Many citizens may know that the registered merchant and the registered merchant (generally: merchant) form a special status according to the HGB, but few know the legal differences that exist between merchants and private individuals. Especially for entrepreneurs, however, this knowledge is of crucial importance if they plan to lead their company successfully.

With this article we inform about the basic terms entrepreneurs, merchants and commercial companies (e.g. oHG, GmbH & Co. KG and GmbH). In doing so, we also deal with the legal basis of these definitions and show the high priority of the Handelsgesetzbuch (HGB) for them. In order to underline the difference to private individuals, we also deal with the Civil Code (BGB), which is of outstanding importance in private law. In addition, we show examples where merchants have to comply with private law. Conversely, of course, we also give examples where there are differences between private law and commercial law.

1st definition: private individuals, entrepreneurs, merchants

1.1. Private individuals

Private individuals are simply to be understood as natural persons. Even if they also carry other characteristics, such as those listed in the Income Tax Act (for example, farmers and foresters, freelancers, employees), they attribute the characterization as a private person to their basic existence. In addition, they can also have many other properties that have legal relevance.

1.2. Entrepreneurs

One would think that the term entrepreneur is defined in the law of merchants. In fact, however, the BGB contains this definition. It can be found there in § 14 BGB. The reason for this is that it also gives private individuals the opportunity to work as entrepreneurs without having to be merchants. Interestingly, § 14 BGB thus represents the term entrepreneur both for private individuals and partnerships as well as for merchants and commercial companies as an umbrella term.

1.3. merchants and trading companies

The Commercial Code is the legal framework governing merchants and commercial companies. Therefore, the legal definition of these terms is enshrined in this law. Here, merchants are essentially persons who pursue a trade and become merchants either by the extent of their activity or voluntarily.

Accordingly, commercial companies are characterized as an association of persons pursuing the goal of making profits through commercial activity. Trading companies are precisely defined and regulated in the HGB as well as in other laws (e.g. Aktiengesetz and GmbH-Gesetz). Incidentally, however, they are on an equal footing with merchants. Therefore, the rules regarding merchants presented in the following examples apply to them as well.

Trade is hard to imagine without the possibility of buying or selling objects or exchanging them. However, instead of finding the relevant legal norms in the HGB (where you would actually expect them), the BGB determines these processes. After all, private individuals should also be able to buy and sell according to these rules. In addition, the regulations also apply to entrepreneurs who are not merchants. In any case, merchants must also observe the corresponding standards of the BGB.

2.2. Special rules for the transfer of land

So if you read carefully, you will hardly find regulations in the HGB that regulate the purchase or sale of real estate in which merchants are involved. Therefore, the same laws apply to merchants as to private individuals. These are actually also included in the BGB. In addition, there are also a few regulations in the HGB with regard to the acquisition or sale of real estate by merchants.

2.3. Rental right

The legal bases in the BGB are also fixed in matters of rental law. It thus applies equally to private individuals and merchants.

2.4 Payment terms for private customers

If a private customer receives a delivery or service from a merchant, the invoice must contain the notice at the time of payment. This point in time is precisely defined in the BGB. He enters 30 days after receipt of the service and the corresponding invoice. If this information is missing on the invoice to a private customer, there is no obligation on the part of the customer to comply with the invoice’s other requirements. If any indication of a payment term is missing, the private person has the free choice when he wants to pay.

2.5 Jurisdiction of courts in a dispute between private individuals and merchants

In a legal dispute among private individuals, the locally competent district court in the first instance is competent. However, if a merchant is also involved in the legal dispute, he must also observe this provision.

2.6 Provisions on Labour Law

In fact, many regulations on employment law, such as duties in the employment contract or notice periods, are also included in the BGB. In the absence of other regulations in the HGB, these also apply to merchants as employers.

Examples of different regulations for merchants and private individuals

3.1. Check on acceptance of consignments of goods

If a private person receives a delivery, there is no obligation for him to immediately check the shipment of goods. Even if you only notice a defect after a week, for example, you have the right to claim the defect.

For shipments of goods among merchants, another principle applies: Here the recipient is obliged to immediately check the received goods for defects. However, if no defect is objected to, the obligation for the supplier to remedy a defect that may be found later expires. This applies even if you can prove that the defect existed before the receipt of the goods.

3.2. Payment terms among merchants

For transactions among merchants, a regulation according to the BGB also applies with regard to the time of the timely payment. In this case, however, it is defined differently for merchants. They are automatically subject to a fixed deadline for payment within 30 days of receipt of the invoice.

3.3. Guarantee: written contract vs. Handshake

According to the BGB, private individuals who enter into a guarantee must record this in writing. This is to provide the guarantor with further clarity that a guarantee is a significant obligation. Only the signature under the guarantee contract removes the reservation that the guarantor may enter into the guarantee lightly.

With the merchants, however, one can expect that they always do their business with great care anyway. Therefore, merchants can also enter into guarantees among themselves without having to pay attention to the written form of contract fixed in the BGB. A handshake among merchants can therefore already have legal force.

3.4 Accounting obligation, obligation to draw up balance sheets and financial statements

Merchants are subject to the duty of proper accounting laid down in the HGB. So you have to create a complete documentation for all business actions. This is then the basis for a balance sheet at the end of a marketing year and thus the basis for determining the profit in the annual accounts. The legal regulations are both varied and complex. Anyone who had no or only little contact with the subject of bookkeeping during his vocational training should therefore definitely consult a tax consultant in his financial accounting. Other entrepreneurs with no qualification as merchants, on the other hand, come with less effort in the tax profit determination.

3.5 Jurisdiction of courts in legal disputes among merchants

If there is a legal dispute among merchants, they must already bring their complaint in the first instance in the district court. In a legal dispute among private individuals, this would only be the second instance after the district court.

4th Summary

As you can see, merchants have to observe an enormous variety of regulations due to the legal requirements contained in the HGB. In addition, the laws of the BGB are also relevant in many cases. For example, it contains a number of labour legislation. Many individual questions are of everyday frequency, but at the same time also of crucial importance for the success of the company. It therefore takes much more than just a good idea and professional know-how to successfully operate a company – whether of a private or commercial nature.

Therefore, it is extremely important to have and apply the necessary legal expertise, especially in the initial phase of a company. Anyone who has these prerequisites can be sure that his company is running optimally, at least in this respect. All other entrepreneurs, on the other hand, are well advised to consult an experienced tax consultant when starting a business. In particular, it helps to analyse the medium- and long-term perspective of the company and to design it accordingly.