Set up a sole proprietorship. Go solo, start right away.

You can start a sole proprietorship (Einzelunternehmen) in a day: register the trade, send the questionnaire to the tax office, done. You need no notary, no partnership agreement and no minimum capital; the trade registration usually costs €20–65 depending on the city, and liberal professions pay nothing.

1. 1

   Classify your activity. Trade or liberal profession? Registration, trade tax and chamber membership depend on it, see trade or profession.

2. 2

   Check permits. Some activities need a licence or proof of qualification first, such as hospitality, security, estate agency, financial brokerage or a licensed craft entered in the crafts register (Handwerksrolle).

3. 3

   Decide on a name. Without a commercial register entry you trade under your first and last name, see name.

4. 4

   Register the trade. With the municipality, at the time you start (§ 14 Abs. 1 GewO), see trade registration.

5. 5

   Questionnaire for tax registration. Within one month via ELSTER (§ 138 Abs. 1b, 4 AO); this is also where you choose the small business scheme, see tax office.

6. 6

   Set up account and bookkeeping. A separate business account is not mandatory but keeps private and business money apart. You can compare providers under business accounts.

We prepare the trade registration and the questionnaire with you; you find our package under pricing. You only need the commercial register once your business requires a commercial operation, see registered merchant.

The first fork: do you practise a liberal profession (freier Beruf) or carry on a trade (Gewerbe)? § 18 Abs. 1 Nr. 1 EStG lists the liberal professions: scientific, artistic, literary, teaching and educational work, listed professions such as doctors, lawyers, engineers, architects, journalists, translators and similar professions. Everything else done for profit is usually a trade (§ 15 Abs. 2 EStG).

The tax office decides borderline cases such as IT consulting, coaching or design by your training and the actual work. If you do both, say photography as art and selling prints, the parts are treated separately as long as they can be separated; the contagion rule that makes a partnership entirely commercial does not apply to sole proprietors. As a freelancer, our starter kit for freelancers helps.

Whoever starts a stationary trade must notify the competent authority at the same time (§ 14 Abs. 1 GewO), usually your municipality's trade office (Gewerbeamt), in many cities online. The municipality sets the fee, usually €20–65.

• What you need: ID, the address of the business premises, a precise description of the activity and, where required, the permit or crafts card.
• What happens next: The trade office passes the data on to the tax office, the IHK or chamber of crafts and other bodies; the IHK contacts you about membership, the tax office about the questionnaire (§ 138 Abs. 1 AO).
• Alongside a job: You register a side business the same way. Whether you must tell your employer is in your employment contract; competing with your employer while employed is off limits.
• Later: You also report a move, a new activity and closing the business (§ 14 Abs. 1 Satz 2 GewO).

We prepare the registration for your municipality under trade registration.

Within one month of starting you submit the questionnaire for tax registration (Fragebogen zur steuerlichen Erfassung) electronically via ELSTER (§ 138 Abs. 1b, 4 AO); liberal professions report their activity this way only (§ 138 Abs. 1 Satz 3 AO). You then receive your tax number.

• Estimate turnover and profit: The tax office sets your income tax prepayments from this, due on 10 March, June, September and December (§ 37 Abs. 1 EStG). Too high ties up cash, too low leads to back payments.
• Choose the small business scheme: Or opt out, see small business scheme.
• Profit calculation: Cash-basis accounts as long as you need no balance sheet, see bookkeeping.
• VAT identification number: Needed for business with companies elsewhere in the EU; apply for it at the same time.

Our filling-in guide explains it field by field; the responsible office is in our tax office directory. To hand it over, use the tax office start-up help with a tax advisor.

As a small business (Kleinunternehmer) you charge no VAT if your total turnover was at most €25,000 in the previous year and does not exceed €100,000 in the current year (§ 19 Abs. 1 UStG). In the year you start, the tax authorities apply the €25,000 limit to the current year. Since 2025 these sales are exempt, and VAT pre-returns and the annual VAT return fall away.

If you opt out, you are bound for five years (§ 19 Abs. 3 UStG). Opting out can pay off if you mainly sell to businesses and invest a lot at the start.

Only a registered merchant has a trade name (Firma) under the Commercial Code, a name under which you do business and sue (§ 17 HGB). Without registration you trade under your first and last name; a business designation like “Studio Lumen” may be added as long as it does not look like a registered trade name, so no “e. K.”, “GmbH” or “& Co.”.

As an e. K. you choose the name freely, including descriptive or invented names. It must be distinguishable from other companies in the area, must not mislead (§ 18 HGB) and carries the suffix “eingetragener Kaufmann”, “eingetragene Kauffrau” or “e. K.” (§ 19 Abs. 1 Nr. 1 HGB). Business letters and invoices then state the trade name, suffix, place, register court and register number (§ 37a HGB), and the website's legal notice your name and address (§ 5 DDG).

Whether your preferred name is already registered shows our company name check; think about trademarks at the same time, see trademark registration.

A merchant (Kaufmann) is whoever carries on a commercial business, that is a trade which by its nature or size requires a commercially organised operation (§ 1 HGB). There is no fixed threshold; what counts is the overall picture of turnover, staff, number of transactions, credit dealings and stock. You must then file your trade name with the commercial register (§ 29 HGB). Small traders may register voluntarily (§ 2 HGB); liberal professions cannot.

A notary files the application electronically after certifying your signature, also by video (§ 12 Abs. 1 HGB). The costs follow the GNotKG and the commercial register fee ordinance; the responsible court is listed in our commercial register directory.

Registration does not change liability. If you take over a commercial business and continue its trade name, you are even liable for the predecessor's old debts (§ 25 Abs. 1 HGB), unless an exclusion is entered in the commercial register or notified to the creditors.

Legally, you and your business are one. For contracts, taxes, damages and loans you are liable with everything you own: account, car, home, and later future income too. A business account or a trade name does not separate this.

• Spouse: Under the statutory property regime (Zugewinngemeinschaft) assets stay separate (§ 1363 Abs. 2 BGB). Your spouse is not liable for your business debts unless they co-sign a loan or give a guarantee.
• Insurance: Professional or business liability insurance covers damage to customers, not unpaid invoices or loans.
• Contracts: Liability limits in terms and conditions or individual contracts help where the law allows them; we offer terms drafted by a lawyer.

If you want to separate the risk from your private assets as a rule, you need a corporation, see switching to a UG or GmbH.

Most sole proprietors calculate profit with cash-basis accounts (Einnahmen-Überschuss-Rechnung): business income minus business expenses, each when the money flows (§ 4 Abs. 3 EStG). You only need a balance sheet once one of these limits applies:

• As a registered merchant: Bookkeeping duty under § 238 HGB, unless you stay at or below €800,000 turnover and €80,000 net income on two consecutive balance sheet dates; for a new business the first date already counts (§ 241a HGB). The same applies for tax purposes (§ 140 AO).
• As an unregistered trader: Only when the tax office requires it because you had more than €800,000 turnover or €80,000 profit; the duty starts with the following financial year (§ 141 AO).
• As a liberal professional: Never; cash-basis accounts are always enough.

Cash-basis accounting also requires complete, timely records and kept receipts; it goes to the tax office as the Anlage EÜR with your tax return. If you would rather not do it yourself: bookkeeping or tax returns for freelancers.

Your sole proprietorship's profit is your income. It is taxed together with your other income; under the 2026 tariff it is tax-free up to the basic allowance of €12,348, and taxed at 42% from €69,879 taxable income (§ 32a Abs. 1 EStG).

As a trader you also pay trade tax, but only above €24,500 trade income (§ 11 GewStG). You deduct four times the base amount from your income tax (§ 35 Abs. 1 Nr. 1 EStG); up to a multiplier of 400% the two usually cancel out. An example with €60,000 profit:

If your municipality's multiplier is higher, the difference is a real cost. On top comes 19% VAT on your invoices (§ 12 Abs. 1 UStG), which you pass on to the tax office unless you are a small business. Setting money aside for back payments in the first year is essential: the prepayments rest only on your own estimate.

After registration these obligations continue:

• Tax returns: Every year an income tax return with the Anlage EÜR, as a trader also a trade tax return, and without the small business scheme VAT pre-returns and an annual VAT return.
• Chamber of commerce: As a trader you are a member of the IHK. Without a commercial register entry you pay no fee up to €5,200 trade income; as a founder you are fully exempt in the first and second year as long as profit does not exceed €25,000 and in the five years before you had no business income and held no more than a tenth of a corporation (§ 3 Abs. 3 IHKG).
• Insurance: Health insurance is mandatory, statutory on a voluntary basis or private. Some self-employed people, such as teachers or craftspeople, must also pay into the statutory pension insurance.
• Legal notice and invoices: Name and address on website and invoices (§ 5 DDG), as an e. K. the details under § 37a HGB.

Switching to a UG or GmbH usually pays off for one of three reasons:

• Liability: Employees, large orders, loans, leases or products with a risk of damage make unlimited liability expensive. In a corporation only its assets are liable.
• Taxes: A GmbH pays 15% corporation tax (§ 23 KStG) plus solidarity surcharge and, at a 400% multiplier, trade tax on profit it retains, about 29.8% in total. As a sole proprietor your marginal rate is 42% from €69,879 taxable income. When the GmbH distributes, 25% flat-rate withholding tax follows (§ 32d EStG); the advantage arises mainly when profits are reinvested.
• Partners and investors: Shares can only be issued in a company, see cap table calculator.

How you switch depends on registration. An e. K. can hive its business down into a new GmbH under the Transformation Act (§ 152 UmwG). Without registration you contribute the business to a GmbH as a contribution in kind; for tax this is possible at book value (§ 20 UmwStG). Neither works for a UG, which may not accept contributions in kind (§ 5a Abs. 2 GmbHG); there you form it from scratch and transfer contracts and customers individually.

Our formation cost calculator (in German) computes what forming costs; forming a UG and forming a GmbH describe the routes. The right moment is a question for a tax advisor.

As of 9 October 2026. Trade registration fee from our formation cost calculator (in German), tax figures under the 2026 tariff. This guide is no substitute for legal or tax advice; for your case, get advice from a lawyer or a tax advisor.

Statutes

• § 14 GewO
• § 138 AO
• § 18 EStG
• § 15 EStG
• § 19 UStG
• § 12 UStG
• § 17 HGB
• § 18 HGB
• § 19 HGB
• § 37a HGB
• § 5 DDG
• § 1 HGB
• § 2 HGB
• § 29 HGB
• § 12 HGB
• § 25 HGB
• § 1363 BGB
• § 4 EStG
• § 238 HGB
• § 241a HGB
• § 140 AO
• § 141 AO
• § 32a EStG
• § 37 EStG
• § 11 GewStG
• § 35 EStG
• § 3 IHKG
• § 23 KStG
• § 32d EStG
• § 152 UmwG
• § 20 UmwStG
• § 5a GmbHG