Starting a Business in Berlin

26 27 Starting a Business in Berlin A Beginner’s Guide Entry in the Commercial Register Commercial enterprises must be entered in the Commercial Register, and small-scale businesses can be entered. The following legal forms must also be entered: e.K. (registered commercial trader), OHG (general commercial partnership), KG (limited commercial partnership), GmbH (limited liability company), UG (entrepreneurial company with limited liability) and AG (joint stock company). Special formalities must be observed when entering them in the Commercial Register. Businessmen who have an entry in the Commercial Regis- ter have a company name that describes the commercial enterprise. Businessmen may choose a personal, descriptive or imaginative name for their company. By being entered in the Commercial Register, a one-man business becomes a re- gistered commercial trader whose name must be completed with a designation such as e.K., e.Kffr. or e.Kfm. Examples: Bruckers Buchhandel e.K., Hotel Himmelbett e.Kffr., or Putzblitz e.Kfm. (more on this topic can be found in the ‘What name should I choose?’ section). The advantages of registration might be, for instance, that the businessman can grant general commercial power of representation to his employees, and has the right to ope- rate under his company name (rather than his own name), perhaps enabling the company to appear more reputable or to improve its image. Some banks, businesses and trade associations will only enter into a business relationship with companies listed in the Commercial Register. On the other hand, one disadvantage of registration is the obligation to use double-entry bookkeeping and prepare a balance sheet in compliance with the German Commercial Code, which is more time-consuming than a simple profit and loss calcula- tion. Commercial traders are also subject to the stricter legal WHAT LEGAL FORM SHOULD I CHOOSE? This is a decision you simply can’t avoid: even by simply re- gistering your business, you’ve automatically chosen a legal form! If you start up your business alone, it will be a sole proprietorship from then on. If you start up your business as team you are automatically a partnership constituted under civil law (GbR) or a general commercial partnership (OHG) is set up as a team effort. Since the applicable legislation for your business depends on its legal form, it stands to rea- son that the choice of legal form is a crucial decision. A commercial enterprise or a small-scale business? This distinction is an idiosyncrasy of German company law with far-reaching consequences. It is frequently confused with what’s known as the small business operator regulation under tax law (see also the ‘What taxes do I have to pay?’ section). A small-scale business is a sole proprietorship or a GbR that does not require a commercial organisation. Characteristics of a commercially organised business enterprise Annual turnover (e.g. more than € 175,000 for a service provider) No. of employees (more than five) Business assets (more than € 100,000) Volume of credit (more than €50,000) More than one branch office CHAPTER 3