Well, there were actual problems preventing people from creating companies.
Such as the 10'000€ minimum assets that were required for an Ltd. in Germany until a few years ago. (The problem was basically: How do you handle a company going bankrupt? The legislators said that any company should always have enough assets to cover its liabilities. Obviously not compatible with the snowball-scheme based startup scene).
It's actually 25000 euros. This was somewhat fixed with the introduction of the mini-GmbH (GmbH - something like Ltd.), but a mini-GmbH comes with some extra strings attached, so it's still very far from a UK Ltd. or a US LLC in terms of ease of setting up.
This is indeed an obstacle to creating a company, but there are quite a few more, all having to do with just plain ol' bureaucracy (handling monthly tax reporting, interacting with the tax authorities, handling insurance, etc.) The previous issue of The Economist made a case that these bureaucratic problems are even bigger in Italy.
I've recently been kicking around the idea that it's kind of weird that some hard-hit places in the EU like Spain or Greece sport up to 50% unemployed young folks (18-35) - these people are highly educated, just out of college, eager to build/work and yet they are economically inactive. My theory is that this is because it's hard to set up any sort of business activity due to the bureaucracy. It's also socially discouraged because it's risky.
There have always been options to start without capital requirements, usually at the price of personal liability. The idea is that you need a bit of "skin in the game" to protect vendors.
If you're in something like software and have no immediate plans for employees or large investments you can get the bureaucracy done in 30 min. It's literally a one-page form with address, name, purpose.
Well, my "self-employement" form was actually 8 pages long and it featured a lot more items than address, name, purpose and processing it took about 4 weeks. To be fair, I could start my business as soon as I sent that out, but I could not invoice clients until I got the reply, which included my new tax number. This is how it works in Germany. Add on top of that the mandatory monthly VAT tax reporting.
That is a significantly higher cost of entry when compared with an Ltd/LLC, not to mention a sole proprietorship.
Here's the sole proprietorship form, it's actually one page: http://www.hamburg.de/Dibis/form/pdf/Formular-Gewerbeanmeldu... – but obviously it depends a lot on the individual circumstances (like the tax ID you need for cross-border transactions). VAT is annoying, but it's only monthly if you're above 120000 Euro or so. We've started only filling in our revenue (which I can get within a few seconds) and file the tax we paid to suppliers with the yearly declaration. It's much faster to do it all in one go.
I had to fill out this form: "Fragebogen zur steuerlichen Erfassung" and I have to report my VAT using the Elster system monthly, even though my VAT is always 0 (my clients are all outside of the EU).
I went this way after consulting some other folks in Berlin and a tax consultant that I found myself. I'm kind of surprised that there's a different, easier way to go. Thanks for sharing the information.
