Legal forms for founders: sole proprietorship, GbR, UG, GmbH

In short: The legal form determines liability, formation effort and taxes. A small business almost always runs as a sole proprietorship: simple, no minimum capital, but with personal liability.

In more detail: For minors the sole proprietorship is the obvious route. Corporations such as the GmbH or UG need articles of association, notary, commercial register entry and share capital, and management by minors is legally difficult.

In detail

• Sole proprietorship: formed by business registration, full liability with private assets (limited for minors under § 1629a BGB).
• GbR: association of at least two people, no registration needed, partners are personally liable.
• UG (limited liability): from 1 euro share capital, notary and commercial register, liability limited to company assets.
• GmbH: 25,000 euros share capital (at least 12,500 euros must be paid in on formation), notary, commercial register.
• For a small business: a company usually only pays off with bigger risks or several founders.

See also: Small business and the commercial register (merchant under HGB), Liability limit for minors (§ 1629a BGB)