I had my first LLC in grade school over a summer. I didn’t make a ton of money, but I did earn enough for my first real computer, which launched my interest in programming.
When my wife started her current business as a consultant, she was living off her savings from teaching high school. If you think every entrepreneur has €25k of capital, you need to reevaluate what your country thinks of entrepreneurship.
It’s unlikely you’ll lose it all, but suppose you write a clever app — maybe a cvs editor.
Suppose you find out your cvs editor infringes on a patent and you’re liable. Suppose some business suffers data loss and sues. These things do happen in Europe too.
Also, it’s just a matter of professionalism. A sole proprietor isn’t very professional and many medium-size businesses won’t do business with sole proprietorships.
The discussions is not about setting up an LLC in the EU, but specifically in Germany. Subsequent to that we are comparing this with other developed countries in the world, not all of which are in the EU, which is fine, and does not undermine the comparison.
As explained in the article, if you don't have 25k€ of capital, then you open an Einzelunternehmen (sole proprietorship), not a GmbH (LLC). It's a much simpler process.
Delaware is a popular state for incorporation in the United States due to its favorable corporate laws and established legal precedents. A C-Corporation (C-Corp) is a type of business structure that is a separate legal entity from its owners (shareholders). Shareholders have limited liability, and the corporation itself pays taxes on its profits. This is different from an LLC, where the owners report the profits and losses on their individual tax returns.
You can also create an UG (haftungsbeschränkt) which is basically a GmbH with the 25k€ requirement removed.
The only drawback is that this can make the operation look less trustworthy, depending on whom you are dealing with.
If you are selling Hot Dogs, nobody will bat an eye if it’s a UG, but if you apply for a big software contract, people might be wary.
I'm skeptical that an at most 25k€ recovery would alleviate weariness of a big software contract without additional due diligence.
It seems to me that a sole proprietorship would do more to protect against counterparty risk, i.e. more of the person's assets would be available to satisfy the debt.
My guess is that counterparties prefer a limited liability partner to arguably insulate themselves from employment liabilities.
Presumably the UG is still preferable to being a sole trader when dealing with much larger customers. Is that right? Or does providing services in your own name come across as more trustworthy to those parties?
When my wife started her current business as a consultant, she was living off her savings from teaching high school. If you think every entrepreneur has €25k of capital, you need to reevaluate what your country thinks of entrepreneurship.