non-receivable unilateral declaration of intent to complete your registration, and this in turn must be certified by a notary.

Excerpt from the law – § 3 GmbHG:

(1) The memorandum and articles of association shall contain:

1. The company name and registered office,
2. The object of the company,
3. The amount of the share capital,
4. The number and nominal amounts of the shares that each shareholder takes over in return for a contribution to the share capital (nominal contribution).

(2) If the company is to be limited for a certain period of time or if other obligations towards the company are to be imposed on the shareholders in addition to the payment of capital contributions, these provisions must also be included in the company statutes.

Establish a GmbH: Legal form and alternatives

1. No-person GmbH: inheritance, gift, termination
2. Two-person GmbH: Founder Duo
3. Limited liability company (GmbH)
4. Special case: Real estate GmbH
5. Legal forms: List

No-person GmbH: inheritance, gift, termination

No-Person GmbH – The model for a GmbH without shareholders! By appointing new shareholders or leaving existing shareholders, the limited company model you choose can easily change. Whether it’s a one-person company, a two-person limited company or even a company that operates without shareholders at all…. In each case, there are specifics that you should be aware of as they deviate from the norm of the traditional limited liability company.

• No-Person-GmbH

Two-person GmbH: Founder Duo

Two-person GmbH – The GmbH model for founding duos! By appointing new shareholders or leaving existing shareholders, the GmbH model you choose can easily change. Whether it is a one-person company, a two-person GmbH or even a company that operates without any shareholders at all… In each case, there are specifics you should be aware of as they deviate from the norm of the traditional limited liability company.

• Two-person limited liability company

Limited liability company (GmbH)

Limited Liability Company (Gesellschaft mit beschränkter Haftung, GmbH) – The limited liability company is a German legal form that is founded by at least one person and managed by at least one shareholder. As the name already indicates, this corporate legal form is characterized by a limitation of liability for its shareholder(s).

• Limited liability company (GmbH)

Special case: Real estate GmbH

Immobilien GmbH / Vermögensverwaltende GmbH / Immobiliengesellschaft – In this article you will learn the basics about real estate companies. Who would think of founding a limited liability company when buying a house or a condominium? Admittedly, this makes no sense for owner-occupation, but it does for renting.

• Real estate company

Here you will find all the legal forms that can be chosen as a founder in Germany and a guide with a checklist:

Legal forms: List

Legal forms – What types of company are there? If you want to start your first company, then choosing the ideal legal form is one of the first steps in the process of setting up a company. Whether it’s a special real estate company or a start-up, I’ve summarized all the types of companies in Germany for you here.

• Legal forms: List

Trade tax (GewSt) – tax for commercial enterprises

As a rule, trade tax – GewSt for short – is levied on the income of every German commercial enterprise and is therefore based on the objective earning power of the respective company. Since limited liability companies, stock corporations and the like are always regarded as commercial enterprises by virtue of their legal form, trade tax is mandatory for corporations – regardless of the composition of the founding team.

Other taxes for businesses:

• Corporate income tax (KSt)
• Income tax (ESt)
• Capital gains tax (KapESt)
• Value added tax (VAT)

If you want to learn more specifically about taxes for real estate companies, you can learn more here:

• Save taxes on real estate

Trade tax in detail – collection, levy & allowances

As an object or property tax, trade tax is by its nature one of the real taxes. Effectively, it belongs to the municipal taxes and contributes significantly to their financial system. The municipalities are entitled to levy the tax and set the tax rate valid for one year by resolution. Trade tax is payable quarterly in equal instalments on 15 February, 15 May, 15 August and 15 November. As of the 2008 tax period, these taxes are no longer deductible as a business expense, but can be offset as a lump sum against the income tax payable.

Dates for advance payment of business tax:

• February 15
• May 15
• August 15
• November 15

According to the Trade Tax Act (GewStG), natural persons and partnerships may offset their tax burden with an exemption amount – currently 24,500 euros; legal entities may reduce their tax burden by a reduced exemption amount – currently 3,900 euros.

Which companies are subject to GewSt?

Most commercial enterprises are charged with trade tax. Since all corporations are in principle considered to be commercial enterprises, this type of tax is particularly relevant for the limited liability company (GmbH) and the stock corporation (AG).

In addition, the general partnership (OHG) and the civil law partnership (GbR) are usually subject to trade tax – at least insofar as their annual income exceeds 24,500 euros. However, a GbR among freelancers remains exempt from trade tax. The same applies to the freelancers themselves: A sole proprietorship only has to pay trade tax levies if the company founder is a small trader or a registered merchant (e. Kfm.).

Overview of company law forms

You can find more information about the different legal forms under the following links. Starting with the sole proprietorship and the registered traders… to the various partnerships and corporations… to other companies such as the family foundation – all the essential aspects of formation, liability, tax burden and more explained simply and understandably! First of all, an overview of the individual legal forms of companies:

• Sole proprietorship (EU)
  • Freelancer
  • Small business
  • Registered traders (e. K.)
• Silent partnerships
• BGB companies / civil law partnership (GbR)
• Partnerships
  • Limited partnership (KG)
  • General partnership (OHG)
  • Limited Liability Company and Company Limited Partnership(GmbH & Co KG)
  • Limited Liability Company and Compagnie General Partnership(GmbH & Co OHG)
• Corporations
  • Stock corporation (AG)
    • AG & Co KGaA
  • Partnership limited by shares (KGaA)
  • Limited liability company (GmbH)
    • GmbH & Co KGaA
  • Entrepreneurial company / UG (limited liability)
  • European Company / Societas Europaea (SE)
    • SE & Co KGaA
• Other companies
  • Foundations / Family Foundations
  • Insurances
  • Partnerships
  • Registered associations (e. V.)
  • Registered cooperatives (e. G.)

Taxes in Germany: List

Corporation tax (KSt), income tax (ESt), capital gains tax (KapESt), turnover tax (USt), trade tax (GewSt) – who pays what? In this overview of the different types of taxes / tax forms in Germany, you will find relevant taxes for you as an individual and for your business, depending on which legal form you have chosen. Also, after the tax list: How does the tax cycle work around month-end closing, year-end closing and balance sheet? A little insight for those starting their first company. What taxes are there? Simple explanations, definitions, tax optimization, an insight into taxes.

• Taxes: List

Financial investments: savings account, call money and time deposit account

In addition to traditional savings accounts, you can also opt for securities as an investment. The interest rates are higher. The disadvantage, however, is that you cannot count on the money so well. You do not know in advance how the interest rates will develop, because they depend on the prices on the capital markets. In contrast, the classic investment of money in the form of a savings account, a call money or a fixed-term deposit account can be calculated exactly in advance. However, the interest rate can be significantly lower than if you invest in shares or securities.

Pay attention to the availability of the investment

If you have saved reserves for the purpose of construction financing, it is advisable to coordinate the investment of funds with your planning. This applies in particular to investments in securities and fixed-term deposits. The capital will not benefit you if it is not available on the due date. If you liquidate cash investments prematurely, you will often lose some of the interest or be charged fees.

Investing money from the sale of real estate in a financial investment

Similarly, you can transfer money you receive from a property sale into an investment. This is possible in the short or long term. Since most banks no longer pay interest on funds held in a current account, it is advisable to transfer funds that are not needed immediately from the current account to an investment. With the large amounts you get for selling a property, even low interest rates have a positive effect and you can make a positive profit. If you would like individual advice on financial investments to be used in connection with the sale or purchase of a property, we would be pleased to offer you our services.

Investment in shares and securities

Shares and securities are considered a flexible and very profitable investment. You can buy individual shares, or you can decide to invest in a fund. In this case, different shares are grouped together. The fund is managed by experts. In principle, you can buy or sell shares at any time at the current daily price. However, always keep an eye on the development of the increase in value. Also take into account that the securities account is subject to charges at many credit institutions. Furthermore, the purchase price of a share is higher than the issue price.

Value development: consider risk in calculation

In contrast to a classic savings investment, the performance can go down as well as up. You should also take this into account in your calculation. Compared with other financial investments, you can achieve the highest returns by investing in shares and securities. However, this may take some time. Knowledge of the market is an advantage. If you want to save money for a construction loan, stocks and securities are only a good choice if you plan for the long term. Short-term gains are theoretically possible. However, unlike the classic fixed investment, they cannot be planned.

Fixed investments with classic interest rates

A fixed-term deposit has a specific term. The interest rate is also fixed, so you know in advance how much money you will have available at the end. This is an advantage for construction financing. The disadvantage is that interest rates are at a consistently low level. This is especially true for cash investments with a short term. Also take into account that you usually do not have access to the money during the fixed period. You can terminate a fixed-term deposit in the normal way. However, you must observe notice periods of up to a quarter of a year and you will lose part of your interest.

Per diem account: Advantages, disadvantages, interest

You should only deposit money in a call account if you need it at short notice or do not know exactly when the withdrawal is necessary. Overnight deposit accounts are often linked to the current account. Transferring the money and returning it to the checking account usually takes one banking day. The advantage is the immediate availability of the money. The disadvantage is the low interest rate.

Real Estate Loan

A construction loan differs from the classic consumer loan by the more favourable interest rates and the longer term. The property serves as collateral for the financing. The debt is entered in the land register. If the instalments cannot be serviced on time, the bank has the right to terminate the property loan and pursue foreclosure. In this case, it gets back its money or a large part of it. Thanks to this deposited collateral, the bank has the possibility to grant more favourable conditions for real estate financing than for a consumer loan granted without the deposit of collateral.