Legal, Tax, and Accounting June 28, 2020

Starting a business as a solopreneur

Aidas Bendoraitis @archatas

I am about to start a company in Germany with UG legal form. It's a side business, and I don't expect it to be profitable from the beginning.

As the business owner, how should I pay salaries to myself? Should I have a job contract within my own company, or should I send invoices to my own company to get paid? Can I transfer any reasonable amount of money from my business bank account to my private bank account or just a specific maximal amount per month?

What are the standard legal practices to work at your own company?

  1. 2

    Hi @archatas, I've opened an UG using Firma.de. It was a pleasant experience. I would recommend that you contact a Steuerberater that would look into you specific case and suggest the best solution. Don't forget that as an UG you have to keep at least 25% of your revenue until you reach 25000 euro, at which point you'll have to transition to Gmbh. Don't forget additional costs like accounting, insurances and taxes.
    Another thing that I've noticed in a many indie hacker communities is that most of the people are not from Germany and perhaps do not have the same laws and restrictions as you do. So don't follow their advice to do business without limiting your liability. Starting an UG is the right decision.

    1. 1

      @batkir, thanks for the advice and motivation! I hope that the strict bureaucracy won't hold me up for too long. :)

  2. 2

    Hi there,

    How should I pay salaries to myself?
    A: As a 1-man UG owner you're automatically listed as the CEO "managing shareholder" or "Geschäftsführender Gesellschafter". You then make a contract with the company and get paid a salary. This is the most common and best way to do it.
    If you invoice the UG, you must open another company to which you invoice. This makes the whole thing more complicated and you have a lot more work in accounting

    Can I transfer any reasonable amount of money from my business bank account to my private bank account?
    A: This is not so easy with limited liability companys (like the UG / GmbH / Ltd). You should inform yourself more intensly here as this can make problems in the future. https://www.firma.de/rechnungswesen/gewinnverteilung-bei-gmbh-ug-das-ist-zu-beachten/ (in german)

    The formation of a limited liability company (UG) is associated with many obligations and additional costs. I don't know what you're up to, but I recommend you start with a one-man business ("Einzelunternehmen"), especially when your risk is manageable

    1. 1

      Thank you very much, @michashacks! Your answer is the most informative.

      I want to start as a limited liability company and am planning to grow the company incrementally to more people over the years. Thank you for the link. This is what I needed.

      1. 2

        Glad it helped you! You can definitely get a free consulting at your local start-up center or IHK for more info ;) I wish you the best of luck

  3. 2

    I got the advice that it doesnt matter until it matters. I am not saying its good advice, but ultimately its just you and not a big deal until you make a lot of money.

    1. 1

      @Red8lima, this is not an option for me as I don't want to have any legal problems with the company in the future.

  4. 1

    First question ... do you need to set up a company? Unless you need to limit your liability or are working with customers that require you to be limited then you could avoid the hassle and operate as a sole-trader. I don't know the specifics for Germany but this kind of model works in many other countries.

    1. 1

      Hi @rab! Thank you for suggesting an option. As I am planning to grow the company to more people over the years, and want to have non-personal liability, I want to start a UG, and solo-trader would work for me only in the early stages.

      1. 1

        I updated as my comment on the threshold as was about tax (wasn't concentrating). Look up Mike Ashley of Sports Direct - he shows how far sole trader can take you before switching to limited. It's a long long way.

  5. 1

    Hi,

    We at businesslaunchub.com can help you set up a remote company in the UK. You can draw the salary from the company (some or all of it as the director) and might be able to benefit from tax if the total falls below 12000 sterling.

    1. 1

      Hello, @HammadSiddiqui! Thank you for the offer.

      But as I am living in Berlin and I see myself living there for the next decades, I want to pay the taxes in Germany and have my company here.

      Maybe your offer will be useful for some other entrepreneurs.

  6. 1

    I'm also in Gernany and chatted with my old bosses how to best set up a business here. They're advice was to avoid it at all costs. They've both set up companies here (GmbH and one solo thing each I believe) and would never do it again. Advised me to set up via Atlas and never look back

    1. 1

      Hello @alex_portabella! Can you please elaborate what is Atlas? Is it some company like firma.de which makes it easier to register a company?

        1. 1

          Cool service. I would probably use it if I was able to create a business in my chosen country (which is Germany). I hope this information will help other founders. Thanks for sharing.

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