4 ms·

If you don't actively seek outside investment (yet) it's much easier to start off with a sole proprietorship or a partnership (GbR) in case of more than one fou

If you don't actively seek outside investment (yet) it's much easier to start off with a sole proprietorship or a partnership (GbR) in case of more than one founder. The caveat is this though: You and your partners will be personally liable for the company's liabilities. In most cases however this doesn't matter as much as is often presumed. This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners. First of all, as long as it's just you and potential partners, who put in their own time there usually isn't a whole lot of financial risk involved anyway. That changes once you decide to hire employees. At that moment you quite likely should incorporate. Secondly, in many cases even with a GmbH or UG you will be held personally liable as a managing director anyway (for example when taking up a loan).

sneak 9y ago
> This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners. That level of risk is nuts. Most companies would never get started, or lots of founders would get screwed.
- BjoernKW 9y ago
  There's indeed a considerable level of risk but it's often also grossly overstated. There are plenty of partnerships and sole proprietorships and there have been for years. They're doing just fine. I agree the system is far from perfect but in my experience the people who commonly complain about the risk of setting up a partnership on one hand or the high cost and the bureaucracy that comes with incorporating in Germany on the other hand often don't really want to found a company in the first place but rather find a convenient reason not to. After all, it's a matter of risk assessment. If your proposed business is inherently risky, you have to hire right from the start or you're looking for equity financing then by all means do incorporate. Doing so is a one-time effort (or rather a once-per-year effort when including the additional requirements for annual accounts). In a company's lifetime that effort really doesn't matter all that much.
easytiger 9y ago
> In most cases however this doesn't matter as much as is often presumed. I only hope you don't fail to deliver and get sued, misuse client data and get sued, get accused of patent infringement et al. Seen all of these happen.
- Xylakant 9y ago
  If you're the sole owner and CEO of the GmbH/UG, you're often not shielded from personal liability in these cases. Any of these actions could be considered (gross) negligence and that would pierce the limitation in many cases. Limited liability for single person GmbHs is often overstated and overrated.
- BjoernKW 9y ago
  Germany and the EU in general is a civil law system (the UK and Ireland being exceptions). Suing a company for simple failure is not as easy as it might be in the US (though I doubt that's very common even in the notoriously litigious US legal system). Misusing client data is a criminal offence under European data protection laws. Doing so not only makes you liable for damages no matter if you're a sole proprietor or 'merely' a managing director of an Ltd-style company but it can also land you in jail. Finally, there are no software patents in the EU so if you run a software startup you're fine in that respect.
  - gt2 9y ago
    With no software patents, why don't more companies incorporate in Europe to avoid being sued for patent infringement in SV/elsewhere in the US?
    - easytiger 9y ago
      Because if you operate in any capacity in the US you are subject to US laws, presumably. I've worked now for 3 companies that are not US HQd but have been sued by patent trolls.

sneak 9y ago

> This is assuming you can 100% trust your partners (which should be a requirement when starting a company anyway) because a GbR implies that each of the partners is fully liable for the others' actions and decisions made with regards to the company, too. Creditors can recoup their assets from any of the partners. That level of risk is nuts. Most companies would never get started, or lots of founders would get screwed.

BjoernKW 9y ago
There's indeed a considerable level of risk but it's often also grossly overstated. There are plenty of partnerships and sole proprietorships and there have been for years. They're doing just fine. I agree the system is far from perfect but in my experience the people who commonly complain about the risk of setting up a partnership on one hand or the high cost and the bureaucracy that comes with incorporating in Germany on the other hand often don't really want to found a company in the first place but rather find a convenient reason not to. After all, it's a matter of risk assessment. If your proposed business is inherently risky, you have to hire right from the start or you're looking for equity financing then by all means do incorporate. Doing so is a one-time effort (or rather a once-per-year effort when including the additional requirements for annual accounts). In a company's lifetime that effort really doesn't matter all that much.

easytiger 9y ago

> In most cases however this doesn't matter as much as is often presumed. I only hope you don't fail to deliver and get sued, misuse client data and get sued, get accused of patent infringement et al. Seen all of these happen.

Xylakant 9y ago
If you're the sole owner and CEO of the GmbH/UG, you're often not shielded from personal liability in these cases. Any of these actions could be considered (gross) negligence and that would pierce the limitation in many cases. Limited liability for single person GmbHs is often overstated and overrated.
BjoernKW 9y ago
Germany and the EU in general is a civil law system (the UK and Ireland being exceptions). Suing a company for simple failure is not as easy as it might be in the US (though I doubt that's very common even in the notoriously litigious US legal system). Misusing client data is a criminal offence under European data protection laws. Doing so not only makes you liable for damages no matter if you're a sole proprietor or 'merely' a managing director of an Ltd-style company but it can also land you in jail. Finally, there are no software patents in the EU so if you run a software startup you're fine in that respect.
- gt2 9y ago
  With no software patents, why don't more companies incorporate in Europe to avoid being sued for patent infringement in SV/elsewhere in the US?
  - easytiger 9y ago
    Because if you operate in any capacity in the US you are subject to US laws, presumably. I've worked now for 3 companies that are not US HQd but have been sued by patent trolls.