The most commonly chosen legal form for business founders in Germany is an Einzelunternehmen. It refers to a sole proprietorship in which one person owns and operates the business alone.
This form is suitable for both commercial traders (Gewerbetreibende) and freelancers (Freiberufler). No starting capital is required, and the setup process is quick and straightforward. For commercial activities, a business registration (Gewerbeanmeldung) is necessary.
The taxation of an Einzelunternehmen is based on personal income tax, and accounting requirements vary depending on the business size and whether it is entered in the Handelsregister.
Which legal forms are under the sole proprietorship category?
There are three common legal forms under Einzelunternehmen:
- Kleingewerbe (Small business) – A small-scale business with simplified tax and registration rules
- Freiberufler (Freelancer) – A liberal professional (e.g., doctor, artist, consultant)
- Eingetragener Kaufmann or e. K. (Merchant) – If the sole proprietor runs a commercial business requiring Handelsregister entry
