When my wife started her current business as a consultant, she was living off her savings from teaching high school. If you think every entrepreneur has €25k of capital, you need to reevaluate what your country thinks of entrepreneurship.
What would you need to mess up to be liable for huge sums as a single consultant company?
Suppose you find out your cvs editor infringes on a patent and you’re liable. Suppose some business suffers data loss and sues. These things do happen in Europe too.
Also, it’s just a matter of professionalism. A sole proprietor isn’t very professional and many medium-size businesses won’t do business with sole proprietorships.
Imagine if you’re a consultant and for whatever reason, you get sued or worse. That’s what the LLC is for.
Germany insolvency can take a decade, make getting a flat or even keeping your bank account a challenge and rarely results in debt relief to boot [1].
[1] http://www.privatinsolvenz-hilfe.org/en/german-bankruptcy-la...
You can get the simple company type (disregarded entity) and all the advantages of limited liability with an LLC.
If you are selling Hot Dogs, nobody will bat an eye if it’s a UG, but if you apply for a big software contract, people might be wary.
It seems to me that a sole proprietorship would do more to protect against counterparty risk, i.e. more of the person's assets would be available to satisfy the debt.
My guess is that counterparties prefer a limited liability partner to arguably insulate themselves from employment liabilities.
I am generally suspicious of rhetoric like "you're a little well off, so we can heap arbitrary amounts of bullshit on you and you shouldn't complain".
They can open an Einzelunternehmen (sole proprietorship) instead. You shouldn't (and cannot) go all the way to the complexities of a GmbH (LLC) if your company is that tiny.
> But also many ordinary inexperienced people can have that amount of money up front, yet still be deterred by the complexity of a 6 week long incorporation process as described in this article.
Back to my point then. If they're not ready to put up with okay-ish bureaucratic friction in the founding phase, they're not ready to open a company. Because if you think opening the company is hard, wait until payroll or tax season is upon you.
> I am generally suspicious of rhetoric like "you're a little well off, so we can heap arbitrary amounts of bullshit on you and you shouldn't complain".
You're completely mischaracterizing what I said. Don't do that.
Sole proprietorship doesn't have liability protection. That's not a small thing.
>You shouldn't (and cannot) go all the way to the complexities of a GmbH (LLC) if your company is that tiny.
"[Thing] is too complex, don't bother with it" is not an argument against making [thing] less complex. It's actually just a restatement of the problem!
Other countries make it easy to set up a limited company. UK, US, Singapore, they're all just a token fee and a handful of forms. I see no reason for Germany to make it so difficult as described in the article.
A lot of successful companies were started by broke college grads out of their dorms; they would never have gotten off the ground if they had to scrounge together the equivalent 25k euros before even getting started. Hell, I don't have a spare 25k lying around and I've been working full time for 4 years.
With this mentality, it's actually a miracle a German startup scene exists at all.
The _last thing_ a founder wants is to wade through useless bureaucracy when there's a product to push and Vacs to talk to.
But Germany never really was a founder's country, and much more ruled by big conglomerates it seems or small family business who did non-innovative things (the bakery at the corner - necessary&nice, but not innovative), than startup culture.