Summary
A sole proprietorship 💬Einzelunternehmen is the simplest way to start a business in Germany. It requires no minimum capital, and the founder retains full control of the business. However, the owner bears unlimited personal liability with their private assets. For commercial activities, you need to register with the trade office; for liberal professions only a tax-office registration may be required. You must also handle naming, tax registration and bookkeeping.
Contents
Intro
If you want to start a business without forming a company such as a UG or GmbH, a sole proprietorship as a commercial trader or a Freiberufler may be the ideal option.
A sole proprietorship is the simplest way to start a business in Germany. Registration is quick, inexpensive and involves far less bureaucracy than an incorporated company.
The basics
- Unlimited liability with the owner’s private assets
- No initial or minimum share capital required
- Employees can be hired
- No partners allowed — one owner only
- Suitable for commercial business activities or liberal professionals 💬Freiberufler.
Types of sole proprietorships
In Germany, a sole proprietorship can take different forms depending on the type and size of the business. You may operate as a commercial trader 💬Gewerbetreibender, a liberal professional 💬Freiberufler or a registered merchant 💬eingetragener Kaufmann (e.K.).
Set up your sole proprietorship
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- Setup service in English
- Fast registration
- Optional accounting services
Commercial trader
A commercial trader is a self-employed individual whose work falls under commercial business rather than a liberal profession and are not related to agriculture, forestry, fishing or mining.
If your sole-proprietor business falls into this category — and the tax office has the final say — you are considered a commercial trader and you need to register at the trade office.
Even small, regular profit-oriented activities count. For example, if you regularly sell goods or services (such as repeated sales on eBay) with the intention of earning money, the activity is classified as commercial.
Freiberufler
Some sole proprietors work as Freiberufler, for example in fields such as medicine, law, consulting, science or the arts. If a sole trader works exclusively as a Freiberufler, no trade registration is required.
Get our Freiberufler starter kit
- 50-page guide: tax registration, naming, partnerships
- Checklist: Setup in 5 easy steps
- Templates such as invoices, employment contracts, imprint
Registered merchants
In Germany, some commercial traders qualify as registered merchants 💬eingetragene Kaufleute (e.K.).
This applies when a business is considered a commercial enterprise under § 1 (1) HGB and needs to be run in a merchant-like way. If the business is not large or complex enough, merchant status does not apply.
In practice, the tax office decides whether a commercial trader is treated as a registered merchant. If so, you must register with the commercial register and keep double-entry accounts.
How to set up a sole proprietorship: Your checklist
Capital and costs
No start-up capital is required to set up a sole proprietorship because you don’t need to prove available funds like with a GmbH or UG.
Still, having some capital is practical — starting a business with zero investment is rarely realistic.
Typical initial costs may include:
- Trade registration (not required for liberal professionals)
- Domain purchase
- Website setup
- Office rent
- Software licences
- Staff
- Tax advice
Location
Running a sole proprietorship from your home is possible in many cases and often the first step into entrepreneurship. However, it’s not allowed everywhere. Local municipalities decide which areas permit business activity, and in purely residential zones it’s often prohibited.
If you’re a tenant, additional rules apply. You must always get the landlord’s permission before operating a business from the flat — even if your rental agreement doesn’t mention it. And don’t rely on verbal approval: always request written consent.
You can read more about the requirements for business addresses here.
Registrations
The first step for commercial traders and merchants is to register with the trade office. Before doing so, check whether your activity requires a business licence. If a licence is needed, you must apply for it first.
The trade registration is simple and inexpensive. You can submit it in person at the trade office or register online. Here is our guide how to fill in the registration form. Once registered, your business is entered into the trade register.
Then you need to register with:
- HWK / IHK (chamber of trade or chamber of industry and commerce)
- Berufsgenossenschaft (employer’s liability insurance association)
If you are classified as a merchant, the tax office will tell you. Then you have to apply for an entry in the commercial register via a notary.
Freiberufler only need to complete their tax registration. The tax office has the final decision whether the Freiberufler status is given or not.
Liability
As a sole proprietor, you are personally liable for all business obligations. There is no limitation of liability and no separation between business and private assets. In practice, this means your private property can be used to settle business debts.
Business name
As a sole proprietor, your full name (first and last name) should appear in the business name so it is clear that the business and the individual are legally identical. Examples include: “Klaus Müller, Florist” or “Britta Hausen, Attorney-at-law”.
For branding, you may add an additional establishment name such as “Restaurant zum Berg” or “Versicherungscheck 360°”. However, your real name must appear on all invoices, contracts, business cards, correspondence and in the website imprint 💬Impressum. Outsiders must always be able to identify who runs the business.
Tax number & bookkeeping
After your trade registration, your details are forwarded automatically to the tax office. You will then be asked to complete the tax registration questionnaire via ELSTER, Germany’s official online tax portal.
Once processed, you receive your tax number and, if requested, your VAT ID. Only then can you issue valid invoices and begin meeting your tax obligations.
If you are not classified as a merchant you are allowed to use the EÜR as a profit and loss statement. Merchants need to submit the more complex annual financial statement to the tax office.
A sole proprietorship has no managing director
A sole proprietorship does not have a managing director 💬Geschäftsführer. This title is reserved for incorporated companies regulated under the German Commercial Code. Using it for a sole proprietorship can create a misleading impression about the business’s legal form, size or creditworthiness.
To avoid confusion, sole proprietors should use titles such as owner 💬Inhaber when describing their role.
Employing people as a sole proprietor
As a sole proprietor, you can hire employees and grow your business. You may employ permanent staff, work with freelancers, engage working students or hire mini-jobbers. Each form of employment comes with its own advantages and administrative requirements.
To employ staff, you need a company number 💬Betriebsnummer. Learn more about it here.
Conclusion
Selecting the sole proprietorship 💬Einzelunternehmen form offers speed and simplicity for a business start-up, but be fully aware of the consequences of unlimited personal liability. Prepare your business name, determine whether your activity is commercial or a liberal profession, complete the registration processes, and set up tax and bookkeeping accordingly. With this preparation you’ll be able to launch confidently and manage your business correctly from day one.
