Founding a sole proprietorship - what to bear in mind

The most common legal form of newly founded companies in 2022 was by far the sole proprietorship. According to Data from the WKO over 80% of new businesses were sole proprietorships in 2022. In this blog post, we take a look at what to consider when starting a sole proprietorship.

What is a sole proprietorship?

A sole proprietor in Austria is a natural person who operates a commercial or freelance business and manages the business alone, without other partners or associates. It is a form of self-employment in which a person is economically active on his or her own account and at his or her own risk.

A sole trader is legally responsible for his business and bears all risks and rewards alone. He is personally liable for the company's debts and his private assets can be held responsible in case of debts or legal problems.

How do I set up a sole proprietorship in Austria?

To set up a sole proprietorship, you basically don't have to do much. A sole proprietorship comes into being with the Business registration. A further formal act of incorporation is not necessary in many cases.

In some cases, however, registration of the sole proprietorship in the commercial register is also mandatory. This is the case if a sole proprietorship is obliged to render accounts. There are two cases in which there is an accounting obligation:

1. The net turnover of EUR 1,000,000 is exceeded or exceeded in one business year.
2. The net turnover of EUR 700,000 is exceeded in two consecutive business years.

There are also exceptions if 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 with surplus income.

Every sole proprietorship can voluntarily register in the company register. The registration of 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 commercial register, it is important to choose a permissible name for the company. In principle, the name can include the name of the sole proprietor. A completely fanciful name is also permissible. The name must fulfil the following criteria:

• The designation must be suitable for identifying the sole proprietorship.
• The designation must have distinctive character.
• The designation must not be misleading.

If the sole proprietorship wishes to be registered in the commercial register, the designation must have an addition. This addition may be "registered entrepreneur" or "registered businesswoman" or a generally understandable abbreviation of this designation, in particular "e.U.".

If you are uncertain about the correct name of the company, sole proprietorships can seek advice from the WKO. More information can be found here.

Establish a sole proprietorship with a notary: Registration in the commercial register

If the sole proprietorship wants or needs to be registered in the commercial register, documents must be certified by a notary public. These are the following documents:

• Application for entry in the commercial register &
• Sample company drawing.

You can now obtain these documents quickly and easily via notarity notarised online. You can arrange an online notary appointment directly with a few hours' notice. here book. You will receive an offer for the costs of a partner notary once you have booked an appointment. You can then decide whether you want to accept this offer from a partner notary or not. You can find out more about the online notary appointment process at here can be found here.

Registration trade

The sole proprietor must register a trade before engaging in commercial activity. Engaging in commercial activity" means that you are engaged in an economic activity that aims to make a profit and is usually carried out on a regular basis and in an orderly manner. It is an entrepreneurial activity in which you produce goods, sell goods or offer services in order to earn income.

Basically, a distinction is made between commercial, freelance and agricultural and forestry activities. Here are some examples to better understand the term "commercial activity":

Commercial activity:

• A retailer who buys goods and sells them in a shop.
• A craftsman who manufactures products or carries out repairs.
• A restaurant owner serving food and drinks.
• An estate agent who brokers real estate.

Freelance activity:

• A doctor who provides medical services.
• A lawyer who provides legal advice and representation.
• An artist who creates and sells artistic works.

Agricultural and forestry activity:

• A farmer who grows and sells agricultural products.
• A forester who carries out forestry work and extracts wood.

It is important to note that not all sources of income qualify as commercial activity. Occasional or one-off sales of personal possessions, such as second-hand furniture or clothing, do not normally fall under the term "engaging in commercial activity".

The registration of the trade can also be done completely online. here .

Conclusion

The sole proprietorship is by far the most common form of business. You can set up a sole proprietorship quickly and easily. Some sole proprietorships have to be registered in the company book - all others can be, to give the sole proprietorship more respectability. The entire process of setting up a sole proprietorship - from certifying the documents to registering the business - can be done online.