The legal form issue. Almost every founder stands in front of it at some point and asks himself: What suits me? Read this guide and find out which legal form really suits your founding.

The short answer: A GmbH offers liability protection and costs at least 25,000 euros of share capital (of which 12,500 euros must be paid in). In theory, you can start a UG with one euro, but you have to save 25% of your profit. As a sole proprietorship, you are liable with your private assets, but start without capital and formalism.

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The basics: What is there anyway?

sole proprietorship is the easiest way. You are your company. No start-up costs, no notary, no registration except with the tax office and, if applicable, the trade office (for traders). It's done.

GbR You need it if there are at least two of you. A sample contract from the Chamber of Industry and Commerce is enough; in theory, it's even a handshake. Uncomplicated, but: Everyone is liable with their entire private assets.

UG and GmbH are corporations. You create a legal entity - it can conclude contracts itself, have property and be sued. The difference? The starting capital and a few details.

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The three questions that really matter

1. How important is liability protection to you?

With sole proprietorships and GbR, you have unlimited liability for everything you have. Sounds scary for now. But in practice? Most risks can be insured. Professional liability, product liability, financial loss liability — there is suitable insurance for almost everything.

It only becomes critical in high-risk industries (nuclear transport, passenger transport). But let's be honest: If you offer an online service, advice or a software product, you'll get that insurance.

With the GmbH, you are “only” liable with the contributed capital. But beware: As managing director, you are still personally liable if you do not pay taxes, do not react in good time in the event of insolvency or do not pay social security contributions for employees.

Tax advisor Christians Take: “The issue of liability is often overrated. Instead, think about how to get your business up and running.”

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2. How much bureaucracy can you handle?

Sole proprietorship = minimal. A simple income surplus statement is usually sufficient. Many do this without a tax advisor (even if it is more recommended).

GmbH = maximum formalism. Duplicate bookkeeping, annual financial statements, all changes to the notary, registration in the commercial register. Realistically, you need a tax advisor (costs: from 1,500-2,500 euros/year for small limited liability companies). You're not committed, but it gets complicated without.

The GbR is the opposite: changes via email, no commercial register, no notary.

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3. How serious are you?

The underrated question. Is this a side project for testing? Or do you already know that you want to do this for the next 5 years?

For experiments: sole proprietorship or GbR. Low barrier to entry, you can start quickly and stop just as quickly

For serious business with scaling plans: GmbH makes more sense right from the start. More creative freedom, better options for employee participation, more professional public image.

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UG: The “budget GmbH”?

The UG was introduced in 2008 so that founding works even without much capital. In theory, one euro is enough. In practice, the UG is almost identical to the GmbH - legal entity, limitation of liability, same formalism.

The catch: You must save 25% of your profit until you reach 25,000 euros. You can't withdraw the money. The UG should “grow” into a GmbH.

The reality:

• Some business partners do not take UGs seriously (“Billig-GmbH”)
• You have the full GmbH formalism PLUS profit allocation restriction
• The subsequent conversion to a GmbH costs money again (notary, possibly auditor)

Tax advisor Christian's recommendation: “If you know that you want to do this in the long term, start directly with the GmbH. The basement primarily makes sense as a holding structure.”

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The most expensive mistake: Start incorrectly and switch later

Unfortunately, I often see this: Someone starts out as a freelancer, builds up a successful business for three years and then wants to become “more professional” with a GmbH.

The problem? The tax office sees this as selling your business to your own GmbH. Your customer relationships, your reputation, your contracts — everything has value. With a well-running business, these can quickly be five or six-digit amounts that you have to tax PRIVATELY.

An example: Assumed goodwill of 80,000 euros = over 30,000 euros in taxes, which are due immediately.

It can be solved with good advice, but it costs. Therefore: invest the time to make the right choice at the beginning.

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And taxes?

Sure, there are differences. Private person pays up to 45% income tax, GmbH around 30% corporation tax. Sounds good for the GmbH?

But: If you take out the money, you pay capital gains tax on it again. So the question is: Do you need the money to live on or do you want to reinvest?

Tax advisor Christian's most important advice: “For most founders, tax optimization is not the main criterion at the beginning. We use it to optimize the decimal place. The real question is: How do you make your business fly?”

Only when you have several profitable businesses or plan complex structures does tax optimization become a game changer.

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Your checklist

Ask yourself:

✅ Is this serious or an experiment?

✅ Do I already have customers or specific promises?

✅ Am I starting alone or with co-founders?

✅ Can I raise 12,500 euros without any problems?

✅ Am I planning to scale up or take on investors in 3-5 years?

✅ Is professional public image important for my target group?

4+ times “Yes”? A GmbH is probably right for you.

Lots of question marks? Start as a sole proprietorship or GbR - but expect that a later change will cost you.

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Bottom Line

In principle, you can't do much wrong with any legal form. The question isn't “What's the best?” , but “What fits my situation?”

A later change is possible, but never free of charge. Therefore: Take your time at the beginning. An hour of thinking or consulting with a tax advisor (200-400 euros) can save you five-digit mistakes.

The three key questions remain:

1. Liability - how quietly do you want to sleep?
2. Bureaucracy — how much formalism can you tolerate?
3. Seriously — how long do you want to do that?

Answer them honestly for yourself - and the right legal form will result.

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