Individuals who want to engage in business activities do so by using the corporate form of a sole proprietorship (one single natural person operates the business in his/her own name and under his/her own accountability) 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 of self-employed persons (Sozialversicherung der Selbstständigen) if the marginal earnings threshold is exceeded. See social insurance
Good to know
Sole traders who are insured for longer than 12 months under the mandatory insurance of self-employed persons, can no longer use the smallest 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 responsible tax office within one month after having begun activities. Sole traders who do not work as artists but want to generate commercial earnings (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, it is mandatory to join the chamber of commerce and trade (one-time registration fee, annual membership dues).
An artist within the meaning of the Artists' Social Insurance Fund Act (Künstler-Sozialversicherungsfondsgesetz) is anyone who creates works of art in the fields of fine arts, performing arts, music, literature, cinematography or in one of the contemporary manifestations of the fields of art within the framework of an artistic activity.
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 of self-employed persons (SVS). Persons whose earnings from self-employed work in a given calendar year is not exceeding EUR 6,010.92 (valid 2023) are freed from mandatory insurance due to their low self-employed income (profit).
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 cases, you must 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