Start a sole proprietorship: How to stay on track for success

Reading time 10 minutes
Start a sole proprietorship: How to stay on track for success

Finally starting your own business, finally being the boss yourself and living your own passion - who wouldn't want that? Many founders opt for a sole proprietorship to realize their dream, because it brings with it numerous advantages. But that doesn't mean there's nothing to consider when starting up.

You won't become a successful sole proprietor overnight. But we help you to shorten the way. We equip you with all the knowledge you need to successful and not to put your foot in your mouth one after the other.

What is a sole proprietorship?

A sole proprietorship is any company founded by a single person. If you decide to do this, you will start up without a team of managers, but you can still Employees Hire. The company belongs to you alone and you make every single decision yourself. However, the term "sole proprietorship" is not defined by law, because there are differences. You can choose from various legal forms, which we will now take a closer look at.

What legal forms can I use as a sole proprietorship?

Before you can start your sole proprietorship, you have to decide which legal form you want to use in the future. For example, you can register as a trader. This is possible for you if you are not a member of the liberal professions - more on this in a moment. You are then obliged to register with the Trade Licensing Office no later than 14 days after starting your business. Trade taxes must also be paid if your annual profit exceeds 24,500 euros.

Sole proprietor and freelancer at the same time

Freelancers basically also operate a business, because they also act with the intention of making a profit. However, if you belong to the liberal professions, for example if you are an artist, doctor or lawyer, you can opt for the legal form of a freelancer. In this case, you do not need to register a business or pay trade tax. You simply send an informal letter to your tax office and inform them about your freelance activity. You will then have to fill out a tax registration form - and that's it.

How to become a small business owner

You can become a small business owner both as a business person and as a freelancer. Strictly speaking, this is not a legal form, but the difference is still important to know. You pass as a small entrepreneur if your annual turnover remains below 22,000 euros. You do not have to pay sales tax, but you can not write it on your invoices.

Registered businessman/woman

The third major legal form you can choose is registered businessman/woman. This automatically applies to you if you run a commercial enterprise. Unfortunately, there is no clear answer to the question under which conditions you have to be registered in the commercial register.

According to the Commercial Code, every trader is a merchant, unless the nature of the business and its scope do not require it. Admittedly, this does not provide much information. Probably one of the most important criteria to solve this question is the financial one. If your annual turnover exceeds 600,000 euros or your annual profit exceeds 60,000 euros, then you are generally a merchant. In practice, the tax office decides whether the characteristics of a merchant apply to your company or not.

sole proprietorship legal form

How do I start a sole proprietorship?

If you want to start your own sole proprietorship, there are a few things to consider. We have summarized the most important steps for you below.

Your startup capital

Life is hard without financial resources, and this is also true when starting a business. But a certain amount of start-up capital is not always necessary. It all depends on what you're using to self-employed and whether you need money for premises, materials, machines, warehouses and more.

For example, if you decide to use a Self-employment If you are a journalist and want to work at home in front of your PC, you basically don't need any start-up capital. However, if you plan to open your own store, for example, you will need to create a financial buffer from which you can pay for rent, furniture, production and more.

The perfect location

You have accumulated the necessary start-up capital and are now ready to finally get started. But where exactly should your sole proprietorship be based? Many founders decide to start by declaring their home as the place of business. In principle, this is possible, as long as you do not run a business with an external impact. So if you are just sitting in your living room and write books or conduct telephone consultations, this is usually not a problem.

However, if there is an external effect, for example because you put up a company sign or customers come in and out of your premises, you will need to consult with your landlord. In addition, almost all cities and municipalities in Germany specify exactly where tradespeople are allowed to set up shop and where they are not. If you are only allowed to live and not to work in your residential area, you are not allowed to set up your business there with an external effect.

Your company name

Finding the perfect name for your company is not that easy. In the case of sole proprietorships, the full name of the owner, i.e. yours, should always be included. Although there is no longer a legal requirement for this, it should nevertheless be clear from your company name who owns it. For advertising purposes, you can leave out your name, but it must be included on your business cards, invoices and in all correspondence.

The registrations with the tax office and Co.

Start-up capital - stands. Location - in place. Now it's finally down to the nitty-gritty, namely your registrations with various authorities. Now it depends on which legal form you have chosen.

As a freelancer, you only have to apply to the tax office. As a tradesperson, you must register with the trade office. Check beforehand whether your planned activity requires a business license and apply for it if necessary. If your registration is successful, the Trade Licensing Office will ensure that the tax office, the Chamber of Trade and Industry and the professional associations are also informed.

It is important to know at this point that both your health insurance company and the German pension insurance company are not automatically informed about your formation. You must take care of this yourself and do it as soon as possible to avoid fines and high additional payments. Some self-employed people are obliged to take out statutory pension insurance, so inform yourself well in advance!

The right accounting for your tax return

You haven't even started your sole proprietorship yet and you should already be thinking about your tax return? Oh yes, because that will save you a lot of work later! Always keep in mind what you will have to list in your tax return and what papers the tax office might demand from you.

Staying on the ball from the beginning and collecting and organizing your documents in one place will save you a lot of time and nerves when the tax return is due. Also, keep the letter with your tax identification number and, if applicable, your sales tax identification number. Both numbers will be sent to you after you register with the tax office and you will need them again and again.

How much does it cost to start a sole proprietorship?

In most cases, the foundation itself does not cost you much. If you want to work as a freelancer, your registration with the tax office is even free. If, on the other hand, you register a business, you will have to pay a small fee. The amount depends on the city you live in and ranges between 20 and 60 euros on average.

As a businessman/woman, on the other hand, a fee is due for the notary who enters you in the commercial register and for the registry court. The associated prices depend on your chosen legal form and also the size of the company. For sole proprietors it ranges between about 200 and 300 euros.

5 tips for starting a sole proprietorship

People who start a sole proprietorship often think, "It won't be that complicated." The fact is, there are significantly more complicated forms of business. But that doesn't mean everything will fall into your lap. That's why we've put together five tips for you that will help you become a successful founder!

1. well planned is half won

If you really want to have long-lasting success with your sole proprietorship, take the time for comprehensive planning. According to the HkW Gründungsmonitor, the average start-up time from the first idea to the open doors is around seven months. That doesn't mean you have to take this time, but it's better to plan a little too much than too little. The foundation of your sole proprietorship is a sophisticated plan, never forget that!

2. maybe a part-time entrepreneur for the time being?

Starting a business is a big step and comes with many risks. You alone are responsible for all processes and stand for every Errorthat happens right now. Also, it is entirely up to you to make sure that the incoming payments cover your business expenses and that you also have some money left over for your own living expenses. You are not automatically paid a fixed salary every month that you can rely on. It is entirely up to you.

And that's exactly why you don't have to take the plunge right away. If you are unsure whether your sales will be sufficient, then become a part-time entrepreneur first. This also gives you enough time to grow slowly. And you are not under pressure from the start to achieve a certain turnover figure.

3. check necessary approvals

Everything is in the starting blocks and then you are thwarted again because a permit is missing. So be sure to check them again in advance, otherwise it will be annoying. But not only permits, but also licenses and certain qualifications may be necessary for your startup.

4. deal with trademark law

When setting up your sole proprietorship, make sure that you do not infringe any existing trademark rights. This applies equally to your company name, logos and products. You should also think about trademark protection yourself. This way, you can secure your position in the competition and keep competitors at bay to a certain extent. In addition, you can be sure that your company name is reserved only for you, so that no confusion can occur.

5. do not forget your customers

When you start a business, you have an incredible amount on your plate, of course. Registrations, finances, premises, employees and more are topics that need to be clarified in advance. But don't forget your customers, even if they don't exist yet. So that you can still enjoy lively customer traffic as soon as possible after your start-up, then start beating the advertising drum and customer acquisition in good time.

5 Mistakes you should avoid when starting a sole proprietorship business

When you start a sole proprietorship, there are many different pitfalls that you could encounter along the way. We warn you!

1. you overextend yourself at the beginning

You've registered with the tax office and the like, come up with a great name, found great premises and even approached your first customers. So you're ready to go! But wait, what's that letter in the mailbox again? Tax office, trade office, trade register - countless authorities are suddenly contacting you because they still need documents or certain things are unclear. The head bursts quickly. Don't make the mistake of underestimating the effort. Seek help if necessary!

2. you overestimate your profit

In its own mind, of course, the company achieves good sales. In reality, however, things often look different. Suddenly, a pallet of products breaks, you accidentally place a wrong order, and suddenly a notary bill flies into your house that you completely forgot about. Unplanned expenses will come your way more often than you might think. So plan a good financial buffer!

3. you underestimate the time factor

So many things in life take longer than you think beforehand. It's no different when you set up a sole proprietorship. Suddenly, a letter from the Chamber of Industry and Commerce flutters into your house, saying that your company name is not permissible after all. Or the tax office keeps you waiting for your tax number and the handover of the keys to your premises keeps getting postponed. These are just a few things that can mess up your schedule.

4. you do not think about your logo

Your logo represents you and what you stand for. Of course you want to have one in place quickly so you can finally get started, but half-assed designs won't make you happy. You'll keep changing your logo until it's perfect, and that will totally mess up your customers. So put some time and money into it and get a professional.

5. you describe your job too precisely

The tax office and others want to know exactly what kind of work you do. Of course, you should also provide comprehensive information about this, but do not limit yourself too much. You are still at the beginning and do not know where the path will lead. Leave room for maneuver in your formulations so that you can act as entrepreneurially as possible.

What are the requirements for the establishment of a sole proprietorship?

In Germany, every citizen is allowed to start a sole proprietorship. It is not even relevant whether you have already finished school, let alone completed vocational training. Theoretically, you can even start your own business while you are still at school or university. become self-employed. You don't have to meet any special requirements for this.

About the advantages and disadvantages of a sole proprietorship

Like everything in life, starting a sole proprietorship has its pros and cons. Let's take a look at the whole thing together!

These are the advantages of a sole proprietorship:

  • Complete freedom of choice and flexibility.
  • Winnings are yours alone, because you don't have to share with anyone.
  • Comparatively low start-up costs and less bureaucracy.
  • Simple bookkeeping usually sufficient (except for registration in the Commercial Register).
  • No minimum capital required for incorporation.

However, a few disadvantages should also be mentioned:

  • You alone are responsible for everything.
  • You are liable with your private assets.
  • Only you make sure you can cover your business expenses and still have money to live on.
  • No reliance on a fixed salary each month.

Are you already in?


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