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If you have a brilliant business idea and entrepreneurial spirit is running though your veins, you are probably already considering starting your own business. But where do you begin? How do you choose the best way of setting up your business and what possibilities are there?
There is no doubt, the easiest way to establish your business is to set it up as a “sole proprietor” – just form your business and operate it as a sole owner. But do not forget: you bear full personal liability for your company. So, if you are risk loving enough and wish to operate a business covered by the Austrian Trade and Industry Regulation Act (GewO) (e.g. sales commercial sector trade, industry) all you have to do is get a trade licence. Also, keep in mind that a notification to the Austrian tax office concerning your entrepreneurial activity is necessary.
A registration with the Austrian Commercial Register (Firmenbuch), on the other hand, is only legally required if during two successive fiscal years the sole proprietorship generated more than 700.000 euros of turnover per fiscal year. If this does not apply to you, you can still voluntarily register with the Commercial Register.
Andreas Stoiber runs the CityTax consulting office in Vienna together with Gernot Jakobs, Photo credit: CityTax
Another tricky issue is how to determine your income and how much tax you have to pay. To get more information on this issue follow this link.
If you have a business idea that you want to realise with partners, then don’t hesitate and take them on board. The alternative to starting a business as a sole proprietor is the General partnership (OG Offene Gesellschaft) or the Limited partnership (KG Kommandit Gesellschaft).
To form a partnership entity requires, as you might have guessed, at least two partners (physical persons or legal entities). While in the OG each partner bears unlimited personal liability for the partnership’s obligations, this is not the case in a KG. Here, it’s only required that there is at least one “general partner” who is completely liable; the remaining “limited partners”, on the other hand, have only limited liability.
The partnership may be set up without any initial capital and comes to a legal existence with the entrance in the Commercial Register.
The profits of partnerships are not taxed on the level of the entity, which means that the income, the profit or the loss, is distributed to the partners directly in proportion to their partnership share of a company (read more here).
The most common way to form a business is an incorporated entity with own legal personality. It may be incorporated by one or several shareholders, who generally do not bear personal liability to the GmbH’s creditors. But to start your business as a GmbH you first need a nominal capital of 35.000 euros and at least half of it has to be fully paid in. However, to make things a bit easier for founders or those who wish to become one, since March 2014 there is a cheaper possibility of setting up a GmbH. Now, only a nominal capital of 10.000 euros (also at least half of it has to be paid in) is required to start your business as entity with own legal personality.
Having scraped together the start capital, the articles of association of a GmbH must be prepared in the form of an Austrian notarial deed. Moreover, in order to valid the GmbH’s existence, it must be registered with the Commercial Register. The managing directors must then report the GmbH to the commercial court with a notification, which requires the notarised signatures of all managing directors.
The current taxation of a GmbH is 25 per cent corporation tax on profits. In case of losses there is a minimum tax of 1.750 euros which is credited against corporation tax in subsequent years (read more here).
Finding the best solution for your own business can be a tough task. But the more you know about your options and possibilities, the easier it becomes to decide for a model that suits you and your new endeavour best."
If you are planning to start a banking business, a private equity fund or insurance business and want to compete with the big players on the market, you have to incorporate an AG.
In contrast to the above mentioned, the AG has an independent legal personality and possesses rights and obligations of its own. The shareholders, generally, bear no personal liability for the AG’s obligations. To form an AG you need nominal capital of 70.000 euros and at least one quarter of the equity capital must be fully paid in.
Moreover, you can’t start an AG by yourself or with only one partner but you need at least four persons: one member of the management board plus at least three supervisory board members. Furthermore, the articles of association must be prepared in the form of an Austrian notarial deed. And once again you have to valid the AG’s existence by registering with the Commercial Register. The managing directors must report the AG to the commercial court with a notification, which requires the notarised signatures of all management board members.
The current taxation of AG is 25 per cent corporation tax on its profits. In case of losses there is a minimum tax of 3.500 euros which is credited against corporation tax in subsequent years.
The Austrian company law provides also other corporate forms such as the civil law partnership (Gesellschaft bürgerlichen Rechts), silent partnership and co- operatives (Genossenschaften), the legal association (Verein). To find out more about these exotic types of business funding follow this link.
Finding the best solution for your own business can be a tough task. But the more you know about your options and possibilities, the easier it becomes to decide for a model that suits you and your new endeavour best. CityTax is offering free initial consulting meetings that shed light on the subject of business foundation.
Andreas Stoiber is a 37 year old tax consultant and runs a consultant office in Vienna together with managing partner Gernot Jakobs. He has a degree in business economics and has accompanied many successful startups in Austria on their way. Besides his work in the consultant office, Stoiber is also a vintner and enjoys inviting clients to tastings.
In partnership with Vienna CityTax
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