Do you still want to convert your individual company into a GmbH in 2025? Then you have until 17.07.2025 to contact us. Because we have aligned and optimized our processes precisely to ensure that the transformation of your individual company is successful this year. Benefit from the many advantages of a GmbH over a sole proprietorship!

1. 2025 Converting individual companies – Introduction

In addition to trade tax and sales tax, sole proprietors basically only know income tax. Neither corporate income tax nor capital gains tax meet them in everyday life. It is therefore not self-evident that sole proprietors are aware of the significant differences, such as the transparent taxation of partnerships as opposed to taxation under the principle of separation in the case of limited liability companies.

The distinction between income tax and corporate income tax in income taxation is fundamental to the taxation of a company’s profits. Because on the one hand, individual entrepreneurs always pay their income tax with their personal tax rate, which increases progressively with income. It can be 42% or even 45%, which is almost half of taxable income. It does not matter whether you as a sole proprietor use the entire profit for private purposes or reinvest part of it. A GmbH, on the other hand, can look at a flat-rate tax rate of 15 % for corporate tax. Only if a profit distribution to the shareholders takes place, the dividend is subject to a new taxation with 25 % capital gains tax. So anyone who wants to reinvest profits with a GmbH has a clear tax advantage on their own side.

2. Converting individual companies: this is how we proceed

If an entrepreneur wants to convert a sole proprietorship, regardless of whether this should take place in 2025 or in another year, then we usually carry out a transfer to a GmbH according to § 20 UmwStG. However, in some cases one can also go another way. Under certain circumstances, one can achieve the same goal by selling the sole proprietorship to a specially founded GmbH, but also generate other, long-term tax advantages. But this is a separate issue.

In any case, the transfer of a sole proprietorship to a GmbH is a conversion carried out regularly in our law firm. What we need for this is a balance sheet of the individual company. The balance sheet serves to prove the value with which the sole proprietorship is transferred to the GmbH. It must be produced at the notarisation of the conversion.

Basically, there are even three methods for transferring a sole proprietorship to a GmbH. In addition to the foundation of the GmbH in kind, for which a rigorous examination of the impairment of the sole proprietorship is necessary, there is also the possibility of an increase in capital in kind and an increase in capital in kind with share premium. The two last mentioned methods differ from the first mentioned in that we first set up a separate cash for the GmbH and then either a pure capital increase in kind or a capital increase in kind with Sachagio by means of contribution of the sole proprietorship. However, it is important in these two methods that an additional capital increase is made and new shares are granted for this purpose. A capital of EUR 1 can already suffice for the capital increase.

3. Transactions with retroactive effect

What is exciting about the transformation of a sole proprietorship into a GmbH is that this can even be done retroactively for up to eight months. This is particularly interesting because you can then carry out the conversion until August of a year and then refer to the fact that the GmbH already exists legally as well as tax law since the beginning of the year. In this way, individual entrepreneurs can achieve, for example, a recovery of their income tax advances already paid since the beginning of the year. This also makes it easier to tax the company. Because this gives a clear transition from one to another legal form, which coincides with the turn of the year. A division of the annual profit in the profit determination and allocation to the sole proprietorship and the GmbH in the case of an under-year conversion is therefore obsolete. This saves potential disputes with the tax office. It thus also facilitates the changeover in financial accounting.

4. Why You Should Transform Your Individual Business in 2025

We have basically already provided the reasons for this in the introduction: to save heavily on taxes in the future! A GmbH pays on the one hand 15 % corporation tax, but on the other hand also business tax, which is often in the order of 15 to 17 % – depending on the amount of the respective municipality. In sum, this leads to a tax of around 30% at company level. In other words, up to 70% is available for reinvestments in the GmbH. And this is significantly more than if a sole proprietor invested 60 or even only 50 % of his profit in his sole proprietorship. Successful individual companies should realistically expect 50%.

In any case, company growth is much faster with a GmbH than with a sole proprietorship. So why wait? Of course, this is a very good reason why you should already convert a sole proprietorship into a GmbH in 2025 – the sooner, the better.

But this is only cost-effectively possible until the end of August 2025. Anyone who makes a conversion can use a balance sheet that goes back to a date that also goes back a maximum of eight months. And this is feasible in our favoured case with the balance sheet from the annual accounts, which you have to prepare very current anyway. Anyone who makes a conversion in September or later in the year, on the other hand, needs a more up-to-date balance sheet. These would then have to be made separately on a new, still suitable deadline. Logically, this entails additional costs. So costs that are absolutely avoidable if you contact us until 17.07.2025 to convert your individual company with our support.

5. 2025 Converting individual companies – Conclusion

So there are very good reasons why you should convert a successful individual company into a GmbH – and in 2025. In addition to the tax reasons, a conversion by the end of August 2025 is also supported by the cost savings for conversion balance sheets to be prepared separately. Another plus is the retroactive effect of the conversion on the beginning of the year. In addition, the fact that we at Kanzlei Meyers & Partner AG routinely carry out this for you with our expertise and many years of experience speaks for a conversion – legally secure and tax-neutral. We are even at your disposal at short notice, provided that you can contact us by 17.07.2025 and submit all necessary documents in a timely manner. And if you also decide on the many advantages of a holding structure, then we make that possible for you.