The right type of business for your E-Commerce business

You want to start an E-Commerce business, but you are wondering which legal form best suits your needs? The choice of the right legal form is crucial, as it influences aspects such as liability, taxes, and the complexity of your business management. In this guide, I will give you a comprehensive overview of the different legal forms you can consider. We will especially focus on sole proprietorship, civil law partnership (GbR), entrepreneurial company (UG), and company with limited liability (GmbH).

Main Insights

• The choice of legal form depends on your individual goals (e.g., speed, liability, complexity of accounting, tax treatment).
• Sole proprietorships are quickly established but carry the risk of personal liability.
• An UG or GmbH provides limited liability but is more complex and expensive to manage.
• Tax aspects should also be considered, as the tax burden may vary.

Step-by-Step Guide

Step 1: Consider how quickly you want to start

Before deciding on a legal form, you should ask yourself: How quickly do I actually want to start? If you want to quickly open an online store, a sole proprietorship could be the simplest solution. Registration is uncomplicated and allows for a quick start.

Step 2: Take liability into account

An important aspect in choosing your legal form is liability. With a sole proprietorship, you are personally and unlimitedly liable with your entire private assets. This means that in case of damage or insolvency, your personal assets are at risk.

On the other hand, an UG or GmbH offers you limited liability. In many cases, only the company's assets are liable as long as the laws are correctly followed. However, there are exceptions, so it is advisable to still take out business liability insurance.

Step 3: Consider Quick Start and Insurance Questions

If you choose a sole proprietorship, you still need business liability insurance to protect yourself from financial damages. This insurance can clarify many liability questions and is especially important when collaborating with other partners or selling products.

Step 4: Compare Tax Aspects

You should also consider the tax implications of different legal forms. While sole proprietorships typically use income-expenditure accounting, the accounting for a GmbH or UG is more complex as it requires a balance sheet.

Generally, it is the case that you can benefit from a lower tax burden with a GmbH or UG. However, this depends on various factors, such as revenue and expenses. If you want to reinvest, an UG or GmbH is often the better choice as it gives you more flexibility.

Step 5: Consider the Company Structure

Another consideration is the structure of your company. If you are founding alone, you can choose either a sole proprietorship or a UG or GmbH. However, if you are founding with others, a GbR may be the simplest and fastest solution.

If you are looking for a more complex structure, such as a GmbH or UG to better regulate liability, founding with others is also possible. Above all, you should clarify how many founding partners there will be and how you want to divide the responsibility.

Step 6: Consider Long-Term Perspectives

Also, think about long-term perspectives. Do you want to stay in Germany in the long term? With a UG or GmbH, there may be a so-called exit taxation if you move away. This is a complex tax issue that could also affect your business activities.

In contrast, deregistering a sole proprietorship is often easier if you want to leave Germany. In this case, consider which form best suits your long-term plan.

Summary

Choosing the right legal form for your E-Commerce business is crucial and should be carefully considered. There is no one-size-fits-all solution, as the best form depends on various factors such as your desire for speed, liability, and tax aspects. A sole proprietorship offers a quick start but has disadvantages regarding liability. An UG or GmbH provides limited liability but entails additional administrative effort. Evaluate the risks you can calculate, as well as long-term goals, before making the final decision.