Registered merchant (e.K.): meaning, obligations and liability

What does e.K. mean?

The abbreviation e.K. tells every business partner that behind the business name there is a single person who is entered in the commercial register. The suffix is mandatory, even for a business name that is being continued (Sec. 19 (1) no. 1 HGB). "Eingetragener Kaufmann", "eingetragene Kauffrau" or an understandable abbreviation such as e.K., e.Kfm. or e.Kfr. are permitted; e.K. works for any gender.

Sole merchants are listed in division A of the commercial register (Sec. 3 (2) HRV), so the register number begins with HRA. Anyone can inspect the entry (Sec. 9 (1) HGB). Our formation glossary explains terms relating to the register.

This is what business names with the suffix can look like:

without registration (small business)	with registration (e.K.)
Lena Maier Keramik	Keramikwerkstatt Lena Maier e.K.
Jonas Berger Fahrradservice	Radwerk Berger e.Kfm.
not permitted: "Nordlicht Kaffee" as a purely invented name	Nordlicht Kaffeerösterei e.Kfr.

Is the e.K. a separate legal form?

The business name (Firma) is merely the name under which the merchant conducts business and signs (Sec. 17 (1) HGB). They can sue and be sued under it (Sec. 17 (2) HGB), but the contracting party is always the merchant personally. Anyone who runs a commercial business together with others forms a partnership, usually an OHG (general partnership, Sec. 105 (1) HGB); with us, form an OHG for €369 net plus VAT and third-party costs.

Who is a merchant? Mandatory, optional, by legal form and apparent merchant

A merchant within the meaning of the HGB is anyone who runs a commercial business (Sec. 1 (1) HGB). A commercial business is any trade, unless the business does not require a commercially organised operation by its nature or scope (Sec. 1 (2) HGB).

Type	Legal basis	Registration	Effect of registration	Example
Mandatory merchant (Istkaufmann)	Sec. 1 HGB	mandatory (Sec. 29 HGB)	declaratory only, they are already a merchant beforehand	wholesaler with a warehouse and twelve employees
Optional merchant (Kannkaufmann)	Sec. 2 HGB, agriculture and forestry Sec. 3 HGB	voluntary	constitutive, only registration makes them a merchant	small business that wants to trade as an e.K.
Merchant by legal form (Formkaufmann)	Sec. 6 HGB, Sec. 13 (3) GmbHG	mandatory	merchant by virtue of the legal form, regardless of size	GmbH, UG
Merchant by registration	Sec. 5 HGB	already registered	towards anyone relying on the registration, the trade is deemed a commercial business	e.K. whose business has shrunk
Apparent merchant (Scheinkaufmann)	no statutory provision, legal appearance	none	anyone who presents themselves as a merchant must accept being held to it	small trader with "e.K." on the letterhead without an entry

The apparent merchant is based on case law, not on statute. Members of the liberal professions do not carry on a trade and therefore cannot become an e.K.

Do I have to register as an e.K.? The criteria

The mandatory merchant must register the business name, the place and the domestic business address of the establishment with the register court (Sec. 29 HGB). Whether your trade requires a commercially organised business operation is assessed by the courts on the basis of the overall picture, not a single feature.

Is there a turnover threshold? No. The HGB does not name a turnover figure from which you are a merchant. The thresholds of €800,000 turnover and €80,000 profit in Sec. 241a HGB and Sec. 141 AO only concern bookkeeping. Rules of thumb with fixed amounts are not a yardstick.

What happens if I fail to register? The register court can compel you to apply by imposing a coercive fine; each individual fine may not exceed €5,000 (Sec. 14 HGB). As a mandatory merchant, you are a merchant anyway, with all the obligations of the HGB.

e.K., small business, UG or GmbH?

Feature	Small business	e.K.	UG (haftungsbeschränkt)	GmbH
Commercial register	no	yes, division A	yes	yes
Notary	no	yes, certification of the application (Sec. 12 (1) HGB)	yes, notarisation	yes, notarisation
Start-up capital	none	none	from €1, in cash in full	€25,000, of which at least €12,500 at the time of the application
Business name	none, first and last name plus business designation	freely chosen with the suffix e.K.	freely chosen with the suffix UG (haftungsbeschränkt)	freely chosen with the suffix GmbH
Liability	unlimited	unlimited	company assets	company assets
Bookkeeping	cash-basis accounting up to the thresholds of Sec. 141 AO	balance sheet, exemption under Sec. 241a HGB possible	balance sheet	balance sheet
Prokura possible	no	yes	yes	yes
Price at Recht 24/7	€259 (sole proprietorship)	€259 (sole proprietorship, plus notary and register)	€259	€319

All prices net plus VAT and third-party costs. If you want to limit liability, the route leads to the UG or GmbH. The guide UG or sole proprietorship draws the comparison with the UG, and our explainer "What is a sole proprietorship?" covers the variants of the sole proprietorship.

Business name of the e.K.: which name is allowed?

As a registered merchant, you choose your business name largely freely:

• Personal name: with your name, for example "Lena Maier e.K."
• Descriptive name: with the line of business, for example "Keramikwerkstatt Nord e.K."
• Invented name: for example "Nordlicht e.Kfr."
• Mixed name: made up of several elements, for example "Radwerk Berger e.Kfm."

The law sets limits in three places. The business name must be suitable for identification and be distinctive (Sec. 18 (1) HGB). It may not be misleading about essential business circumstances (Sec. 18 (2) HGB), so it may not, for example, suggest limited liability by using "GmbH" or "AG". And it must be clearly distinguishable from all business names in the same place or municipality (Sec. 30 (1) HGB).

On all business letters, including order forms, you state the business name, suffix, place of establishment, register court and register number (Sec. 37a (1), (3) HGB); otherwise a coercive fine may be imposed (Sec. 37a (4) HGB). Also check whether your name infringes someone else's trade mark; you can secure your own trade mark through a trade mark application from €239 net plus VAT and official fees.

Liability of the registered merchant

Registration changes nothing about liability: you are liable for all obligations without limit with your entire assets. Unlike "GmbH" or "UG (haftungsbeschränkt)", the suffix e.K. stands for full personal liability.

An additional risk: if you take over a commercial business and continue it under the previous business name, you are liable for all debts of the former owner incurred in the business (Sec. 25 (1) HGB). An exclusion of liability only has effect towards third parties if it has been registered and published or communicated (Sec. 25 (2) HGB).

Liability can be limited through contracts, insurance or a switch to a corporation, and as an e.K. also by way of a hive-down (see below).

Obligations as a merchant

Bookkeeping and balance sheet: every merchant must keep books (Sec. 238 HGB) and prepare a balance sheet and a profit and loss account (Sec. 242 HGB). Sole merchants with no more than €800,000 turnover and no more than €80,000 annual net profit on two consecutive reporting dates, or on the first for a new formation, are exempt (Sec. 241a, Sec. 242 (4) HGB). If a threshold is exceeded, the exemption no longer applies. The HGB obligation then also applies for tax purposes (Sec. 140 AO).

Reporting obligations: you register changes to the business name, owner, place or business address and the extinction of the business name with the commercial register in certified form (Sec. 12, 31 HGB).

Transparency register: according to the wording, only legal entities under private law and registered partnerships are obliged to report (Sec. 20 (1) GwG). The e.K. is neither and is therefore not obliged to report.

IHK: as a trader, you are a member of the chamber of industry and commerce (IHK) (Sec. 2 IHKG). The exemption from contributions for small businesses with up to €5,200 trade income only applies to traders who are not registered (Sec. 3 (3) IHKG), so as an e.K. a contribution is usually payable.

Rights as a merchant

• Your own business name: you may trade under a freely chosen name, including an invented name, and sue and be sued under this business name (Sec. 17 HGB).
• Granting Prokura: only the owner of a commercial business can grant Prokura, a broad statutory commercial power of attorney (Sec. 48 (1) HGB). As a small trader this is not possible, as an e.K. it is. Our explainer on Prokura explains what an authorised signatory (Prokurist) may do.
• Reliance on the register: what is entered and published in the commercial register must be accepted by third parties as binding on them (Sec. 15 (2) HGB).
• Hive-down: only a registered merchant can transfer their business as a whole to a corporation under the Transformation Act (Sec. 152 UmwG).

Taxation of the e.K.

For tax purposes, the e.K. hardly differs from the unregistered sole proprietorship: income tax on the profit, trade tax with a €24,500 allowance (Sec. 11 (1) sentence 3 no. 1 GewStG), largely credited against income tax (Sec. 35 EStG), and the small business VAT exemption with no more than €25,000 turnover in the previous year and €100,000 in the current year (Sec. 19 (1) UStG).

The difference lies in how profit is determined: without the exemption under Sec. 241a HGB, you also prepare a balance sheet for tax purposes (Sec. 140 AO); with the exemption, cash-basis accounting is sufficient as long as the thresholds of Sec. 141 AO are complied with. Clarify the details with your tax adviser.

Forming an e.K.: steps, duration and costs

1. Check the business name: distinguishability in the same place (Sec. 30 HGB), not misleading (Sec. 18 HGB), no third-party trade marks.
2. Application via the notary: the business name, place and business address (Sec. 29 HGB) are registered electronically in publicly certified form, also by video certification (Sec. 12 (1) HGB).
3. Registration: the register court enters you in division A and publishes the entry. How long this takes depends on the register court.
4. Register the trade: trade registration remains mandatory for the e.K. as well (Sec. 14 GewO). You send the tax registration questionnaire to the tax office within one month (Sec. 138 (1b), (4) AO).

Item	Amount	Note
Recht 24/7 fee (form a sole proprietorship)	€259 net	fixed price with a name check by a lawyer and the IHK and all formation documents
Notary	approx. €127 incl. VAT	drafting and certification of the application, business value €30,000 (Sec. 105 (3) no. 1 GNotKG): 0.5 fee €62.50 (no. 24102 KV), XML €25 (no. 22114 KV), expenses €17.50 (no. 32005 KV), documents approx. €2, together approx. €107 net plus 19% VAT
Register court	€140	registration €105 (no. 1100 of the fee schedule of the HRegGebV) plus one third retrieval fee €35 (no. 6000)
Trade registration	depends on the municipality
IHK	depends on the chamber	contribution under the contribution rules of your IHK

According to our calculation, the notary and register come to around €270. There is no minimum capital.

Advantages and disadvantages of the e.K.

Advantages	Disadvantages
your own business name, including an invented name	unlimited liability as with a small business
no minimum capital, formation without a partnership agreement	notary and register court, around €270
Prokura possible	stricter HGB rules, such as the duty to give notice of defects and guarantees without form
commercial register entry as a signal of trust	balance sheet obligation as soon as a threshold of Sec. 241a HGB is exceeded
hive-down into a corporation under the UmwG possible	mandatory information on business letters and reporting obligations to the register
cash-basis accounting possible up to the thresholds	no IHK contribution exemption for small businesses

Switch, sale, inheritance, deletion

Switching to a GmbH: as an e.K., you can hive down all or part of your business to a corporation, with contracts passing over as a whole (Sec. 152 sentence 1, Sec. 131 (1) no. 1 UmwG). This is excluded if your liabilities exceed your assets (Sec. 152 sentence 2 UmwG). If the hive-down covers the entire business, the e.K.'s business name is extinguished on registration of the hive-down (Sec. 155 UmwG), but you remain liable for the transferred liabilities for a further five years (Sec. 156, 157 UmwG). Whether a hive-down to a UG is possible must be checked in the individual case because of the prohibition of contributions in kind (Sec. 5a (2) GmbHG). We support the switch with converting a sole proprietorship into a GmbH for €1,069 net plus VAT, notary fees, court fees and the costs of amending the trade registration.

Sale: the buyer may continue the previous business name if you expressly consent (Sec. 22 (1) HGB). The buyer is then liable for the old business debts (Sec. 25 (1) HGB), unless an exclusion of liability is registered and published or communicated (Sec. 25 (2) HGB). If the buyer is liable in this way, you as the former owner are only liable for these old debts if they fall due within five years and are established or enforced against you (Sec. 26 (1) HGB).

Inheritance: heirs may continue the business under the previous business name (Sec. 22 (1) HGB). If they do so, they are liable for the former business debts like an acquirer; the unlimited liability under Sec. 25 HGB does not arise if they discontinue the business within three months of learning that the inheritance has passed to them (Sec. 27 HGB). In addition, the six-week period for disclaiming an inheritance under inheritance law applies (Sec. 1944 BGB), see disclaiming an inheritance. A Prokura does not expire on the owner's death (Sec. 52 (3) HGB).

Deletion: if you give up the business, you register the extinction of the business name with the commercial register (Sec. 31 (2) HGB). The register court enters the extinction free of charge (preliminary note 1 (4) of the fee schedule of the HRegGebV); the notary fees for the application remain. As an optional merchant, you can also apply for deletion without giving up the business, as long as your business has not in the meantime come to require a commercially organised operation (Sec. 2 sentence 3 HGB). If a mandatory merchant's business shrinks, they initially remain a merchant because of the registration and can also apply for deletion.