A one-woman business

I started my own business over a year ago and had to make the same decision. In the end I did not go for a GmbH but chose a one-woman business for a couple of reasons:

 

Accounting:

With a GmbH you have to double entry bookkeeping rather than just using the net income method. Unless you are really fit in German accounting you would hire a tax advisor to do your accounting but it will cost you a lot.

 

Taxation:

On a monthly basis, I declare and pay my VAT. Once a year I do an annual VAT return and an income tax return.

With a GmbH you will deal pay corporate tax, trade tax, and withholding tax. You will have to pay tax upfront and then do an annual declaration as well and either get a refund or another payment coming up.

 

Publishing your results:

As a GmbH your results will have to be published at Bundesanzeiger. Depending on your balance sheet total you publish a short version of your balance sheet and P&L as well as a status report.

 

 

For UG:

In the last few weeks I have founded my own UG (mini-GmbH). It cost me €110 registration fee, €45 Notar fee and €1 to open the bank account to finalist the formation of the company.

 

I received my Urkunde a few days ago, all bound in blue and white sting with the bavarian flag on the front, I’m very proud 🙂

 

A couple of points:

 

Yes you have to return a percentage of profits after costs and tax – which means if your company earns 50,000 in a year and you are paying yourself 30,000, this gets deducted before tax, then finally they look at how much is left in order to work out how much you have to keep in the company. This is definitely no bad thing, it’s generally good practice to keep a good capital base and it forces you to do this. When you have enough capital, the company form changes to a full GmbH.

 

The reason I chose a mini GmbH or “UG” (Unternehmergesellschaft) is because I would like the status of a GmbH and the protection against liability but I don’t have the cash right now to found one. It was brought into law in Germany in 2008 to stop people doing exactly what is mentioned above – i.e going to the UK and founding a limited company.

 

My second point is something I found out last week when trying to open the company bank account to formalise the formation of the company… Stadtsparkasse do not support the UG form just yet as it is perceived as “too new”, and Deutsche Bank fully support the UG form but want to see the “satzung”. The “satzung” is a document which you get from the Notar when founding your company – it contains lots of info and legal statements regarding your company and liability etc. It also is proof that you signed your company into German law in the presence of a Notar.

 

Basically as of 2010, when you found a UG you can opt to get a “satzung” which costs 300-400 euros, or a new shortened version called a “musterprotokoll” which costs about €45. My Notar advised me to just take the musterprotokoll as it is widely accepted now and contains all the relevant information and legal weight of the satzung without all the flaff – the satztung is what you would HAVE to have if you were founding a full GmbH

 

still with me? 😉

 

So anyway – I have a musterprotokoll as my “proof of business” but it is still not completely accepted everywhere. I eventually opened my account with Commerzbank who were well up to date on the new legal forms, so take a look there once you start looking for a bank to open your company account with.

 

 

 


 

 

Taxation and social security for businesses

Taxation
You can earn EUR 8,130 a year without paying tax, after which you pay on a sliding scale. As soon as you earn over EUR 17,500 in a year, you will be liable for Umsatzsteuer/Mehrwertsteuer (VAT/ turnover tax).

Social security
The self-employed are not covered by the state-funded social security system so you will need to organise private insurance plans for healthcare, life insurance and pension.

For more information on taxation and social security, see the Expatica article Taxation and charges for the self-employed in Germany.

Invoices and paperwork

Your invoices for any amounts over EUR 150 should include the following information:

  • full name and address of your company;
  • full name and address of the customer/service recipient;
  • location and invoice date;
  • tax number (Steuernummer);
  • invoice number;
  • amount/type of goods or services provided;
  • time of delivery/provision;
  • any payment already received;
  • net amount owed;
  • the tax amount and, as you do not pay turnover tax, include the line ‘Turnover tax is not levied, as small entrepreneur in accordance with § 19 UStG Paragraph 1’;
  • any discount;
  • date by which payment should be received.

For amounts under EUR 150, it is sufficient for an invoice to include:

  • the full name and address of your company;
  • location and invoice date;
  • amount/type of goods or services provided;
  • amount owed and tax amount as one sum, ie. the gross amount to pay;
  • tax rate, or note of tax exemption.

You need to send invoices to another company or organisation within six months of delivering the goods or services and should keep all invoices for 10 years.

Getting advice for your business start-up

Take advantage of the free advice on business start-ups available from the business promotion unit in your municipal or city authority, your local Chamber of Industry and Commerce (Deutscher Industrie-und Handelskammertag or DIHK) or Chamber of Trade (Zentralverband des Deutschen Handwerks or ZDH). They may be able to provide information on any national, regional or local initiatives, training in business skills and some may offer specific services for foreigners who want to start a business in Germany. Women can also contact the National Agency for Women Start-ups Activities and Services (bundesweite gruenderinnenagentur or bga).

If you need advice on legal issues in setting up your business, then contact a lawyer via the German Association of Lawyers (Deutsche Anwaltauskunft) or a public notary through their professional body the Federal Association of Notary Publics (Deutscher Notarverein).

Tax consultants can advise on legal structures, tax issues and business management. To find a tax consultant, contact the German Federal Chamber of Tax Consultants (Bundessteuerberaterkammer or BSTBK) and the German Association of Tax Advisors (Deutscher Steuerberaterverband or DStV).

Contact relevant professional associations for advice. You can also get business help and advice for a small donation from experienced senior technical and executives from the commercial world via the organisation Bundesarbeitsgemeinschaft der Wirtschafts-Senioren.

KfW Bankengruppe provides financial advice for start-ups and Federal Government loans though its network of 70 offices throughout Germany. Information line: 0800 539 9001 (from inside Germany).

 

SOURCE: several websites. Unfortunally I did not took note of the addresses at the time. I will try to find them again and post here.

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