Founding a company in Austria – what is the best legal form for a new company? Stefan Zangerle 11. January 2022

Founding a company in Austria – what is the best legal form for a new company?

Founding a company in Austria - what is the best legal form for a new company?
Founding a company in Austria - what is the best legal form for a new company?
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Establishing a business in Austria needs to be carefully considered. Choosing the right legal form has many implications and determines the rights and obligations of the founder. While the most popular legal form for startups in Austria is the GmbH, the sole proprietorship is the most common choice for all other entrepreneurs. You can find out why this is the case and what is the best legal form for a start-up in this article.

Legal forms overview

There are several legal forms in Austria. You let yourself in partnerships and corporations separate and differ above all in the liability, but also in the tax burdens and the accruing resp. current costs. First of all, a brief overview of all legal forms that are made up of make sense from my point of view for budding entrepreneurs:

Partnerships

  • Sole proprietorship (eU)
  • Open Society (OG)
  • Limited partnership (KG)

Corporations

  • Limited Liability Company (GmbH)

What the choice depends on :

The choice of the legal form depends on various factors and is always left to the founder. However, you should consider in advance whether the company should be founded alone or with other people. In addition, it must be determined how liability should be regulated: in the case of corporations, founders are only liable with their contribution, whereas in the case of partnerships the liability covers the entire private assets of the founder.

Comparison of legal forms

one-man business

  • Number of people: 1
  • Liability: full and unlimited (with the Private wealth)
  • Start-up costs: approx. 100 €
  • Profit taxation: EKSt – Income tax return
  • Commercial register: can be registered (eU) must but not to be made
  • Accounting obligation: only one after the other the following exceeding of the sales limit of EUR 700,000 or more Exceeding 1,000,000 euros per year
  • Minimum capital: freely selectable

The sole proprietorship is the most popular legal form for domestic entrepreneurs. The reasons are obvious. It is inexpensive, quick and relatively easy to set up – it is now even possible online. No minimum capital has to be paid into the company for this, the sole proprietor can make decisions on his own and there are no compliance costs, as no annual financial statements have to be drawn up.

1st floor

  • Number of people: several (at least 2)
  • Liability: full and unlimited (with private assets)
  • Start-up costs: approx. € 300
  • Profit taxation: EKSt – income tax return
  • Commercial register: yes
  • Accounting obligation: only after successively exceeding the sales limit of 700,000 euros or one-time exceeding of 1,000,000 euros per year
  • Minimum capital: freely selectable

At first glance, the OG does not differ that much from the sole proprietorship. This legal form can also be set up quickly and inexpensively and no minimum capital has to be paid in. However, it must be entered in the commercial register and the shareholders of the OG should draw up a partnership agreement that regulates the ownership structure.

KG

  • Number of people: several (min 2)
  • Liability: General partner: full and unlimited (with private assets); Limited partner: limited to contribution
  • Start-up costs: approx. € 300
  • Profit taxation: EKSt – Income tax return
  • Commercial register: yes
  • Accounting obligation: only one after the other the following exceeding of the sales limit of EUR 700,000 or more Exceeding 1,000,000 euros per year
  • Minimum capital: freely selectable
  • Other: Limited partner is not allowed Be a manager

The KG is an interesting legal form. There is one here Person with full and unlimited liability (general partner) and at least one Person who is only liable with the capital brought in (limited partner). The KG is particularly suitable for companies in which the limited partner is not in the company cooperates and acts more as an investor. The full liability must be with the KG but not necessarily a natural person. This creates the Possibility of the GmbH & Co KG – in which the GmbH as a company fully and has unlimited liability. From the point of view of liability, this brings some advantages – brings but also increased start-up costs with it.

GmbH

  • Number of people: single or multiple
  • Liability: limited to deposit
  • Start-up costs: between 100 € (one-man GmbH) and approx. € 2,500 (several shareholders)
  • Profit taxation: KÖSt & KESt
  • Commercial register: yes
  • Accounting obligation: yes
  • Minimum capital: € 35,000 (half of which in bar); for a GmbH with privilege to set up: 10,000 € (half of which in cash)

The GmbH is the most popular legal form for Austrian startups. This is mainly due to the fact that the liability is limited to the deposit and thus the risk for the founders is lower. In addition, as a corporation, the GmbH is ideally suited to accepting additional shareholders (such as investors or capital providers). The profit, provided it remains in the company, is taxed at a GmbH with 25% corporation tax. In the event of a profit distribution, however, another 27.5% capital gains tax will be withheld by the tax office. Regardless of the turnover, the accounting and bookkeeping obligation applies to the GmbH. Since the bookkeeping should be carried out in a tax consultancy and annual financial statements have to be drawn up, compliance costs of several thousand euros arise annually. Of course you can also do the bookkeeping yourself, but you have to have the necessary knowledge and shouldn’t underestimate the time required.

What is the best legal form for a start-up?

There is no general answer to that. However, I think that the sole proprietorship is perfect for everyone who wants to become self-employed on the side, who want to turn their hobby into a profession and who want to set up and manage the company on their own. The OG is particularly suitable for smaller companies where several partners are involved. The KG is also an interesting legal form for companies that have an investor, for example, but where the founder himself would like to have full control over his company. And the GmbH? It is the perfect legal form for all startups, all companies aiming for rapid growth. Higher formation costs and ongoing compliance are to be expected, but the limited liability creates a lower risk for the founders and the corporation is preferred by investors.

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