Sole proprietorship
As a single company is called in a broader sense any independent actuation of a single individual as a farmer, trader or freelancer, regardless of whether the person has employees or not.
In a narrower sense is meant by the Company of a fully adhering sole trader within the meaning of the German Commercial Code (HGB).
General
A sole proprietorship is a business entity, which may be created without large financial reserves of a single person. The owner of a sole proprietorship called owners.
As far as the individual entrepreneur is a merchant according to the Commercial Code, it is required by law to keep books and make them visible in these its trading business and the position of its assets in accordance with generally accepted accounting principles (GAAP ) (Accounting ). This means that as the registered Kaufmann ( ek ) is obliged to draw up a balance sheet.
In 2011 there were, according to VAT statistics (Source: Federal Statistical Office, subject-matter series 14, series 8.1. ) In Germany 2,211,766 individual companies ( 68.8 % of all legal forms ), which is about 9.8 % of all deliveries and services rendered (about 557 billion euros ).
Capital contribution
A minimum capital is not required by law. It occasionally happens, however, that there is another person involved financially, but does not appear to the outside ( silent partners ), it is a silent society that can not be seen but outwardly from the individual companies. To the outsider, it therefore still is a sole proprietorship.
Company or business name
The free choice of company name, so keeping a " company " is reserved in Germany individual entrepreneurs who are registered in the commercial register and thus be subject to the provisions of the Commercial Code. This registration is for merchants as defined by HGB (formerly "must Kaufmann " ) acc. § 17 HGB prescribed. For other industries it is voluntary (formerly: " Can Kaufmann "). In any case, the company name to add " registered trader " or " registered clerk " or " e K. "," e Kfm "or" e " Supplement Kfr ( § 19 HGB). The name, including the addition forms a legally binding designation - the "Company" - in business transactions.
In contrast, " trades " are a sole proprietor or owner-operators in Germany, which is not registered in the commercial register, in business generally under his personal, civil surname and at least one complete first names. Notes on the activity or industry are acceptable, for example, " hair salon Iris Schmitt ". This arose directly from formerly § 15 b Industrial Code, which was, however, repealed and not replaced in March 2009, so that it now is only to recommendations that are useful for other legal considerations. However, performing a " company " within the meaning of commercial law is not permitted without the commercial register entry. At the same time not affect the provisions of the Commercial Code, but only those of the Civil Code shall apply to such business but.
To be distinguished from the " company " is the - under other legal restrictions such as the Trademark Act - freely selectable " business name " or " Etablissementsbezeichnung ". This has a substantial economic significance. However, you must not fool about relevant circumstances and, for example, give the impression of size or importance which does not own the company. It may not even make it appear as if the company is registered in the commercial register if this is not the case, so that in such cases the term " owner " should be avoided in most cases, unless it is located the takeover (successor ) of a long- established business.
In Germany it is common that the business name contains the ( full ) name of the owner, often combined with the business content: John Doe Wood & Building, drywall Doe, electrical goods Doe, owner of John Doe. The contractor is allowed arbitrarily select a correct name, as for example in the restaurant and catering ( restaurant Rose, owner John Doe ) are common.
Management / external representation
The sole proprietor manages the business under his name or his company at their own expense and risk. He can conduct transactions but can also lead by an employee or third party to authorize by issuing power of attorney or powers of attorney to manage the business.
Assessing the gain
If the sole proprietor has not registered as a merchant in the Commercial Register, the accounting rules of the Tax Code ( § 141 AO) apply, which means that the entrepreneur is exempt up to a fiscal year profit of € 50,000 or an annual turnover of € 500,000 from the accounting and its profit may be determined by net income method. It was only after one exceeding this limit the owner of the individual enterprise is encouraged by the tax office for accounting in the sense of § 141 AO in conjunction with § 4 paragraph 1 Income Tax Act.
Individual entrepreneurs are merchants within the meaning of the Commercial Code, were generally committed to the enactment of the Accounting Law Modernization Act according to commercial law to keep books and make them visible in these its trading business and the position of their assets according to generally accepted accounting principles (GAAP ) (Accounting ). The new provision of § 241a HGB also registered merchants are now exempt under the above conditions of the obligation to keep accounts and can determine your profit by net income method.
Legal capacity of the sole trader
A sole proprietor can acquire rights and incur liabilities; he may acquire property and other rights in rem in immovable property and sue and be sued.
Liability of the sole trader
The sole proprietor is liable with all its assets for all debts of his company. With the establishment of its individual company, the portion of private property, which he makes available to the company, the business assets. This can save money, but also other items such as business premises or a car.
Dissolution of a sole proprietorship
A sole proprietorship is resolved, if the entrepreneur sells the main operating bases or transferred to the private assets.
Tax Treatment of a sole proprietor
Business tax
The sole proprietor is liable to trade tax if it carries out an activity within the meaning of the Trade Tax Law (§ 2 TTA ). The sole proprietor of which may be payable trade tax is partially credited to his income tax.
Income Tax
A sole proprietor can generate income from trade or business, as well as income from self-employment or income from agriculture and forestry, with his company. Income tax is not the company but the owner of the individual enterprise. The income will be - regardless of whether the income has been taken - subject to taxation in the year of origination.
Case of income from commercial operations, the tariff income tax reduced by 3.8 times the trade tax measurement amount = tax reduction acc. § 35 Income Tax Act.
VAT
A sole trader is an entrepreneur within the meaning of the VAT Act. An entrepreneur is obliged to determine the sales tax and the basis of its calculation to make records (§ 22 UStG). If a sole proprietor several individual companies at the same time ( for example, a hairdresser and a bakery business) sales tax for both companies in a VAT return must be notified to the tax office in whose district the first single company was opened (Financial Office of the Erstbefassung see also § § 18 ff AO). Entrepreneurs whose total annual turnover does not exceed € 17,500, can make use of the small businesses regulation, but can then also not input tax assert ( § 19 ).
Inheritance Tax
When transmitting an operating way of gift or inheritance to a successor, a special allowance is inheritance tax for business assets granted ( § 13a Inheritance Tax ).
Advantages of sole proprietorship
- Full freedom of choice and control over the operating assets and business policy
- No minimum capital
- Foundation made informally, easily and economically
- Profit is only the business owner to
- Prestige, because the owner is fully liable → good negotiating position with banks and creditors
Disadvantages of the sole proprietorship
- The business is at the risk owner of the individual enterprise, the liable with all his personal assets
- Raising capital more difficult than for example in the AG