Working Life > Self-Employment > Trade

Trade: Definition, Register, Unregister

Definition, Explanation

According to Gabler Economic Encyclopaedia, a trade is defined as “any activity that is planned and is performed profit-making, except agriculture, forestry and liberal professions”. Thereby, the following features of a trade are implied:

• The activity is performed in self-employment, i.e. for own account
• Sustainability, i.e. the activity is performed permanently
• Profit-making, i.e. participation in exchange of services or goods for the purpose to earn money
• Neither a liberal profession, nor agriculture or forestry

By that definition, traders include craftsmen, producers of goods, marketers, restaurant proprietors, hoteliers, providers of simple services (e.g. repair services, cleaning services), salesmen, finance- and asset consultants. The legal forms of Aktiengesellschaft and the GmbH (Gesellschaft mit beschränkter Haftung) are trade businesses by legal definition.

German industrial code (Gewerbeordnung) regulates the carrying out of a trade. It concerns:

• Registering and un-registering (by trade certificate) and changes in the operating activities within a municipal district
• Freedom of trade, being free choice of operational activity, workplace and educational institutions attended
• Trade supervision
• Classification of a trade as industry, merchandizing, craft, home trade, or publishing industry
• Taxing directives: income tax and trade tax

Tips, Checklist

• The carrying out of a trade requires membership in either the Industrie- und Handelskammer, IHK (chamber of commerce and industry) or the Handwerkskammer, HWK (chamber of crafts)
• Working as a craftsman requires to be registered in the Handwerksrolle (skilled trade register) or in the Verzeichnis der handwerksähnlichen Betriebe in the Handwerkskammer (register of trade-like businesses)
• As a trader, one is a merchant obliged to double-entry accounting and obliged to send the revenue annual balance reports with profit- and loss account and to document your inventory in a statement of assets
• Find out which trade insurances you require. There are: public liability insurance (Betriebshaftpflichtversicherung), industrial fire-risk insurance (Feuerversicherung), theft insurance, legal expenses insurance
• Display your name or your business’s name outside your business premises (obligatory acc. to § 15 a GewO) if your trade premises are publicly accessible
• By all means, report conceptual changes in your trade business as well as any cancelling of it to the trade supervisory center
• Open an account solely for each business
• For your location choice, consider that a trade business is not allowed to be settled arbitrarily, but only e.g. in an explicitly declared industrial area (Gewerbegebiet)

Last update: 05/02/2010