Starting a Business: legal requirements and formalities

How do you start a company?

If you want to start a company, you first need a business idea: your own or that of a franchisor. A personality test should also clarify whether the founder is suitable as an entrepreneur. A number of decisions, from legal form to financing, must also be taken to establish the company. Furthermore, founders have to complete official formalities.

Establish GbR, UG or GmbH: Which legal form to choose?

Before the business registration, it is necessary to determine the legal form of the foundation. Should the foundation be a GmbH, GbR or sole proprietorship – and what are the advantages and disadvantages? This goes hand in hand with the question of possible partnerships or participations. Hardly any company founder will survive as a lone fighter. In the following main article, the legal form is discussed in detail under point 1.

Starting a business: what should be considered?

There is hardly any foundation without equity and debt. Sound financial planning with a capital requirements plan, sales and cost plan and liquidity planning is therefore necessary. The key figures flow into the business plan that lenders require for lending. A clearly defined corporate goal and marketing planning to achieve the goals are also part of the business plan.

Before the store opens, however, there are also a number of formalities to be completed – from registering the business to obtaining the tax number and recruiting employees. It must also be clarified whether there is a compulsory chamber. After all, company founders need permits, licenses or exemptions in certain industries and fields of activity. The following main article also deals with the official obligations to set up a company.

1. Choice of legal form

Video interview with franchise expert Reinhard Wingral on the legal form:

At the beginning of every independence and company foundation there is the choice of the legal form. It is crucial for two reasons. First, it regulates questions of finance, liability, limitation of liability, participation and capital requirements. Second, it depends on the legal form whether the company has to submit balance sheets or have to be entered in the commercial register.

No start-up without money: The founder of a company has the choice between a partnership and a corporation. Partnerships are individual companies, GbR, OHG or KG. The founders very often choose a sole proprietorship or a GbR. In both cases, they are personally liable and with their private assets: as sole proprietors, as GbR partners on an equal footing. The GmbH, the UG or the British Limited are particularly suitable for founding a corporation. This requires capital contributions with which the partners are liable formally or to a limited extent. Establishing a GmbH requires a cash deposit of at least 25,000 euros. The UG is similar to the Limited. At the UG, the shareholders must make a minimum of 1 euro as a regular contribution when they are founded. However, at least 25% of the annual surplus must flow into the reserve until EUR 25,000 in share capital has been reached.

2. Business registration and chamber duty

Depending on the industry, legal form and other framework conditions, company founders have to register with different positions or enter their business activity in registers. This applies not only to full-time full-time jobs, but to every business start-up. It is also an obligation for anyone who is self-employed on a part-time basis, runs a small business or works as a freelancer.

The first step on the way to self-employment leads the founder to the competent authority for business registration. It automatically informs the responsible IHK or Chamber of Crafts. Some liberal professions have their own chambers, for example doctors, lawyers, pharmacists or architects. Membership is mandatory. However, the contributions depend on the type and scope of business of the company. Some small businesses or freelancers can apply for exemption from contributions.

For some professions, start-ups require special permits or concessions. The permits include, for example, master craftsman titles, IHK test certificates or passenger transport certificates. They must be presented for business registration. Concessions require businesses such as taxi companies or restaurants. The licenses must be applied for from the competent authority before starting to work independently.

3. Tax number and registration at the tax office

Establishing a company also means taking your time on tax and finance. Registration with the tax office takes place automatically when registering a business. But the mills of the offices and authorities are grinding slowly. Anyone who wants to open their business and take money and issue invoices as soon as possible after the company is founded needs a tax number. In the case of cross-border companies (for example with intra-Community deliveries in the EU) it is also necessary to state the VAT identification number on the invoices and in the tax returns.

Important to know: If you only submit your first tax return or advance sales tax return after the mostly late request from the tax office, you risk default penalties or even tax evasion charges. It is therefore important to approach the tax office independently and on your own initiative when setting up the company and to complete the questionnaires on sales and profit expectations. The Office then determines the quarterly or monthly tax advances. The entrepreneur himself has to submit the advance VAT returns – including payments.

4. Industrial property rights or licenses

When starting a company with a new business idea, industrial property rights should be registered. Anyone who takes over a business concept – for example as a franchisee – must acquire a license from the rights and brand owner to found the company. With this license, the founder of the company can market the licensor’s products or services exclusively for a specific time and in a – mostly protected – sales area. This can include brands, patents, utility models, designs, designs, characters, company names or business names. The licensor provides the entrepreneur with the necessary knowledge about business ideas, products and services in training courses.

5. If necessary Entry in the commercial register

Depending on the type, legal form and business volume, a company foundation must be entered in the commercial register. The entry in the commercial register is mandatory for corporations such as GmbH and AG. The same applies to partnerships such as KG or OHG. The entry is not necessary for GbRs, freelancers or so-called small businesses.

6. Participations, partnerships and employee recruitment

Establishing a company is usually not a go-it-alone: ​​For most companies, it is difficult to stand up to the competition on your own. Therefore, the founders should network with specialists at an early stage, enter into cooperations or even involve selected partners in their company. If there are several partners, the social contract is of crucial importance: It defines the legal basis of the company and the powers of the management. The necessary insurance such as legal protection should also be taken out before the store opens.

After all, it is important to search for, select and hire the right employees in good time to start self-employment. Even if every step and all questions about starting a business were perfectly organized by the entrepreneur and all tips were observed, from the idea to the business plan and financing to marketing: Anyone who cannot serve their customers or cannot meet delivery obligations when starting a business, gambles away from the start to every customer loan.