As a first step towards entrepreneurship, many founders first open a small business because it is the easiest way to become self-employed. But for whom is it actually worth it?
In principle, anyone can start a small business in Germany. Whether as additional income to your main job, additional income for students or to start full-time self-employment – with a small business it is possible to start your own company without start-up capital.
Fewer regulations and obligations
Although the operator of a small business is legally an entrepreneur, he does not have the status of a merchant, as the business portal “Register a Business” reports. For this reason, he is not obliged to keep double-entry books and is allowed to tax his profits as part of a normal tax return. In addition, unlike commercial companies, they can be exempt from sales tax. However, two requirements must be met for this, which the blog “Become self-employed” explains: The company’s sales must not have exceeded a gross value of 22,000 euros in the previous calendar year and must probably remain below 50,000 euros in the current year. As a result of a successful exemption, sales tax is no longer charged when issuing invoices, meaning that a small business owner can usually offer their goods at a cheaper price or make more profit. However, an unavoidable obligation is to register with the trade office, according to “Register a business”.
So if you want to start out as an individual and want to test your business idea with as little financial burden as possible, you can take the first step by starting a small business. Nevertheless, you should inform yourself thoroughly about all eventualities beforehand. Contact persons can be trade offices, the Chamber of Commerce or the employment agency.
It depends on the business idea
However, for a start-up in technical areas with high initial investments, it may make more sense not to take advantage of the small business regulation, as “Self-Employed” advises. Because high investments in technical equipment such as computers or software solutions can quickly lead to high levels of stress. These investments cost several thousand euros, and the sales tax on the purchase is correspondingly high. This can be claimed as input tax if an exemption is waived.
Even those who want to sell primarily to business customers often find themselves in a better position with sales tax liability than with small business regulations. When purchasing the goods, founders are generally entitled to deduct input tax. This means that the net prices can be used as a basis for calculation – the sales prices are reduced accordingly. The sales tax then only represents a continuous item.
Anyone thinking about starting a small business should be aware that this decision will remain valid for at least five years. In addition, small businesses are liable with their private assets, warns the insurance broker “Finanzchef24”.
Editorial team finanzen.net