Most start-ups are sole proprietorships. Starting alone or as a solo founder has advantages and disadvantages. Very common legal forms for sole proprietorships are small businesses or freelancers. However, these are linked to personal liability. Therefore, remember to hedge larger risks.

For sole traders who want to exclude personal liability, there is also the option of becoming self-employed with a corporation.

What is a sole proprietorship?

Sole proprietorships are any business such as wholesale bathroom cabinets craft founded by a single person. The solo founder forms the company without a management team. Certainly, he can employ employees. The sole proprietor owns 100% of his business and can make decisions without having to consult a co-owner or a co-managing director first.

The term sole proprietorship is not defined in the law. In practice, therefore, you have the choice between different legal forms if you are founding a sole proprietorship or are planning to start a business as a sole proprietor.

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Setting up a sole proprietorship for bathroom cabinets: Advantages and disadvantages

When you set up your sole proprietorship, you have several legal forms to choose from. These legal forms differ in the founding process, the accounting obligations and the taxes. The question of naming is also an important decision criterion when founding your sole proprietorship. Only incorporated merchants and 1-person corporations can give your business a fancy name.

Freelancers, small traders and registered merchants are legal forms with unlimited liability. The owners of these sole proprietorships are therefore also liable with their private assets for all of the company’s debts with their own assets. On the other hand, the incorporation process is very simple for these three legal forms. The 1-person corporations offer the possibility of reducing the liability risk on the assets of the company.

The advantages of the uncomplicated foundation and the chance to be one’s own boss make the sole proprietorship a popular legal form. However, the liability risk hovers over the founder. In any case, the founder of a sole proprietorship should take care of adequate insurance cover. Anyone who chooses the legal form of a corporation when founding a sole proprietorship should know that the obligation to publish the annual financial statements is the price for the reduced liability.