What makes you an entrepreneur in Austria?
We, at The Collaboratory, care deeply about making the law understandable and accessible for our audience. As you might know, our members get in-house legal consulting and business consulting. Here is an excellent blog post everyone who wants to do business in Austria can benefit from!
Who is an entrepreneur under Austrian law and why is this important?
Under § 1 of the Austrian Commercial Act, every person who conducts business is an entrepreneur. As you can see this definition doesn’t help a lot. Furthermore, the law says “a business” is every long-term organization of independent economic activity.
This means that you are conducting business if:
- you conduct economic activity
- you plan to do it for a longer period of time
- the purpose of this activity is at least covering its own costs.
It doesn’t matter how big your organization is, or if you have any employees or not. You can also say that each type of self-employment will be treated as entrepreneurship, if
- the business activity requires a minimum level of organization,
- its goal is to bring you income and
- you are personally liable for the decisions you make.
Once you decide to be an entrepreneur, you need to see what kind of registration you need. The Austrian commercial law differentiates between the following types of entrepreneurship:
- Sole proprietor with trade license
- Liberal professions and
- Agriculture and Forestry
Who is an entrepreneur with a trade license?
An entrepreneur with a trade license is every person, who conducts business as an individual, for which business the law foresees a trade license. The person also conducts business in their name and on their account, and he or she has unlimited personal and financial liability. In the praxis, this type of self-employed person usually registers with the Commercial Register as Einzelunternehmer, but this registration is mandatory only under specific circumstances.
Types of trade licenses
The Austrian Trade Commerce and Industry Reglamentation Act 1994 distinguishes between „free“, „regulated“ and „sensitive“ trades. Regulated trade licenses are listed in the Industry Reglamentation Act 1994. All trades not expressly listed there need a free trade license. A list with all free trade licenses is being published every year by the Chamber of Commerce. It includes, for example, trading in retail goods (but not trade in weapons, pharmaceuticals, and the like), IT services, advertising agencies. The specific is, that for the free trades, no evidence of formal qualification is required in order to carry it out. On the other hand, regulated trades require certification of proficiency.
More information (in German) about it you can find here.
Liberal professions vs entrepreneurs with trade license
What does the Commercial Act say?
If you tried to resolve a legal problem in Austria you might already know that the Austrian law is very fragmental. A rule that applies to you, may not apply to a very similar case, because there is one tiny difference that only the authorities can see. The same situation reflects also the regulation of liberal professions.
There is no legal definition, who belongs to this type of self-employment. Furthermore, things are not getting easier by the fact that the scope of liberal professions is different in the different areas of Austrian law. Usually, there are requirements for high education or some other type of professional qualification. The liberal professions are mostly from the circle of economics, arts, science, etc.
The commercial law gives us the practical characteristics, which can help us to differentiate the liberal professions, from entrepreneurs with trade license: The liberal professions are those ones, which belong to a professional union (doctors, lawyers, Notary, civil engineers, etc). But this characteristic serves only as a reference because there are a lot of liberal professions, where there isn’t a professional union: writers, interpreters, tutors, etc). The next characteristic of the liberal professions is that there is a high grade of personal relationships and the bond of trust between the client and the contractor. If only you can provide the service and you can’t be represented by somebody else, then most likely your self-employment type belongs to liberal professions.
More information (in German) about it you can find here.
What the social insurance act says
Last, but not least, for the purposes of social insurance, there is a different definition of liberal professions. The social insurance law takes the general term from the commercial law and splits it into two – liberal professions (narrower concept) and new-self employed.
Here the differences are easy to establish because there is an exhaustive list of liberal professions for the purposes of social insurance law: § 2 FBSVG. The second group here is the new self-employed. These are Individuals who have taxable income from independent business activity and don’t need a trade license. They don’t belong to any professional union and use their own equipment and materials.
Everything important for becoming new self-employed in Austria you can find in the Complete Guide to Self-Employment in Austria. Our team is part of the authors of the guide. We did our best to make the law understandable for you!
What happens in real life?
In the praxis, the most used criteria are: If the type of economic activities isn’t listed in the free or regulated trade license list, then by exercising this particular activity you will be part of the liberal professions. for the purposes of social insurance law, you will belong to the group of new self-employed.
The reason for this vague description is a political one. By issuing the Commercial Act, the government wanted to create a wide description of “entrepreneur”. The professional unions, on the other hand, wanted tо preserve the specific regulation for every single type of liberal profession. The result is a complicated system of self-employment types, where also the specialist and court! has difficulties to understand.
What is the practical meaning of this regulation?
The distinction between sole proprietor with trade license, liberal professions (in the meaning of the social insurance act), and new-self employed only matters when it comes to registration with the public social insurance company (SVS) and the tax office.
The most important consequence is if the commercial law will apply for you. Regardless of the type of self-employment if you conduct economic activity, you are an entrepreneur (Unternhemer) and for this activity, the commercial law will apply. This is important because there are different regulations for concluding a contract, for the application of the Regular Terms and Condition, etc. It will be important when it comes to consumer rights, as well. As a sole proprietor, you are not protected under commercial law by your purchases, etc.
In our next articles, we will concentrate on the special regulations, which apply to the entrepreneurs (regardless of the type of entrepreneurship). The next topic will be about the name of your business (Firma/Firmenname) and the registration in the trade Commercial Register.
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About the author:
MMag. Severina Ditzov is one of the co-founders of The Collaboratory and Austria for beginners. She is a passionate lawyer with degrees from Sofia University and the University of Vienna and a dedicated Nightwish fan.
The expat journey introduced her unexpectedly to social entrepreneurship and she can’t love it more!
Our members have the privilege to get her professional help every time they have to deal with authorities or other third parties. She never fails to provide them with the best advice and gets their problem solved.
Are you in the need of a business consultation? Look no further, and contact Severina at ditzovs(@)thecollaboratory.at today!