Legal structures for traders: Einzelunternehmen versus UG or GmbH, the Trading-GmbH idea, costs and when it makes sense (general orientation)

What you will learn

• The practical differences between an Einzelunternehmen, a UG (haftungsbeschränkt) and a GmbH for a trader.
• How a corporation's profit is taxed in Germany (Körperschaftsteuer, Solidaritätszuschlag, Gewerbesteuer) and what happens on distribution.
• What the Trading-GmbH idea is, which income it helps and why prop-firm payouts are not that income.
• A rule of thumb for when the corporate form is worth its fixed costs.

Explanation

General orientation for Germany as of 2026; the decision needs a Steuerberater. A law passed in July 2025 lowers the Körperschaftsteuer in steps from 15 percent to 10 percent between 2028 and 2032, so recalculate with the rate of the year you plan for.

Einzelunternehmen

The Einzelunternehmen (sole proprietorship) exists automatically after a Gewerbeanmeldung: no minimum capital, no notary, the EÜR below the lesson 10 thresholds, and profit taxed as personal income at the progressive rate (up to 42 percent, 45 percent at the top, plus Solidaritätszuschlag where it applies, plus largely credited Gewerbesteuer). Liability is unlimited, which matters little when the main risk is a lost fee, but matters if you later manage other people's money.

UG (haftungsbeschränkt) and GmbH

Both are limited-liability corporations registered in the Handelsregister via a notary. The GmbH needs share capital of €25,000, at least €12,500 paid in before registration. The UG (haftungsbeschränkt) can start with €1 but must put 25 percent of each year's profit into a reserve until €25,000 is reached. Both keep double-entry books, prepare and publish annual accounts and pay IHK fees; recurring costs for a small company are a four-figure euro amount per year, plus formation costs. The owner is usually the managing director (Geschäftsführer); a salary is a company cost and personal income.

How a corporation's profit is taxed

A corporation pays Körperschaftsteuer of 15 percent (2026) plus 5.5 percent Solidaritätszuschlag on that tax, and Gewerbesteuer of 3.5 percent × Hebesatz with no €24,500 allowance: about 29.8 percent at a 400 percent Hebesatz. A distribution adds Abgeltungsteuer plus Solidaritätszuschlag (26.375 percent) on the dividend, so fully distributed profit carries around 48 percent, more than the top personal rate. The form pays only for profit that stays and compounds inside the company.

The Trading-GmbH idea

The "Trading-GmbH" idea rests on § 8b KStG: gains from selling shares held by a corporation are 95 percent tax-free, an effective rate of about 1.5 percent instead of 26.375 percent privately. Three limits: the exemption covers shares, not futures, options, CFDs, forex or crypto, which are fully taxed at about 30 percent; dividends are exempt only with a stake of at least 10 percent; and, decisive here, prop-firm payouts are service income, so a Trading-GmbH gives a prop trader no § 8b benefit, only the 29.8 percent rate plus fixed costs. Since the Jahressteuergesetz 2024 the former €20,000 annual cap on offsetting private losses from Termingeschäfte is also gone, retroactively, removing an older argument for the company.

When a corporation makes sense

Rule of thumb: consider a GmbH or UG when you reliably earn well above living costs and retain most of the profit for years, your marginal rate is clearly above 30 percent, the tax saved exceeds the fixed costs several times over, and you want limited liability because you manage money for others or employ people. For a prop trader whose volatile payouts are needed for living costs, none of these usually holds.

Worked example

Hypothetical example: A trader expects a profit of €80,000 per year from prop-firm payouts after costs, Hebesatz 400 percent, Körperschaftsteuer 15 percent. He compares an Einzelunternehmen at a hypothetical average personal tax rate of 35 percent on this profit (trade tax assumed neutral after the § 35 credit) with a GmbH with annual fixed costs of €2,500. Solidaritätszuschlag on personal income tax and church tax are ignored.

1. GmbH Gewerbesteuer: 80,000 × 3.5% × 400% = €11,200.
2. Körperschaftsteuer: 80,000 × 15% = €12,000; Solidaritätszuschlag: 12,000 × 5.5% = €660.
3. Total company tax: 11,200 + 12,000 + 660 = €23,860, or 29.8 percent; retained after tax: 80,000 − 23,860 = €56,140.
4. If he distributes everything: 56,140 × 26.375% = €14,806.93; net in his pocket: €41,333.07; total burden 48.3 percent.
5. Einzelunternehmen at 35 percent: tax €28,000; net €52,000.
6. Comparison: if he needs the money to live, the GmbH leaves him €41,333 minus €2,500 costs against €52,000 as a sole trader, about €13,000 worse. If he can leave the profit in the company, €56,140 minus €2,500 costs remains invested against €52,000, about €1,600 better per year, before any later tax on distribution.

Common mistake

Practice activity

On paper: a trader expects €40,000 of prop-firm profit per year, Hebesatz 450 percent, Körperschaftsteuer 15 percent, GmbH fixed costs €2,200 per year. She would otherwise pay a hypothetical average rate of 28 percent as a sole trader. (a) Calculate the company's total tax and the retained amount. (b) Calculate the sole-trader net amount. (c) Does the GmbH pay off if she needs the entire profit for living costs?

Key takeaways

• An Einzelunternehmen is cheap and simple; UG and GmbH add limited liability, double-entry books, publication duties and four-figure yearly costs.
• A corporation pays about 30 percent on retained profit and about 48 percent on fully distributed profit at a 400 percent Hebesatz, as of 2026.
• The Trading-GmbH advantage exists only for share disposal gains under § 8b KStG; prop-firm payouts and derivative gains get none of it.
• Consider a company only when you retain large profits for years at a personal rate well above 30 percent.

Next step

The final lesson brings everything together: you write a complete evaluation plan with risk rules and a trading-business budget on paper.