Individuals who want to engage in business activities do so under using the corporate form of a sole proprietorship (one single natural person operates the business in his/her own name and for his/her own account) or for self-employed activities (artistic activities and others) as so-called new self-employed. The rules are more or less identical, there are however some differences in tax and social insurance law.
Good to know
Sole traders may, when performing a contract, rely on the services of employees (via an employment contract) or on self-employed subcontractors, unless the contract requires performance in person.
At a glance
- are solely responsible for raising the required capital
- bear the full risk of possible losses
- are liable without limit with their private assets
- foundation is free of charge, no formation act is required, unless a trade licence is required
- the trader has full discretion to act
- no limitation on the withdrawal of funds
- mandatory insurance with the social insurance for commerce and trade (Sozialversicherung der Gewerblichen Wirtschaft) if the marginal earnings threshold is exceeded. Link social insurance
Good to know
Sole traders who are insured for longer than 12 months under the mandatory insurance for commerce and trade, can no longer use the small business regime with an actual income below the marginal earnings threshold. However, mandatory insurance remains. This does not apply to the new self-employed. They may apply for a release from mandatory insurance.
Foundation of a sole proprietorship
A sole proprietorship generally begins as soon as activities are taken up. There is no need for a formal foundation act, and therefore no formation costs are involved. You need to notify the competent tax office within one month after having taken up activities. Sole traders who do not work as artists but want to generate commercial earnings (culture managers, curators, concert agencies, music productions, etc.) must apply for a trade licence (subject to fees) if they fall under the Trade Code (Gewerbeordnung). Once you have a trade licence, you must mandatorily become a member of the chamber of commerce and trade (one-time registration fee, annual membership dues).
An artist within the meaning of the Artists’ Social Insurance Law (Künstlersozial-versicherungsgesetz KSVG) is any person who creates, performs or teaches music, performing or fine arts.
A trade licence is not required.
Registration in the companies register
Any natural person who operates a company may have it registered in the company register on a voluntary basis at any time. Registration in the companies register becomes mandatory only when the company becomes subject to accounting and disclosure requirements (= maintaining an accrual-based system of accounting, preparation of annual financial statements with a balance sheet and a profit and loss statement).
When being recorded in the companies register, the company name (name under which all business is carried out) must be followed by the addendum as to the corporate form “registered business” (“eingetragene Unternehmerin” / “eingetragener Unternehmer” / “e.U.”).
Sole traders are insured on a mandatory basis with the social insurance for commerce and trade. Persons whose earnings from self-employed work in a given calendar year is estimated not to exceed EUR 4,871.76 (valid 2015) are not subject to insurance due to their small income.
Sole traders are subject to income tax and to VAT.
Accounts / Financial statements
If the annual income or expenditure of a sole trader does not exceed EUR 1 million, it is sufficient to keep a cash-based system of accounting. Sole traders who generate a turnover of more than EUR 700,000 in two successive financial years, or more than EUR 1 million in one financial year, are subject to accounting and disclosure requirements (accrual-based system of accounting, preparation of annual financial statements with a balance sheet and a profit and loss statement).
A sole proprietorship is dissolved by discontinuance of its operations. There is no formal act necessary, unless the company is registered in the companies register. In such case, you need to file an application for deletion after all outstanding business has been settled.
Austrian Companies Code (Unternehmensgesetzbuch) / in force since 01/01/2007
More information at www.usp.gv.at