Starting as a sole trader in Germany (Einzelunternehmen)

What it is

• A sole trader business is not a separate legal form: you run the business yourself. A trade (Gewerbebetrieb) is any independent, lasting, profit-seeking activity on the market that is neither farming or forestry nor a liberal profession. (EStG § 15 (Einkünfte aus Gewerbebetrieb))
• Anyone may carry on a trade unless the Trade Regulation Act (Gewerbeordnung) provides otherwise. (GewO § 1 (Gewerbefreiheit))
• A merchant (Kaufmann) is anyone whose business, by type or size, needs a commercially organised operation. Smaller businesses (Kleingewerbe) may register in the commercial register (Handelsregister) voluntarily. Registered sole traders add "eingetragener Kaufmann", "eingetragene Kauffrau" or "e.K." to their name. (HGB § 1 (Kaufmann, Handelsgewerbe); HGB § 2 (Kannkaufmann); HGB § 19 (Firma des Einzelkaufmanns))

Who it is for

• For one person running a trade alone, for example selling goods or services that are not a liberal profession. (EStG § 15 (Einkünfte aus Gewerbebetrieb); GewO § 1 (Gewerbefreiheit))
• Only for: Craft trade (Handwerk). A licensed craft (Annex A of the Crafts Code, Handwerksordnung) may only be run independently by someone entered in the craft register (Handwerksrolle). (HwO § 1 (Handwerksrolle))
• A merchant (Kaufmann) must register the business name, place and business address in the commercial register. (HGB § 29 (Anmeldung der Firma))

What it costs

• Trade notification: the municipality's trade office charges the fee; there is no national amount. (Gewerbeamt)
• Only if you register in the commercial register: a court fee of €105 for a sole trader's first entry, plus the notary's fee for the certified application (transaction value €30,000). (HRegGebV, Anlage (Gebührenverzeichnis); HGB § 12 (Anmeldungen zum Handelsregister); GNotKG § 105 (Geschäftswert von Registeranmeldungen))
• Only for: Trade or services (Gewerbe). Chamber of commerce (IHK) membership follows from being liable to trade tax; each IHK sets its own fees. People not in the commercial register pay nothing while their trade income does not exceed €5,200. Founders with no business, farming or professional income in the five years before (and no more than a tenth of a company) pay neither base fee nor levy in the opening year and the next, and no levy in years three and four, if trade income does not exceed €25,000. A chamber may lower these limits under conditions set by law. (IHKG § 2 (Kammerzugehörigkeit); IHKG § 3 (Beiträge))
• Only for: Craft trade (Handwerk). Craft businesses belong to the chamber of crafts (Handwerkskammer); each chamber sets its fees with the approval of the federal state. (HwO § 90 (Handwerkskammer, Zugehörigkeit); HwO § 113 (Beiträge zur Handwerkskammer))

Taxes and contributions

• Profit is subject to income tax (Einkommensteuer) on the § 32a EStG tariff; in 2026 the first €12,348 is tax-free (Grundfreibetrag). Solidarity surcharge (Solidaritätszuschlag): 5.5 % of the income tax as computed under § 3 SolZG, charged only when that tax exceeds €20,350 (€40,700 for joint assessment); just above that it is capped at 11.9 % of the excess. (EStG § 32a (Einkommensteuertarif); SolZG § 3 (Bemessungsgrundlage, Freigrenze); SolZG § 4 (Zuschlagsatz))
• Trade tax (Gewerbesteuer): trade income rounded down to whole €100, minus a €24,500 allowance, times the 3.5 % base rate, times the municipality's multiplier (Hebesatz). In return, income tax falls by four times the base amount, at most by the trade tax actually payable. (GewStG § 11 (Steuermesszahl, Freibetrag); GewStG § 16 (Hebesatz); EStG § 35 (Steuerermäßigung bei Einkünften aus Gewerbebetrieb))
• VAT (Umsatzsteuer): standard rate 19 %, reduced rate 7 % for the supplies the law lists. (UStG § 12 (Steuersätze))
• VAT pre-returns (Voranmeldungen) are filed online by the 10th day after the period ends. The period is the calendar quarter, or the month if the previous year's VAT exceeded €9,000. A business that starts in 2026 goes by its expected VAT for the current year instead (rule for 2021 to 2026). (UStG § 18 (Besteuerungsverfahren, Voranmeldungen))
• Small business scheme (Kleinunternehmerregelung): sales are VAT-exempt if total turnover did not exceed €25,000 in the previous year and does not exceed €100,000 in the current year. There are then no VAT pre-returns or annual VAT return to file, unless the tax office asks for one. (UStG § 19 (Kleinunternehmer))
• In the year the business starts, only that year's turnover counts and the limit is €25,000, not €100,000. This comes from the Finance Ministry's (BMF) guidance letter, not from the statute. (BMF-Schreiben vom 18. März 2025: Sonderregelung für Kleinunternehmer (§ 19 UStG))
• You can waive the scheme by an irrevocable statement to the tax office (Finanzamt), by the end of February of the second following year; the waiver binds you for at least five calendar years. Invoices under the scheme must state that the § 19 UStG exemption applies. (UStG § 19 (Kleinunternehmer); UStDV § 34a (Rechnungen der Kleinunternehmer))
• Health insurance is compulsory: anyone living in Germany must be insured in the statutory scheme or privately with a minimum level of cover. People whose main work is self-employment are not compulsorily insured as employees. Only those who qualify can join the statutory scheme voluntarily, mainly people insured in it long enough before (24 months in the last five years, or twelve months immediately before); joining must be reported to the health insurance fund within three months. (VVG § 193 (Pflicht zur Krankenversicherung); SGB V § 5 (Versicherungspflicht); SGB V § 9 (freiwillige Versicherung))
• Statutory health insurance (voluntary member): 14.6 % with sick pay (Krankengeld), which self-employed people choose by declaration (Wahlerklärung), otherwise 14.0 %, plus your own fund's additional rate (2026 average 2.9 %). Self-employed people pay the whole contribution themselves, on their income, on at least €1,318.33 and at most €5,812.50 a month. At the average additional rate, the Federal Ministry of Health puts this for 2026 at a minimum of €222.80 without and €230.71 with sick pay, and a maximum of €982.31 and €1,017.19 a month. (SGB V § 241 (allgemeiner Beitragssatz); SGB V § 243 (ermäßigter Beitragssatz); SGB V § 44 (Krankengeld, Wahlerklärung); SGB V § 250 (Tragung der Beiträge durch das Mitglied); SGB V § 240 (Beitragsbemessung freiwilliger Mitglieder); Beiträge zur gesetzlichen Krankenversicherung: Beitragssätze und Beitragsbemessungsgrenzen 2026)
• The contribution is set provisionally from your latest income tax assessment, or from your documented expected income when you start, and set finally once that year's tax assessment is in. (SGB V § 240 (Beitragsbemessung freiwilliger Mitglieder))
• Long-term care insurance (Pflegeversicherung): 3.6 %, or 4.2 % for childless members from age 23; parents pay a quarter of a percentage point less for each child from the second to the fifth while under 25. Voluntary statutory members pay it all themselves; the ceiling is the same as for health insurance (€69,750 a year in 2026). (Pflegeversicherungsbeitragssatzanpassungsverordnung 2025; SGB XI § 55 (Beitragssatz, Beitragsbemessungsgrenze); SGB XI § 59 (Beitragstragung); Sozialversicherungsrechengrößen-Verordnung 2026; Werte der Rentenversicherung)
• Pension insurance (Rentenversicherung): self-employed people are compulsorily insured only in certain cases, among them teachers, educators and carers with no insured employees, midwives, artists and publicists (through the Künstlersozialkasse), craftspeople entered in the Handwerksrolle, and anyone without such employees who works long-term and essentially for one client. They must register with the pension insurance body within three months. (SGB VI § 2 (Versicherungspflicht selbständig Tätiger); SGB VI § 190a (Meldepflicht selbständig Tätiger))
• Compulsorily insured self-employed people pay 18.6 % themselves. Without proof of income the standard contribution (Regelbeitrag) applies, €735.63 a month in 2026; until the end of the third calendar year after the year you start it is half that (€367.82), or the full amount on application. With proof, actual income counts: in 2026 at least €112.16 and at most €1,571.70 a month. (SGB VI § 165 (beitragspflichtige Einnahmen selbständig Tätiger); SGB VI § 169 (Beitragstragung); Werte der Rentenversicherung)
• If you are insured only because you work for a single client, you are exempted on application for three years after first starting such work; the exemption is backdated if you apply within three months. (SGB VI § 6 (Befreiung von der Versicherungspflicht))
• Only for: Craft trade (Handwerk). Craftspeople are exempted on application once at least 18 years of compulsory contributions have been paid for them. (SGB VI § 6 (Befreiung von der Versicherungspflicht))
• Only for: Liberal profession (freier Beruf). Artists and publicists (people who create, perform or teach music, performing or visual art, or work as writers, journalists or similar) are insured for pension, health and long-term care through the Künstlersozialkasse if they work at it for a living, not just temporarily, and employ at most one employee. They pay about half the contributions; the other half comes from a levy on those who use their work and a federal subsidy. Anyone expecting to earn at most €3,900 a year from it is exempt, except in the first three years. (KSVG § 1 (Versicherungspflicht); KSVG § 2 (Künstler und Publizisten); KSVG § 3 (Versicherungsfreiheit); KSVG § 14 (Aufbringung der Mittel))
• Unemployment insurance on application: possible with at least 15 hours a week, if, among other conditions, you were compulsorily insured for at least twelve months in the 30 months before starting, or were entitled to a wage-replacement benefit under SGB III immediately before. Apply within three months of starting; you can cancel only after five years. The contribution is 2.6 % of the monthly reference amount (Bezugsgröße, €3,955 in 2026), or of half of it until the end of the year after you start. (SGB III § 28a (Versicherungspflichtverhältnis auf Antrag); SGB III § 341 (Beitragssatz); SGB III § 345b (beitragspflichtige Einnahmen bei Antragspflichtversicherung); Sozialversicherungsrechengrößen-Verordnung 2026)

Bookkeeping

• Merchants must keep books and draw up a balance sheet and profit and loss account. Sole traders are exempt if, on two consecutive balance sheet dates, they have at most €800,000 revenue and €80,000 net income; a new business qualifies on its first balance sheet date. (HGB § 238 (Buchführungspflicht); HGB § 242 (Pflicht zur Aufstellung des Jahresabschlusses); HGB § 241a (Befreiung von der Buchführungspflicht))
• For tax, bookkeeping is required once the tax office finds turnover above €800,000 or profit above €80,000, from the financial year after it tells you. Anyone not required to keep books may work out profit as receipts minus expenses (Einnahmen-Überschuss-Rechnung). (AO § 141 (Buchführungspflicht bestimmter Steuerpflichtiger); EStG § 4 (Gewinnbegriff, Einnahmen-Überschuss-Rechnung))
• E-invoices (E-Rechnung): invoices between businesses in Germany are electronic invoices. For supplies up to 31.12.2026 everyone may still send paper or other invoices; for supplies in 2027 only businesses whose turnover in the previous year was at most €800,000. Every business in Germany must be able to receive e-invoices, small businesses included, though these may always issue other invoices themselves. (UStG § 14 (Ausstellung von Rechnungen, E-Rechnung); UStG § 27 Abs. 38 (Übergangsregeln E-Rechnung); BMF-Schreiben vom 15. Oktober 2025: Einführung der obligatorischen elektronischen Rechnung; UStDV § 34a (Rechnungen der Kleinunternehmer))

Steps

1. Only for: Craft trade (Handwerk). Licensed craft: get entered in the craft register (Handwerksrolle) before you start. (HwO § 1 (Handwerksrolle))
2. Notify the municipality's trade office (Gewerbeamt), at the same time as you start. The office passes the data on to, among others, the chamber (IHK or Handwerkskammer) and the tax office. (GewO § 14 (Anzeigepflicht))
3. Within one month of starting, send the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung) to the tax office online through ELSTER. This is how you get your tax number (Steuernummer). (AO § 138 (Anzeigen über die Erwerbstätigkeit); Unternehmensgründung: Fragebogen zur steuerlichen Erfassung)
4. Only if you are a merchant or register voluntarily: apply to the commercial register, electronically and certified by a notary. (HGB § 29 (Anmeldung der Firma); HGB § 12 (Anmeldungen zum Handelsregister))
5. Sort out health insurance: report voluntary membership to your health insurance fund within three months, or insure privately. (SGB V § 9 (freiwillige Versicherung); VVG § 193 (Pflicht zur Krankenversicherung))
6. If you are compulsorily pension-insured: register with the pension insurance body within three months; artists and publicists register with the Künstlersozialkasse (forms by post only). (SGB VI § 190a (Meldepflicht selbständig Tätiger); KSVG § 11 (Meldepflicht); Anmeldung für Künstler und Publizisten)
7. Optional: apply for unemployment insurance within three months of starting. (SGB III § 28a (Versicherungspflichtverhältnis auf Antrag))