How to Register a Sole Proprietorship (Einzelunternehmen) in Germany

Registering as a sole proprietor in Germany (commonly known as Einzelunternehmen) is appealing for many because it offers full control, relatively low startup cost, and a more lightweight administrative burden compared to companies like GmbH or UG. It’s especially attractive for freelancers and micro-entrepreneurs launching small ventures.

That said, there is still a fair amount of bureaucracy, especially if your business is “commercial” rather than a “liberal profession (Freiberufler).” You’ll need to register your business, get a tax number, possibly trade tax, decide on VAT obligations, and deal with social insurance. These steps can take a bit of time, depending on the location and nature of your business.

Some of the main challenges are unlimited liability, multiple tax types (income, trade, VAT), and ensuring you are using the correct classification (Freelancer vs Gewerbe). The main benefits include minimal or no share capital, relatively fast registration, options for small business (Kleinunternehmer) status, and control over your operations.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Germany?

In Germany, a sole proprietorship is called Einzelunternehmen. Sole proprietors in Germany are categorized by whether they conduct commercial business (Gewerbetreibender) or are a liberal professional (Freiberufler). Regardless, all of these refer to a business owned and run by one individual, without forming a separate legal entity like a GmbH. You’re fully responsible for debts and obligations, and profits are taxed on your personal income tax return.

How does a sole proprietorship (Einzelunternehmen) work in Germany?

Sole proprietorship vs other business structures in Germany

Step-by-step guide: How to register a sole proprietorship in Germany

Step 1: Check eligibility

You must be at least 18 years old, be a German citizen (or an EU/EFTA citizen) with a valid ID or passport along with a tax ID.

Foreign nationals can register if they have residence in Germany or an appropriate work permit. They must present a strong business plan to obtain a residence permit. For both German citizens and foreign nationals, some regulated professions require specific qualifications.

Step 2: Choose your business activity

Determine whether your work qualifies as a “Gewerbe” (trade/business) or a “Freiberufler” (liberal profession).

If your work is in trade, you need to register with the trade office (Gewerbeamt). If you’re in a liberal profession (professions that are intellectual, artistic, or educational), you just need to register with the tax office. Consider whether you plan to use the small business VAT exemption (Kleinunternehmerregelung) if eligible.

Step 3: Gather required documents

You’ll typically need:

• Valid ID or passport
• Residence permit or appropriate visa
• Proof of address in Germany
• Business description (nature of your trade/profession)
• For trade registration: Gewerbeanmeldung form from Gewerbeamt; fees vary by municipality
• For some regulated professions: proof of qualifications

Step 4: Register with authorities

• Register your trade via the Gewerbeamt (trade office) and fill out the Gewerbeanmeldung (trade registration form) if you’re a trade business.

• Register with the Finanzamt via the ELSTER portal to get a tax number (Steuernummer). You must also complete the Questionaire for Tax Registration (Fragebogen zur steuerlichen Erfassung) within one month of operations.

• If employing people, obtain a company number, register with social insurance, notify the Finanzamt that you’ve hired employees, and make proper withholdings from your employee’s salary.

• Register for the Commercial Register (Handelsregister) if your business operates at a commercial level (high business complexity and high turnover).

Step 5: Register for VAT (if applicable)

If your turnover in the previous year is below €25,000, and your projected turnover is expected to stay below €100,000, you may use the Kleinunternehmerregelung (small business VAT exemption), so you do not charge VAT. Otherwise, you must register for VAT (Umsatzsteuer). The standard rate is 19%, and a reduced rate of 7% applies to basic goods and services.

Step 6: Pay fees and contributions

Commercial sole proprietors are required to register and pay membership fees to the Chamber of Commerce and Industry or the Chamber of Crafts. Registration in the Commercial Register also comes with a fee, if required.

Additionally, all sole proprietors are required to have health insurance. You can choose to make voluntary contributions to pension and unemployment insurance.

Step 7: Complete post-registration obligations

Keep proper records of revenue and expenses (for many small businesses, only simplified accounting “Einnahmen-Überschuss-Rechnung” – EÜR is required). For commercial sole proprietors and those with larger businesses, full accounting (Bilanzierung) is required and involves double-entry bookkeeping and balance sheets.

File your income tax return annually. If VAT registered, file VAT returns monthly, quarterly, or annually depending on your VAT liability. Maintain all invoices and documents for at least 10 years.

Financial and tax obligations for sole proprietors in Germany

Income tax (Einkommensteuer): You pay income tax on your business profit. Rates are progressive, ranging from about 14% up to 42% (and 45% for very high incomes). There is a basic tax-free allowance (Grundfreibetrag) every year. As of 2025, that tax-free allowance is €12,096 for a single person. File your income taxes annually and make quarterly advance payments throughout the year.

Trade tax (Gewerbesteuer): If your business is commercial (Gewerbe) and profits exceed certain thresholds, you must pay trade tax. Freelancers and liberal professions are typically exempt. You’re also exempt from trade tax if you earn less than €24,500 in profits. Municipal rates vary by town/city.

VAT (Value-Added Tax / Umsatzsteuer): If you exceed the Kleinunternehmer thresholds (turnover under €25,000 in the previous year and under €100,000 expected in the upcoming year), you must charge VAT on your services or goods. The standard rate is 19%, and a reduced rate of 7% applies to basic goods and services. File monthly VAT returns for the first two years in business. After that, filing frequency depends on your total VAT liability in the previous year.

Solidarity surcharge and church tax: On top of your income tax, you will also need to pay a solidarity surcharge (Solidaritätszuschlag) of 5.5%. If you belong to a recognized church, church tax also applies.

Social insurance and health Insurance: You need to secure health insurance (statutory or private, depending on status and income), pension contributions (if applicable), and statutory long-term care insurance. Self-employed persons must arrange these on their own and possibly pay full contributions without employer share.

Recordkeeping: You must keep invoices, receipts, accounting records for at least 10 years. Many small sole proprietors can use simplified bookkeeping (EÜR). Larger ones or those registered in the Handelsregister are subject to stricter accounting under the Commercial Code (HGB).

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