There are a lot of reasons not to form a sole proprietorship. You have personal liability, for one.

A GmbH is not like an LLC, it's more like a Delaware C-Corp. People forget this all the time.

Why Delaware?

Delaware is a popular state for incorporation in the United States due to its favorable corporate laws and established legal precedents. A C-Corporation (C-Corp) is a type of business structure that is a separate legal entity from its owners (shareholders). Shareholders have limited liability, and the corporation itself pays taxes on its profits. This is different from an LLC, where the owners report the profits and losses on their individual tax returns.

You can also create an UG (haftungsbeschränkt) which is basically a GmbH with the 25k€ requirement removed. The only drawback is that this can make the operation look less trustworthy, depending on whom you are dealing with.

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.

Presumably the UG is still preferable to being a sole trader when dealing with much larger customers. Is that right? Or does providing services in your own name come across as more trustworthy to those parties?

I'm skeptical that an at most 25k€ recovery would alleviate weariness of a big software contract without additional due diligence.

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.

Can confirm, did the form online in Berlin, super easy and quick.