Register a business retroactively

When do you have to register a business retroactively

Retroactive registration of a business is required in Germany if a commercial activity has already commenced without prior registration. In principle, the Trade Regulation Act (GewO) stipulates that registration must take place from the time the business is opened. Failure to do so may result in fines in accordance with §§ 146 (2) No. 2 and 14 GewO. In practice, however, the authorities often show goodwill, especially if the delay is only minor. Late registration within a few days usually has no consequences, whereas delays of several months are more likely to result in a fine. However, the exact procedure varies depending on the region and the discretion of the responsible trade office. Failure to register a business is an administrative offense, which can be punished with a fine of up to €1,000.

Reasons for subsequent business registration

A subsequent business registration is often due to simple ignorance of the legal requirements, especially in the case of business founders who are setting up their own business for the first time and overlook the obligation to register. Misunderstandings about whether a certain activity is classified as commercial can also lead to late registration. Organizational negligence or incorrect advice from third parties can also play a role. Regardless of the reason, it is advisable to register as soon as possible in order to avoid legal consequences such as fines.

Do I need a business?

A trade is deemed to exist if a permitted, permanent self-employed activity is carried out with the aim of making a profit. However, many people are not aware that they are already running a business with certain activities. These include regular sales via classified ad portals, the sale of products manufactured with 3D printers, income or benefits via platforms such as Twitch, TikTok and YouTube or income from advertisements on your own website. Case law defines the term "commercial activity" broadly, and the processes involved in online activities in particular are documented electronically and can often be traced even years later. Anyone who regularly carries out such activities should therefore check whether a business registration is required in order to avoid legal problems.

Businesses with a trial period, hobbies and hobby activities

In some cases, business registration is deliberately postponed, for example to test the profitability of a business idea before formal steps are taken. There is no real probationary period, but business registration is always required immediately. Ultimately, you will be classified as a hobby or hobby by the tax office if you generate little or no turnover and make permanent losses.

Advantages of registering a business later

The advantage of registering a business at a later date is that all legal matters relating to the commercial activity are clarified. From this point onwards, you act in accordance with the law and avoid future conflicts with authorities or the tax office. This legal certainty creates a solid basis for future business operations and ensures that you can concentrate fully on developing your company without having to fear unexpected consequences from this direction.

In addition, proper registration helps to ease your own conscience. Instead of constantly worrying that problems could arise, mental resources are freed up that can be used for creative and strategic tasks. Founders in particular face a multitude of challenges, and every construction site that is eliminated creates more room for focus, motivation and long-term success.

There is a special case in which registering a business at a later date can be advantageous under certain circumstances. If you only take up the activity or start-up shortly before the end of a year and register the business in the new year, it may be that there is not yet a permanent scope. In theory, this would save you the bookkeeping that has been accumulated up to that point and a corresponding annual financial statement.

Further disadvantages of late business registration

In addition to possible fines, other problems can arise if you register your business late. To ensure that these are not exacerbated further, you should still make up for them as quickly as possible. In practice, voluntary late registration of a business is often interpreted in favor of the business owner.

Financial disadvantages arise if the tax office subsequently calculates taxes and duties for the entire business activity to date, which often leads to a sudden and unexpectedly high tax burden. It is also possible to be charged with tax evasion! In addition, compulsory contributions to the Chamber of Industry and Commerce (IHK) or the Chamber of Crafts can be levied retroactively. Insurance law issues can also become problematic, as certain liability or business insurance policies do not provide cover in the event of damage if the business was not properly registered.

Who can help me with a retroactive business registration?

It is easy to feel insecure when you are confronted with an unregistered business. As a start-up portal, we cannot and do not want to give any legally binding advice. We only share our own practical experience and how we deal with it. If you would like further support, you can contact the following offices.

• Trade office: Competent authority for registering the business.
• Tax consultants: Support with tax issues and to avoid financial disadvantages.
• Specialist lawyers for tax or commercial law: Legal advice on fine proceedings or more complex cases.
• Chamber of Industry and Commerce (IHK) or Chamber of Crafts: Contact for information and start-up advice.
• Business start-up advice: Support with legal and organizational issues relating to setting up a business.

Costs of registering a business retroactively

If you register your business shortly after starting it, the office will usually charge the normal registration costs. In Germany, these usually amount to less than 100 euros! If you register later, you may also receive a warning from the trade office and a corresponding fine of up to 1,000 euros.

Furthermore, additional payments and penalties to the tax office for tax offenses can be expected in individual cases. A tax and legal advisor will charge his normal rate.

The relevant chamber (e.g. Chamber of Crafts or Chamber of Industry and Commerce) will demand its corresponding contribution. Other minor costs can be expected for office supplies and correspondence.

What you need for a business registration

In addition to the notification of the date of commencement of the business, the following items are generally required for a business registration.

• Business registration: Completion of the appropriate form at the relevant trade office.
• Identity card or passport: Proof of identity.
• Proof of legal form: If applicable, extract from the commercial register for corporations or freelancers.
• Declaration of the type of activity: Exact description of the business purpose.
• Permits or certificates, if applicable: Depending on the sector, certain permits or proof of qualifications may be required.
• Tax registration with the tax office: Apply for a tax number for the business.
• Chamber of Industry and Commerce or Chamber of Crafts membership: mandatory for commercial activities, even for secondary or small businesses.

Frequently asked questions and answers about business registration

• Where do I register a business? Business registration is carried out at the local trade office of the respective city or municipality. Many local authorities already provide links or forms on their website that can be used to conveniently register a business online. This electronic option offers a flexible and time-saving way of submitting all the necessary information without having to appear in person. However, you should bear in mind that experience has shown that it can take a few working days longer to process an online registration than a direct visit to the office. If you want your registration to be completed quickly, you can often benefit from a personal appointment where the documents are checked immediately and the trade license is usually issued straight away.

• Retroactive business deregistration or re-registration A business can also be deregistered or re-registered retroactively. If the business has already been discontinued or there have been significant changes to the location, business purpose and owner, a corresponding notification must be submitted to the trade office. In many cases, goodwill is granted if the notification is only a short time late. However, depending on the length of the delay, fines may also be imposed. Timely clarification protects against additional costs and ensures that the entries in the commercial and tax register are up to date. This is particularly important in order to fulfill tax obligations correctly and avoid unnecessary contributions.

• Is it possible to register a small business retrospectively? The rules for retrospective registration of a business also apply to a small business. Anyone who carries out a small or part-time activity is also obliged to register this properly with the trade office, even if the income generated is low. Late registration can also lead to fines. It is therefore important to register the small business promptly and retroactively.

• For which online platforms do I need to register a business? As a Twitch streamer, YouTuber, operator of a website with advertising revenue, regular seller on platforms such as eBay, classifieds or Vinted, TikToker, Google partner or Steam publisher, you are also obliged to register a business. Activities on platforms such as Fiverr, Upwork, Freelancer and Guru also usually require a business. The decisive factors here are the intention to make a profit and the regularity of the activity, which requires a commercial classification according to the applicable regulations. Although there are legal exceptions in certain cases, these should always be clarified with an experienced tax consultant or lawyer who is particularly familiar with online media and digital business models.

Conclusion

Although the subsequent registration of a business can result in fines and retroactive financial obligations, it has the decisive advantage of creating legal certainty and avoiding future problems with the authorities. If you register your business with the local trade office as soon as possible, you minimize the risk of high penalties. If you have any questions, you can contact a tax consultant, lawyer, the Chamber of Industry and Commerce or the office directly.