Private trader is a good choice for company form if you are running a small-scale business. Starting full-time entrepreneurship as a private trader is a good choice for most small business owners, provided that they are not planning to grow their business in the next few years.
Private trader as a company form
A private trader or sole trader signs agreements under their own name and is personally liable for any debts. This means that, as a private trader, the risks pertaining to your business are simultaneously personal risks.
The personal financial risks facing a private trader are much bigger than those facing the founder of a limited liability company. For this reason, it is wise to make sure that the risks do not become too high. If the business requires a large amount of initial capital and the sums involved in the operations are significant, the entrepreneur should consider founding a limited liability company.
Private trader is probably the wisest choice of company form if the new entrepreneur is only planning to employ themself and the forecast annual revenue is below EUR 30,000.
Easily file your start-up notification online
A separate memorandum of association is not required to become a private trader. All it takes is a start-up notification. As a private trader, you should register in the Trade Register. Even though a start-up notification is not necessary in all situations, it is often advisable.
Filing a start-up notification is easy; you can do it easily online using the Business Information System service. You can also file the start-up notification using a traditional paper form. The start-up notification is subject to a charge. Filing a start-up notification to the Trade Register also protects your company name or business name. The Trade Register will also check if there are any obstacles to using the name.
It is important to specify the company's line of business in the notification. The line of business defines the entrepreneur’s business activities, that is, the sector in which the company operates or plans to operate.
With the notification of establishment, the company will also receive a Business ID. The Business ID identifies the company, and it is used as a customer code in the bank’s systems, for example. After filing the start-up notification, you can also apply for a business mortgage as collateral for a loan.
Once you are registered as a private trader in the Trade Register, you are officially an entrepreneur. It is good to keep in mind that this may affect, for instance, your unemployment benefit in case there is not enough work to keep you going. Of course, the same applies to other company forms.
When should you change from a private trader to a limited liability company?