You can also create an UG (haftungsbeschränkt) which is basically a GmbH with the 25k€ requirement removed.
The only drawback is that this can make the operation look less trustworthy, depending on whom you are dealing with.
If you are selling Hot Dogs, nobody will bat an eye if it’s a UG, but if you apply for a big software contract, people might be wary.
I'm skeptical that an at most 25k€ recovery would alleviate weariness of a big software contract without additional due diligence.
It seems to me that a sole proprietorship would do more to protect against counterparty risk, i.e. more of the person's assets would be available to satisfy the debt.
My guess is that counterparties prefer a limited liability partner to arguably insulate themselves from employment liabilities.
Presumably the UG is still preferable to being a sole trader when dealing with much larger customers. Is that right? Or does providing services in your own name come across as more trustworthy to those parties?
If you are selling Hot Dogs, nobody will bat an eye if it’s a UG, but if you apply for a big software contract, people might be wary.