12 ms·

This is a good argument. In Germany, if you take a loan to open up a business, you can pretty much ruin your whole life and financially never recover if it fail

by zwnow 3y ago

This is a good argument. In Germany, if you take a loan to open up a business, you can pretty much ruin your whole life and financially never recover if it fails once. It's a little different with tech, as you usually don't have as high costs early on, but still. There is an extremely high risk involved that most people simply can't afford.

pier25 3y ago
Isn't this the same in most countries?
- zwnow 3y ago
  It is, but in Germany your taxes on wage is very high. It's easier to save up a financial safety net in countries with higher wages and less taxes.
  - jowdones 3y ago
    Well it's high in Europe in general. And seems quite similar like in the US. That is you can use a rough estimate of 40%, meaning half the time you're working for the state. So the problem is not taxation as much as low wages. Germany has lower wages than US, Romania has lower wages than Germany. State skims half what you make anywhere. It's the absolute amount you are left with that makes the difference and that's why Americans have more money to spend on businesses than Europe and Europe has more than Asia and Asia more than Africa.
    - zwnow 3y ago
      I agree, it's difficult in most countries. Germany has tons of additional laws regarding taxation too. I for myself wouldn't even want to try opening up a business solely due to the taxation expertise I'd have to look up into. Don't get me started on international business too... It's just too much. Kudos to whoever manages to get through all that as a one man business owner.
      - ido 3y ago
        As someone running a business in Germany I think you're overestimating it. I have a steuerberater (accountant/tax-advisor) who is also doing my bookkeeping and he takes care of all that. When my UG was young paying him was a few €100s per year overhead. Today (when my company is turning over several €100Ks per year) it's a couple €1000s per year (so relatively negligible expense for my business). There's still plenty to complain about regarding bureaucracy and red tape but don't let this alone deter you from running a business (especially not a software startup).
        zwnow 3y ago
        I might do, it's just way more work than in other countries. 90% of which I really don't want to bother with.
        ido 3y ago
        I'm pretty sure it's pretty much like that in most other countries (at least most other European countries). I believe its the US/UK that are unusually easy to open a company in.
    - yobbo 3y ago
      > That is you can use a rough estimate of 40% No. But it's complicated ... For example, income tax is charged on the employee, after the employer has been charged employer/social fees of 30-40%. And then, sale of most goods are charged ~20% VAT. The total taxation pressure "per hour worked" is far above 40%.
      - vidarh 3y ago
        Total tax wedge (including employer/social fees) for a single person with no children earning 167% of the average worker in Germany was 49.2% in 2023 according to OECD Taxing Wages. Most of the other categories they measure (a matrix of single vs married, no vs 2 children, and 67%, 100% and 167% of average wage for one of the partners w/ the other person at 100%) end up closer to the 40% mark (as low as 28.4%)... But most people do not count employer contributions, because they are not part of the negotiated salary, and most people don't even know what they are. Yes, they of course affect how high salaries businesses will offer. In terms of income tax and employee contributions, in the OECD scenarios Germany maxes out at 41.2% (the OECD average is 30%; the US is at 29.1%). As a comparison, Belgium is "always" worst in class on this in Europe, w/47.8%. Overall Germany is still one of the highest tax countries in Europe, but it also has a higher difference than most countries the highest taxed (high income single earners) and families with children in total effective tax rate - for the later, Germany is much closer to the pack, to the point of being near or below the OECD average for a couple of categories. VAT in most countries add very little, because most of your gross income does not go towards VAT rates products - for starters you're first paying tax, and then covering housing and most places exclude a number of others things from VAT as well. Depending on country and income level and spending patterns, it does add a few percentage points, but it's rarely significantly skewing the overall taxation level all that much (last time I did the numbers, at a far above average income, VAT increased my total taxation by about 4%)
    - vidarh 3y ago
      The US tax levels are lower than Europe, but it mostly events out when you account for health insurance with exception of a few of the highest tax European countries (Belgium always being the extreme outlier, and Germany is usually second, at least of the OECD countries, depending on your specific circumstances)
tristramb 3y ago
"In Germany, if you take a loan to open up a business, you can pretty much ruin your whole life" So instead you ruin other people's lives?
- hgomersall 3y ago
  The bank? The ones whose job is literally to turn risk into premium on loans?
  - jurgenaut23 3y ago
    Yes, exactly. It's amazing how people don't see that the _whole_ point of banks is to aggregate defaulting risks across a very large number of loans to power the economy.
    - eru 3y ago
      Banks have more than one point and function. Eg they also provide 'checking' accounts. There's no conceptual reason why that function needs to be bundled with the 'aggregating default risk' function; but it happens to be so in many countries. To illustrate, on the one hand, think of an institution that takes deposits and lets you transfer money to pay your rent etc, but doesn't make any 'real' investments: all they do is park the deposits in government loans. On the other hand, think of exchange traded funds that invest in a wide array of bonds (or even equities). They diversify defaulting risk across the economy, without taking deposits, like your typical bank does.
      - hgomersall 3y ago
        The ability to provide loans from nothing is the special feature of a bank, which is why they are so heavily regulated. The deposits are just the opposite half of the loan creation. No bank invest deposits - they're a liability to the bank.
        eru 3y ago
raincole 3y ago
What's the alternative tho? If you take a loan, in most countries you're expected to pay it back, no? Do you think people should be able to default without consequence?
- jurgenaut23 3y ago
  Short answer: yes, but. Without consequence, of course not. But you should be able to 'separate' your professional and personal life, even as an entrepreneur. I would NEVER found my own business if I knew that going bankrupt would take away my kid's house. This is why instruments such as limited responsibility companies have been invented.
  - jeffreygoesto 3y ago
    Knew a guy who tried to outsmart tax rules and founded the company as his wife's. Also had a big mortgage on their house. She fell in love with the local butcher (no joke) and one afternoon they emptied the bank account and flew to Goa. That guy lost his wife, his company and his house in one afternoon and went straight to ER with a heart attack.
    - WalterSear 3y ago
      And his butcher.
      - filoleg 3y ago
        That too. Doesn’t seem like a big deal, but I imagine if you have your own butcher in the first place, you are somewhat particular and specific about what you want (kind of similar to a lot of people clinging onto their usual hair stylist/barber for their dear life, once they find one that does things the way they like). And I would bet that the number of barber options around would be much larger than that for butchers.
  - PurpleRamen 3y ago
    > But you should be able to 'separate' your professional and personal life, even as an entrepreneur. Why? In case of success, you have the personal benefit from it. So why should other people and society take the bill in case of your fail? Or how exactly is this supposed tor work?
hgomersall 3y ago
Does GMbH not afford limited liability for loans?
- zwnow 3y ago
  It does, but it's about 10k€ and you need to meet certain requirements. Recovering from a 10k€ loss will take some time in a country with extremely high taxes.
  - 0x073 3y ago
    And there is UG if you have no 10k€
  - FinnKuhn 3y ago
    Then use a "UG (haftungsbeschränkt)"
- heisenbit 3y ago
  Bank's tend not go give loans to newly formed GmbH without a real person being on the hook.
  - fransje26 3y ago
    I've also heard first hand of banks requiring from business owners to be personally liable for the loans even for well-established, successful businesses. And when you are trying to extend your facilities, the loans are not in the 10k range.. It was mind-boggling..
    - badpun 3y ago
      If the banks gave cheap credit to businesses without any collateral or any real liability, they would quickly go out of business because of people taking advantage of them. Credit without collateral is available (e.g. credit cards), but it’s not cheap, and it’s limited in size.
      - 3y ago
geraldhh 3y ago
please elaborate how germany is different in structuring risk of business failure
deleted 3y ago
[deleted]
FinnKuhn 3y ago
From what I could find it bankruptcy in Germany takes 3 years after a change in 2020, which I find is pretty reasonable and is the same length as in the US...

by zwnow 3y ago

pier25 3y ago

Isn't this the same in most countries?

zwnow 3y ago
It is, but in Germany your taxes on wage is very high. It's easier to save up a financial safety net in countries with higher wages and less taxes.
- jowdones 3y ago
  Well it's high in Europe in general. And seems quite similar like in the US. That is you can use a rough estimate of 40%, meaning half the time you're working for the state. So the problem is not taxation as much as low wages. Germany has lower wages than US, Romania has lower wages than Germany. State skims half what you make anywhere. It's the absolute amount you are left with that makes the difference and that's why Americans have more money to spend on businesses than Europe and Europe has more than Asia and Asia more than Africa.
  - zwnow 3y ago
    I agree, it's difficult in most countries. Germany has tons of additional laws regarding taxation too. I for myself wouldn't even want to try opening up a business solely due to the taxation expertise I'd have to look up into. Don't get me started on international business too... It's just too much. Kudos to whoever manages to get through all that as a one man business owner.
    - ido 3y ago
      As someone running a business in Germany I think you're overestimating it. I have a steuerberater (accountant/tax-advisor) who is also doing my bookkeeping and he takes care of all that. When my UG was young paying him was a few €100s per year overhead. Today (when my company is turning over several €100Ks per year) it's a couple €1000s per year (so relatively negligible expense for my business). There's still plenty to complain about regarding bureaucracy and red tape but don't let this alone deter you from running a business (especially not a software startup).
      - zwnow 3y ago
        I might do, it's just way more work than in other countries. 90% of which I really don't want to bother with.
        ido 3y ago
        I'm pretty sure it's pretty much like that in most other countries (at least most other European countries). I believe its the US/UK that are unusually easy to open a company in.
  - yobbo 3y ago
    > That is you can use a rough estimate of 40% No. But it's complicated ... For example, income tax is charged on the employee, after the employer has been charged employer/social fees of 30-40%. And then, sale of most goods are charged ~20% VAT. The total taxation pressure "per hour worked" is far above 40%.
    - vidarh 3y ago
      Total tax wedge (including employer/social fees) for a single person with no children earning 167% of the average worker in Germany was 49.2% in 2023 according to OECD Taxing Wages. Most of the other categories they measure (a matrix of single vs married, no vs 2 children, and 67%, 100% and 167% of average wage for one of the partners w/ the other person at 100%) end up closer to the 40% mark (as low as 28.4%)... But most people do not count employer contributions, because they are not part of the negotiated salary, and most people don't even know what they are. Yes, they of course affect how high salaries businesses will offer. In terms of income tax and employee contributions, in the OECD scenarios Germany maxes out at 41.2% (the OECD average is 30%; the US is at 29.1%). As a comparison, Belgium is "always" worst in class on this in Europe, w/47.8%. Overall Germany is still one of the highest tax countries in Europe, but it also has a higher difference than most countries the highest taxed (high income single earners) and families with children in total effective tax rate - for the later, Germany is much closer to the pack, to the point of being near or below the OECD average for a couple of categories. VAT in most countries add very little, because most of your gross income does not go towards VAT rates products - for starters you're first paying tax, and then covering housing and most places exclude a number of others things from VAT as well. Depending on country and income level and spending patterns, it does add a few percentage points, but it's rarely significantly skewing the overall taxation level all that much (last time I did the numbers, at a far above average income, VAT increased my total taxation by about 4%)
  - vidarh 3y ago
    The US tax levels are lower than Europe, but it mostly events out when you account for health insurance with exception of a few of the highest tax European countries (Belgium always being the extreme outlier, and Germany is usually second, at least of the OECD countries, depending on your specific circumstances)

tristramb 3y ago

"In Germany, if you take a loan to open up a business, you can pretty much ruin your whole life" So instead you ruin other people's lives?

hgomersall 3y ago
The bank? The ones whose job is literally to turn risk into premium on loans?
- jurgenaut23 3y ago
  Yes, exactly. It's amazing how people don't see that the _whole_ point of banks is to aggregate defaulting risks across a very large number of loans to power the economy.
  - eru 3y ago
    Banks have more than one point and function. Eg they also provide 'checking' accounts. There's no conceptual reason why that function needs to be bundled with the 'aggregating default risk' function; but it happens to be so in many countries. To illustrate, on the one hand, think of an institution that takes deposits and lets you transfer money to pay your rent etc, but doesn't make any 'real' investments: all they do is park the deposits in government loans. On the other hand, think of exchange traded funds that invest in a wide array of bonds (or even equities). They diversify defaulting risk across the economy, without taking deposits, like your typical bank does.
    - hgomersall 3y ago
      The ability to provide loans from nothing is the special feature of a bank, which is why they are so heavily regulated. The deposits are just the opposite half of the loan creation. No bank invest deposits - they're a liability to the bank.
      - eru 3y ago

raincole 3y ago

What's the alternative tho? If you take a loan, in most countries you're expected to pay it back, no? Do you think people should be able to default without consequence?

jurgenaut23 3y ago
Short answer: yes, but. Without consequence, of course not. But you should be able to 'separate' your professional and personal life, even as an entrepreneur. I would NEVER found my own business if I knew that going bankrupt would take away my kid's house. This is why instruments such as limited responsibility companies have been invented.
- jeffreygoesto 3y ago
  Knew a guy who tried to outsmart tax rules and founded the company as his wife's. Also had a big mortgage on their house. She fell in love with the local butcher (no joke) and one afternoon they emptied the bank account and flew to Goa. That guy lost his wife, his company and his house in one afternoon and went straight to ER with a heart attack.
  - WalterSear 3y ago
    And his butcher.
    - filoleg 3y ago
      That too. Doesn’t seem like a big deal, but I imagine if you have your own butcher in the first place, you are somewhat particular and specific about what you want (kind of similar to a lot of people clinging onto their usual hair stylist/barber for their dear life, once they find one that does things the way they like). And I would bet that the number of barber options around would be much larger than that for butchers.
- PurpleRamen 3y ago
  > But you should be able to 'separate' your professional and personal life, even as an entrepreneur. Why? In case of success, you have the personal benefit from it. So why should other people and society take the bill in case of your fail? Or how exactly is this supposed tor work?

hgomersall 3y ago

Does GMbH not afford limited liability for loans?

zwnow 3y ago
It does, but it's about 10k€ and you need to meet certain requirements. Recovering from a 10k€ loss will take some time in a country with extremely high taxes.
- 0x073 3y ago
  And there is UG if you have no 10k€
- FinnKuhn 3y ago
  Then use a "UG (haftungsbeschränkt)"
heisenbit 3y ago
Bank's tend not go give loans to newly formed GmbH without a real person being on the hook.
- fransje26 3y ago
  I've also heard first hand of banks requiring from business owners to be personally liable for the loans even for well-established, successful businesses. And when you are trying to extend your facilities, the loans are not in the 10k range.. It was mind-boggling..
  - badpun 3y ago
    If the banks gave cheap credit to businesses without any collateral or any real liability, they would quickly go out of business because of people taking advantage of them. Credit without collateral is available (e.g. credit cards), but it’s not cheap, and it’s limited in size.
    - 3y ago

geraldhh 3y ago

please elaborate how germany is different in structuring risk of business failure

deleted 3y ago

[deleted]

FinnKuhn 3y ago

From what I could find it bankruptcy in Germany takes 3 years after a change in 2020, which I find is pretty reasonable and is the same length as in the US...