Germany: Einzelunternehmen next to day job, questions about liability
I'm currently evaluating whether I can set up a small company (in Germany) to monetise some aspects of a popular SaaS page I'm running (Alexa Top 50k). I don't think that it will generate a lot of revenue initially, but I want to be ready for the time when it starts doing.
Some of the revenue might come from "ads" (sponsorship logos, job postings, referrals) while the rest of revenue will likely be generated through monthly "pro" subscriptions to the service. The target market is international, though most customers would be US-based F500 the way I see it.
While the service is very popular, I still don't have a good handle on whether / how I can monetise it. Hence I don't want to spend a great amount of resources initially to incorporate. My plan was to set up an Einzelunternehmen, get a subscription to something like ChargeBee to do international VAT-compliant invoicing, get a lawyer to look over terms-of-service and GDPR and IP things and then start charging people, basically. Am I missing something vital? How would I handle transfer of the existing IP / product into a newly formed corporation?
One thing I still haven't completely figured out yet is the difference in liability between a UG (Haftungsbeschränkt) and Einzelunternehmen in Germany. As an Einzelunternehmen, you (as the sole proprietor) are liable with your private assets for any outstanding bills etc, I get that part. But is there anything else you're on the hook for? Am I'm missing something?
Let's say I started a SaaS company as an Einzelunternehmen. What's the risk for me personally since I can always spin up and immediately cancel cloud resources with hourly billing as customers come and go?
I know these are a lot of conflated questions, but I haven't found a good definitive resource yet which covers starting a SaaS company in Germany which targets international customers. If you need to know more details please PM me, hesitant to post the URL at this point in time.
Why do you think you're only liable for outstanding bills as Einzelunternehmen? AFAIK you're on the hook for everything. If you get sued for any reason for example.
I know your problem. I don't have a business yet that's generating revenue (except for my freelance work) but I knew I wanted to do my own projects and build a business. I wanted to have limited liability and this is why I chose to form a UG.
If you need any help feel free to ask. This is a really painful process in Germany. Are you German by the way?
Let me put it another way that explains what I don't understand: Am I really more personally liable with an Einzelunternehmen if you leave standard unpaid bills aside. If my corporation is sued because I did something shady or because of a GPDR violation or patent infringement, would having a UG/GmbH really protect me if I'm the only employee and CEO? What does the Liability Limitation really look like, in practice?
And yes, I am German, and the reason I'm trying to find a way around UG/GmbH is the bookkeeping requirements and fees. Any good resources would be welcome apart from the standard sites that explain the different corporations in high-level terms for the umpteenth time.
Yeah, it's difficult to find good resources.
In certain cases, you're also liable when you have a UG. That's right. But I guess it depends on you doing something on purpose or "fahrlässig". There may be a lot of different scenarios were somebody would sue you. Another reason would be if your product causes some damage. For example, you provide a DB service and it goes down. A shop that is using your service cannot sell for a day.
I'm not a lawyer in the end. So if you really want to know if you would profit from limited liability a legal consultant may help you better. But I think there are so many possible ways we wouldn't think of that could damage you. I would never feel comfortable to no limited liability when running a software business.
Hello John,
with the UG/GmbH you are protected, as long as yo do nothing that is "grob fahrlässig" or "vorsätzlich". Which is about 99% of the stuff you do if you act in the best interest of the company.
The bookkeeping isn't that much more. It is just different. Also you should have a "Steuerberater" anyway to assist you at least at the end of the year. This is also the way I do it. I do the bookeeping myself and let the Steuerberater handle everything related to the Jahresabschluss and the like.
Unless you do something horribly wrong, it's very doubtful that server bills will be a significant risk. The real question is liability to your customers in general.
Are you giving medical or legal advice? Are you sharing information that people could somehow use to hurt themselves and have a credible lawsuit against you? These are the kinds of questions I'd be thinking about.
Hi,
As Johannes already said, as Einzelunternehmer you are liable with your whole private assets. If you get sued and own a house, you could end up losing it.
The better way is to have a GmbH or a UG (haftungsbeschränkt). Then you are only liable if you do something grossly negligent or do something stupid on purpose. The difference between a UG (haftungsbeschränkt) and a GmbH is the starting capital. You can theoretically start a UG (haftungsbeschränkt) with 1€. Whereas you need 25000€ for a GmbH. The GmbH is often better if you work with other businesses, as it implies more trust and shows that you as a company can take a hit and are still going.
If you want to save a few percentages on taxes, you could even go for a "GmbH & CoKG".
Hello Stefan,
as I said to Johannes, I'm aware of the well-known differences between the UG/GmbH/Einzelunternehmen. What I'd like to know is what you'd be liable for in practice, especially if it comes to a SaaS. Give me an example of where a SaaS would be sued for damages that does not fall back to me (as the CEO/sole programmer) as negligence. For example: If I had a bug in my software that exposed customer data and get sued by my customers as a result, would having a UG/GmbH really protect me from personal liability in this case?
You would be protected by a UG /GmbH for bugs that expose customer data, as long as you did not include them on purpose. Even if you did put them in on purpose, you are not liable until they prove the opposite.
Thanks, that's the exact answer I was looking for. With that in mind a UG really looks like the go-to option.
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The simplest way to handle VAT is to use paddle or fastspring. They'll act as a reseller and they have to file VAT. You as a seller to paddle or fastspring only need to handle the payments between them and you, not to the end customers.
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Unfortunately, German law is so different from UK law, that your advice is not to the point.
Having a corporation in Germany has different obligations than in the UK.
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Sure, in the UK, when you run a Ltd it's quite straight forward from an accounting point of view.
In Germany, for a GmbH, accounting is more involved and needs to take into account enumeration requirements for the owner/director. This has quite some tax implications. Also healthcare insurance requirements are different.
The registration of the business is more involved.
However, as a German, you can register a UK Ltd easily (at least before Brexit). :-)
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