Small business – what is it and who is it good for? When setting up a business, the form of small business is often used. It is important to know that the small business owner is not a businessman . This means that small businesses are exempt from some additional regulations at the start and during self-employment. Thus, the small business facilitates the often turbulent initial phase of some startups .
What is a small business?
First and foremost, every independent and entrepreneurial activity is considered a trade . This mainly includes industrial and craft businesses as well as most service providers. A small business is simply put a commercial company whose operators to comply with the provisions of the Commercial Code and other commercial special provisions need to keep.
Difference: small businesses and small business owners
According to FOODANDDRINKJOURNAL.COM, the terms small business and small business owner are often used synonymously or confused. Here, however, they refer to two different facts:
Small business:
Due to the limited scope of business , small businesses are not merchants in the sense of the HGB . Small businesses are not obliged to be entered in the commercial register, to keep double-entry bookkeeping and to prepare balance sheets . The general regulations of the German Civil Code ( BGB ) as well as the tax regulations apply .
Small business owner:
In contrast to small businesses, small businesses in the sense of the Value Added Tax Act are traders as well as self-employed, freelancers as well as farmers and foresters . The prerequisite for this is that your total turnover in the previous calendar year did not exceed € 22,000 and is not expected to exceed € 50,000 in the current calendar year.
Here are a few key differences at a glance:
- A small business owner is primarily spoken of from a tax perspective.
- As a small business owner, you can only work as long as your turnover from the previous year is less than 22,000 euros. In the current year your total turnover must not exceed 50,000 euros (small business regulation).
- The term small business comes from commercial and industrial law . This means that you do not have to observe the very complicated regulations of the commercial code. Among other things, this saves you from having to keep double bookings.
- As a freelancer with very low sales, you can also be a small business owner.
- However, as a freelancer you are not a small business owner . This also applies if you only generate sales and profits that are insignificant. Freelancers do not count among the traders.
Small business regulation
The small business regulation is a special regulation for small business owners and founders . This regulation states that you do not have to pay any sales tax to the tax office. This saves you a lot of administrative work, which is certainly to be seen as the greatest advantage of the small business regulation .
In plain language, this means that you do not have to submit any advance sales tax returns. The small business regulation states that you were not allowed to generate sales of more than 22,000 euros in the previous year and that your sales in the current financial year are unlikely to exceed 50,000 euros .
Possible legal forms for small businesses
To run a small business, you can either found it alone or do it in a team . There are mainly two different legal forms available to you. If you found yourself alone, then you are automatically a sole proprietorship . It looks different when it comes to founding a team. In this case you can choose a legal form like the GbR with your co-founders .
| legal form | description |
| Founding as a sole proprietorship | When you start up, you automatically start your small business as a sole proprietorship if you start your own business . A business registration is sufficient for this . No entry in the commercial register is necessary. However, you must be aware that as a sole proprietor you are always liable for your company with all of your private assets . |
| Founding in a team (GbR) | For founding in a team, an association of natural persons is available as a legal form analogous to the sole proprietorship. This association is the GbR , the civil law company. Everyone who participates in this GbR is liable with all of their private assets – this applies to all founders. It doesn’t matter which one of you makes a mistake: everyone is responsible for one another. Even with the GbR, no entry in the commercial register or minimum capital is required. |
The advantages and disadvantages of small business at a glance
The small business does have some great advantages for you to offer. However, you should also pay close attention to the disadvantages that arise when starting up .
| advantages | disadvantage |
| The biggest advantage comes from the time saved: no advance VAT return required, no balance sheet has to be drawn up at the end of the year , the VAT return is made very quickly. |
If the acquisition costs or investments are high , you can not claim any input tax deduction . |
| A small business can be set up informally and inexpensively . | Many other entrepreneurs prefer a business relationship with a commercial entrepreneur |
| There is no start-up capital required for the establishment – but the small traders liable with his personal assets. | As a small business owner, you are not always taken seriously. |
| You have a competitive advantage because you can sell the goods cheaper or make a higher profit. | The small business owner is limited in the name of his company or the naming. |
