4 ms·

If you are bootstrapping, or just founding a small side business, it doesn't have to be so complicated. There is a special provision for small businesses [1]. A

If you are bootstrapping, or just founding a small side business, it doesn't have to be so complicated. There is a special provision for small businesses [1]. As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person - meaning you don't have to pay VAT to the government for sold goods, but you do have to pay it to vendors like regular customers. Once you've grown enough, you can register as a company. Note also that parts of the complications and expenses arise when you want to be a limited liability company - if you are just making websites on the side, this is probably not neccessary. Germany has a strong culture of entrepreneurship - being not employed but "selbstständig" (occupationally independent) is held in high regards. In my experience, while burocracy can be complicated, officials are very willing to help (I haven't made the jump myself, but I know from others). And one thing that is nicer in Germany / Europe is that it seems less litigious than the US. I would be constantly afraid to get sued or to break some unknown law in another US state, whereas here if you get a good accountant and avoid a few common pitfalls, you are pretty safe. [1]: https://de.wikipedia.org/wiki/Kleinunternehmerregelung_(Deutschland) https://de.wikipedia.org/wiki/Kleinunternehmerregelung_(Deut...

Xylakant 9y ago
Note that none of this has any connection with the legal form of the company, this is a tax matter which applies equally to all companies or freelancers. > As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person This is false. The conditions is that business volume [1] including taxes has not exceeded 17500 EUR in the previous year and at the same time is not expected to exceed 50000 EUR in the running year. If you're a newly founded company you need to file an estimate of your business volume with the tax authorities and if the estimate exceeds 17500 EUR you can't take advantage of the Kleinunternehmerregelung. Also note that the 17.500 EUR limit applies to the sum of all companies you own, you can't have two companies with a volume of 17500 EUR each. It's really only good for a side business and in some narrow circumstances where you sell mostly to private customers. If you want to bootstrap, you're much more likely to benefit from filing your VAT (anything you buy will be discounted 19% effectively, you can have your VAT filed by an accountant from the saving of buying a single expensive computer). A fairly good summary (in german) with a handy flowchart at the bottom is here http://www.kleinunternehmer.de/kleinunternehmerregelung.htm http://www.kleinunternehmer.de/kleinunternehmerregelung.htm [1] minus VAT-free services etc. ...
- captainmuon 9y ago
  I wouldn't say it is false, I was just simplifying. If you take no outside money (yet), have no employees (yet), and don't buy many goods, you don't really have any benefit of either not paying VAT, or getting limited liability. This is for people who have a side-business of "making websites". You can register a simple business ("Gewerbe") when you have to write an invoice, or start making regular income. Of course, if there is real capital investment involved, or once this is not just a side business, you have to do more.
  - Xylakant 9y ago
    No, it's false, it's actually dangerously false since you personally may be liable for the VAT not paid. The limit is actually a hard limit and it gets more and more dangerous the closer you creep to the edge. At the years turnover, when you write the next years first invoices, you need to know your tax status and you don't have at that time the previous years tax declaration. The tax authorities will not notify you of that change in status. If it turns out you had a total (vat)-taxable income of 17499 EUR, you're fine. If you miscalculated and had 17501 € and mistakenly already wrote your invoices thinking you'd be VAT-free then there's two options: if your customer is a company, you can correct the invoice and have them pay the VAT (their accounting department will absolutely love that if you come back half a year later on a paid invoice, trust me). If the customer is a private person, you get to pay the VAT. I've seen people fall in that trap and I can tell you, re-writing all your invoices for a year sucks, paying 20% of your income as VAT because you simplified the rules sucks even more. You also need to file the registration with the tax authorities before you write your first invoice (you need a tax number for a correct invoice). As a general rule of thumb: You don't simplify when it comes to taxes. (Side note: This is still unrelated to registering a company or even registering with the Gewerbeamt which may or may not be required depending on what exactly you do. Members of the Freie Berufe for example don't need that.)

Xylakant 9y ago

Note that none of this has any connection with the legal form of the company, this is a tax matter which applies equally to all companies or freelancers. > As long as you expect to stay under 50000 € in sales in a given year, you can be treated as a private person This is false. The conditions is that business volume [1] including taxes has not exceeded 17500 EUR in the previous year and at the same time is not expected to exceed 50000 EUR in the running year. If you're a newly founded company you need to file an estimate of your business volume with the tax authorities and if the estimate exceeds 17500 EUR you can't take advantage of the Kleinunternehmerregelung. Also note that the 17.500 EUR limit applies to the sum of all companies you own, you can't have two companies with a volume of 17500 EUR each. It's really only good for a side business and in some narrow circumstances where you sell mostly to private customers. If you want to bootstrap, you're much more likely to benefit from filing your VAT (anything you buy will be discounted 19% effectively, you can have your VAT filed by an accountant from the saving of buying a single expensive computer). A fairly good summary (in german) with a handy flowchart at the bottom is here http://www.kleinunternehmer.de/kleinunternehmerregelung.htm http://www.kleinunternehmer.de/kleinunternehmerregelung.htm [1] minus VAT-free services etc. ...

captainmuon 9y ago
I wouldn't say it is false, I was just simplifying. If you take no outside money (yet), have no employees (yet), and don't buy many goods, you don't really have any benefit of either not paying VAT, or getting limited liability. This is for people who have a side-business of "making websites". You can register a simple business ("Gewerbe") when you have to write an invoice, or start making regular income. Of course, if there is real capital investment involved, or once this is not just a side business, you have to do more.
- Xylakant 9y ago
  No, it's false, it's actually dangerously false since you personally may be liable for the VAT not paid. The limit is actually a hard limit and it gets more and more dangerous the closer you creep to the edge. At the years turnover, when you write the next years first invoices, you need to know your tax status and you don't have at that time the previous years tax declaration. The tax authorities will not notify you of that change in status. If it turns out you had a total (vat)-taxable income of 17499 EUR, you're fine. If you miscalculated and had 17501 € and mistakenly already wrote your invoices thinking you'd be VAT-free then there's two options: if your customer is a company, you can correct the invoice and have them pay the VAT (their accounting department will absolutely love that if you come back half a year later on a paid invoice, trust me). If the customer is a private person, you get to pay the VAT. I've seen people fall in that trap and I can tell you, re-writing all your invoices for a year sucks, paying 20% of your income as VAT because you simplified the rules sucks even more. You also need to file the registration with the tax authorities before you write your first invoice (you need a tax number for a correct invoice). As a general rule of thumb: You don't simplify when it comes to taxes. (Side note: This is still unrelated to registering a company or even registering with the Gewerbeamt which may or may not be required depending on what exactly you do. Members of the Freie Berufe for example don't need that.)