Self-employment might sound like a dream to some people. Charging your desired hourly or daily rate, only working the projects you want to and enjoying life might be some of the thoughts people associate with self-employment. In most cases, the reality looks quite different.
Where to start?
Depending on what field you want to be self-employed in, you should get a so-called ‘Gewerbeschein’ (which translates to trade certificate) and a ‘Steuernummer’ (tax number) from your local ‘Finanzamt’ (German tax office). Not all jobs require a Gewerbeschein, but those jobs who don’t do are normally predefined (such as attorney or doctor). Here is a list of some jobs that don’t require a Gewerbeschein . Before you obtain your tax number, you have to fill out a Fragebogen zur steuerlichen Erfassung , which is a survey, by which the German tax office wants to gather some basic information about your business, so they know, how they should classify you. Don't be scared of that short survey. While it might sound inundating, you can always find help with answering the questions; you can visit the Finanzamt in person, ask via phone or find a tax consultant.
You should ask yourself in general, how you want to go about taxes in the future. Do you want to prepare them yourself or find a tax accountant (from the beginning)? Outsourcing your taxes might save you some time, but will also cost you money. Depending on how well your knowledge of the German language is, finding someone to help you professionally with taxes can be a good idea. Depending on your job, there might be a chamber or other professional association you have to join. If you need a Gewerbeschein, you will also join the IHK (Industrie- und Handelskammer, which translates to chamber of industry and trade) by default. However, you only have to pay membership fees once you make more than 5.200 Euros per year. If your company does not have to be registered in the commercial register (Handelsregister) or if your yearly revenue does not reach more than 25.000 Euros, you also do not have to pay the basic fee for the first two years and the levy for the first four years. In addition, you might also have to be (board) certified to work certain jobs in Germany. This does apply for jobs like physician and attorney, but also some other jobs like craftsman.
Should I become an ‘eingetragener Kaufman’, a ‘GmbH’, an ‘AG’, a ‘UG’, a ‘Limited’ or something completely different?
There are quite a few business forms to choose from. Some forms offer a little more liability protection, but require more capital upfront. If you want to freelance, it could be fine to just register yourself as a freelancer and get a Steuernummer. If you work with a number of people and have plans to grow quickly, it might make sense to choose a different option. The UG is somewhat of a German equivalent to the British Limited ; you can start it with just a few Euros (not including possible fees for attorneys or other consultations). A GmbH (Gesellschaft mit beschränkter Haftung, which translates to company with limited liability) requires 25.000 Euros in corpus, of which at least 12.500 Euros have to be in the company’s bank account when the company is formed. An AG (Aktiengesellschaft, which translates to stock company) requires 50.000 Euros in corpus. Both can limit the liability of the companies to the business assets. But Germans are not as litigious as other nations and there are also insurances for freelancers available that help them in case someone wants to hold them liable, as well as with legal expenses. A GmbH and an AG also require more legal and business paperwork, for which you might have to pay an expert as well.