Which legal form suits you?
To be able to sell products on Amazon, you must first set up a company. But which legal form is right for you? In this article, you will learn everything you need to know about sole proprietorships, GbR, GmbH and UG as well as their advantages and disadvantages and how to proceed step by step when setting up a company.
Sole proprietorship and GbR
A sole proprietorship can be set up quickly and easily at your local trade office without the need for any start-up capital. The GbR (partnership under civil law) is the appropriate legal form for a joint formation with a partner. Business registration costs between €20 and €60. Accounting is also quite simple. Profits are only taxed above certain amounts and all expenses such as the purchase of goods reduce the profit. From a net profit of €60,000 or a turnover of €600,000 per year, it is advisable to set up a limited company.
One disadvantage of a sole proprietorship is that you have to set up alone and use your own name as the company name. So you can’t make up a fantasy name. As a founder, you are also liable with your private assets for any personal injury or damage to property. To protect yourself, it is advisable to take out public liability insurance.
Please also note that a subsequent change of name to a GmbH sometimes proves difficult on Amazon. Your account could be blocked for some time. Nevertheless, the process is feasible and definitely worthwhile.
Summary of sole proprietorship and GbR
- Uncomplicated and fast foundation
- Liability with private assets
- Purchase of goods reduces profit
- Low taxes at the beginning, higher later
- Low start-up costs
- Simple accounting
How to set up a sole proprietorship step by step
- Fill out the business registration form and go to the business registration office in your city. Under point 15 you can write: “Import and online trade with …” and then specify the categories on Amazon in which you sell.
- Then fill out the tax registration questionnaire from the tax office, preferably with the help of your tax advisor.
- After a few weeks, you will receive your VAT identification number and tax number by post. Done!
GmbH and UG
The GmbH (limited liability company) is a separate legal entity. You can set it up with several business partners. In contrast to sole proprietorships and GbRs, you are not liable for personal injury and property damage with your private assets. The company name can also be fictitious.
Another advantage is that it is generally easier and quicker to obtain outside capital than with other legal forms. From a tax perspective, the advantage of a corporation is that taxation remains constant regardless of the level of turnover and profit.
One disadvantage is that the formation process is more complex and takes longer than that of a sole proprietorship or a GbR. You must instruct a notary and have yourself entered in the commercial register. You also need share capital to set up the company. As a so-called “one-man GmbH”, this amounts to at least € 12,500, otherwise it is € 25,000.
In contrast, a UG (Unternehmensgesellschaft) can only be founded with €1. However, it is obliged to keep a quarter of the profit from a year as a reserve until the equity exceeds €25,000. A UG can then be converted into a GmbH.
The start-up costs are at least €400 due to the entry in the commercial register, the appointment of a notary and the business registration. In addition, a corporation in Germany is subject to double-entry bookkeeping. Overall, the bureaucratic effort is significantly higher than for a sole proprietorship or a GbR.
Summary of GmbH and UG
- No liability with private assets
- Purchase of goods does not reduce profit
- Fixed percentage tax rate
- Higher start-up costs and bureaucratic effort
- Double-entry bookkeeping obligation
How to set up a corporation step by step
- Think about the name for your company.
- Make an appointment with a notary for notarization.
- You can use the certificate to open a business account with your bank. Transfer the share capital: € 25,000 or € 12,500 for a “one-man GmbH”. Send the proof of transfer to your notary. They will now register your company in the commercial register.
- Once you have been entered in the commercial register, you fill out the business registration form at the trade office. Fill out the business registration form and go to the business registration office in your city. Under point 15 you can write: “Import and online trade with …” and then specify the categories on Amazon in which you sell.
- Then fill out the tax registration questionnaire from the tax office, preferably with the help of your tax advisor.
- After a few weeks, you will receive your VAT identification number and tax number by post. Done!
Setting up a company abroad?
Setting up a company abroad can offer considerable tax advantages. However, you may have to give up your residence in Germany completely. Countries such as Estonia and Cyprus are particularly interesting for e-commerce, as they offer extremely attractive tax conditions. Nevertheless, it is not necessarily advisable to make such a decision at the start of a company. The legal, tax and organizational requirements can be extremely complex and require careful planning and advice.
Small business regulation: yes or no?
The small business regulation allows you not to pay VAT as long as your annual turnover remains below €22,000 in the first year and €50,000 in the second year. However, you also lose the right to claim input tax, which can be particularly important for larger investments and imports. If you invest a lot and have ambitious goals, it may make sense to forego the regulation in order to avoid the later expense of switching to standard taxation.
Conclusion – sole proprietorship for the start, later corporation with more tax advantages
There are several factors to consider when choosing the right company form for your Amazon FBA business. If you are just starting out and have no entrepreneurial experience, a sole proprietorship is certainly the best option. This allows you to focus on the essential aspects of your business without the complexity of a corporation.
If you have more capital available, ambitious goals and already have experience in entrepreneurship, it may make sense to start directly with a corporation such as a GmbH or UG. These legal forms offer you tax advantages, as taxation remains constant regardless of the amount of your profit and is always taxed at around 20 to 30 %.
In summary, the decision to choose the right legal form depends on your individual goals and the long-term strategy of your company. Always seek advice from an experienced tax advisor.
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