The way to self-employment is not only by starting-up a new company. The type of start-up should suit your needs and your business capabilities. For example, it depends on the following factors which way you choose: How flexible would you like to be? Is there a good opportunity for you to take over a company? Can you reduce the risk? You can read more about the possible ways to self-employment on this page and in the sub-sections.
When you set up a company you start from scratch. First of all you have to conquer your market and consolidate your position in the market? You must build up relationships to customers and suppliers, look for staff and build up a reputation. In a nutshell: You have to get through the start-up phase. However setting up a new company does not only have risks. It also provides an opportunity to build up a completely new business to suit your own requirements.
Participation in a company
The same recommendations apply when participating in a business as when taking over a business. It depends on the price of the participation, the future prospects of the business and the specific provisions of the articles of association whether it makes sense to enter the company.
Setting up a company with other persons
There are advantages in setting up a company not on your own, but together with a business associate:
- You do not carry the responsibility for the business only on your shoulders but share the responsibility and the risks.
- You can split up the tasks and represent each other.
- Your customer contacts are greater and your specialised skills complement each other.
- The financing of your business is an important argument in favour of a partnership. It could be difficult to finance the required investments for a start-up on your own.
Taking over a business
If you take over an established business, at the same time you take over a certain position in the market, customer and supplier relationships and staff. It is important that you are aware of the prospects of success of the business.
Management buy-out and management buy-in
Management buy-out (MBO) means the taking over of a company by its own management – mostly by managers or the managing director. Management buy-in (MBI) on the other hand is the taking over of a company by external (third-party) managers.
MBO is above all a possible form of setting up a company when there is a change of generation in the management. The new law on restructuring (Umwandlungsrecht) simplifies the spin-off of previous dependent parts of the business and thus new business start-ups.
Business start-up based on a spin-off
Spin-off companies are mostly technology spin-offs of larger companies, which are set up for the following purposes:
- Development of new fields of business and technology
- Risk transfer
- Restriction to core competences
- As part of outsourcing mainly as dependent subsidiaries
Spin-off companies are particularly common in the higher education sector. The target of the new business is the commercialisation of inventions from colleges of higher education or research facilities. For example, in Baden-Württemberg there are funding possibilities for these companies from regional associations for start-ups or at national level as part of the EXIST program and its numerous regional and sectoral initiatives.
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The German original version of this text was drafted in close cooperation with the relevant departments. The Wirtschaftsministerium released it on 23.09.2019. Only the German text is legally binding. The Federal State does not assume any liability for the translated texts.
In cases of doubt or if you have any questions or problems, please contact the relevant authorities directly.