Guide
Founding a sole proprietorship: what to bear in mind
Published · Updated
In 2022, the sole proprietorship was by far the most common legal form for newly founded companies. According to data from the WKO, more than 80% of new businesses in 2022 were sole proprietorships. In this article, we look at what you need to consider when founding a sole proprietorship.
What is a sole proprietorship?
A sole proprietor in Austria is a natural person who runs a commercial or freelance business and manages it alone, without any other partners or co-owners. It is a form of self-employment in which a person carries on business on their own account and at their own risk.
A sole proprietor is legally responsible for their own business and bears all the risks and rewards alone. Sole proprietors are personally liable for the business’s debts, and their private assets can be called upon in the event of debts or legal problems.
How do I set up a sole proprietorship in Austria?
Setting up a sole proprietorship does not, in principle, involve much. A sole proprietorship comes into being with the trade registration (Gewerbeanmeldung). In many cases, no further formal act of formation is required.
In some cases, however, the sole proprietorship must also be registered in the company register (Firmenbuch). This is the case if the sole proprietorship is required to keep accounts. There is an obligation to keep accounts in two cases:
- Net turnover exceeds EUR 1,000,000 in one business year, or
- Net turnover exceeds EUR 700,000 in each of two consecutive business years.
There are also exceptions when the turnover thresholds are exceeded. The following do not have to register:
- members of the liberal professions (e.g. pharmacists, architects, doctors, lawyers etc.),
- farmers and foresters, and
- entrepreneurs whose income is surplus income (Überschusseinkünfte).
Any sole proprietorship can register in the company register voluntarily. Registering a sole proprietorship in the Austrian company register is an important step that creates legal clarity and transparency.
Company name
When registering a sole proprietorship in the company register, it is important to choose a permissible company name. In principle, the name can include the name of the sole proprietor. A purely invented name is also permissible. The name must meet the following criteria:
- It must be suitable for identifying the sole proprietorship.
- It must be distinctive.
- It must not be misleading.
If the sole proprietorship wants to be registered in the company register, the name must include an addition. This addition can be “eingetragener Unternehmer” or “eingetragene Unternehmerin” (registered entrepreneur) or a generally understood abbreviation of it, in particular “e.U.”.
If you are unsure about the correct company name, sole proprietors can get advice from the WKO. More information can be found here.
Founding a sole proprietorship with a notary: registration in the company register
If the sole proprietorship wants or needs to be registered in the company register, certain documents must be notarised. These are the following documents:
You can now have these documents notarised online by partner notaries quickly and easily via the notarity platform. You can book an online notary appointment with just a few hours’ notice directly here. Once you have booked an appointment, you will receive a quote for the partner notary’s fees. You can then decide whether or not to accept the partner notary’s quote. You can read more about how an online notary appointment works here.
Registering a trade
Before a sole proprietorship starts trading, it must register a trade. “Trading” (gewerblich tätig werden) means carrying out an economic activity that aims to make a profit and is usually carried out regularly and in an organised manner. It is an entrepreneurial activity in which you produce goods, sell goods or offer services in order to earn income.
In principle, a distinction is made between commercial, freelance, and agricultural and forestry activities. Here are some examples to help you understand the term “trading”:
Commercial activity:
- A retailer who buys goods and sells them in a shop.
- A craftsperson who makes products or carries out repairs.
- A restaurant owner who serves food and drinks.
- An estate agent who brokers property.
Freelance activity:
- A doctor who provides medical services.
- A lawyer who provides legal advice and representation.
- An artist who creates and sells works of art.
Agricultural and forestry activity:
- A farmer who grows and sells agricultural products.
- A forester who carries out forestry work and harvests timber.
It is important to note that not every source of income counts as commercial activity. Occasional or one-off sales of personal belongings, such as second-hand furniture or clothing, do not normally count as “trading”.
The trade can also be registered entirely online here.
Conclusion
The sole proprietorship is by far the most common form of business, and you can set one up quickly and easily. Some sole proprietorships must be registered in the company register – all others can register voluntarily to give their business more credibility. The entire process of founding a sole proprietorship – from notarising the documents to registering the trade – can be completed online.
