Step by step to self-employment: How to find the way to self-employment

Berlin Translate

Do you want to start your own business, but the legal terminology has you baffled? Then this article is just for you. Who are the self-employed? They are people who dream of working for themselves and being their own boss. In Germany, they are divided into tradesmen and freelancers. There are different rules, registrations and legal aspects for both. The classification also determines, for example, whether the entrepreneur has to pay trade tax or not. So lets get step by step to self-employment!

  • The legal term “self-employment” denotes:
  • A form of gainful employment;
  • Independence from your employer
  • the possibility of self-employment
  • the freedom to make decisions about orders
  • having advertising opportunities
  • Accounting and taxation to be done annually.

Before you worry about paperwork, registration, taxes, etc., you need to understand the difference between freelancers and tradespeople.

The self-employed in Germany: tradesmen (German: Gewerbe)

The trade is one of the most popular forms of self-employment in Germany. As a rule, it is a merchant in trade or a company. First, you must register a “Gewerbe” (trade) with the local trade office; this is the basis of your trade, even if it is a one-person business.But the term “Gewerbe” can also be confusing. For example, if you only make money from affiliate marketing, that is also a “trade.” As a business owner, you have a choice between sole proprietorships and partnerships, in which individuals and/or legal entities join together to achieve a common goal. Sole proprietorship is the most common form of self-employment, which we will focus on today. Self-employed entrepreneurs are likely to have a property, such as a store, small office, or other property where they sell their goods and services.

Registration as a sole proprietorship

Unlike freelancers, self-employed sole proprietors must register their business as a trade. As mentioned above, you must register a “trade” with the local trade office. Please note that in this case you have to register the “Gewerbe” before you go to the tax office to get a tax number. Your business will then automatically be given the legal form of a sole proprietorship. You do not need capital, but your liability is now unlimited.

Become self-employed as a freelancer

To become a freelancer, you must meet several conditions.

Step 1: Register with the tax office. This must be done no later than one month after you start your self-employment. After registering with the tax office, the person will receive a “tax questionnaire” to fill out.

Step 2: Choosing the form of business. An individual freelancer should register as a sole proprietor. If a person plans to join forces with other self-employed people, he or she should register as a GbR. Before establishing a partnership, a person should register with the registry of the same name. It is better to have the registration notarized.

Step 3: Accounting. Freelancers in Germany keep a simple EUR accounting. Here they record all income and expenses in a digital cash book. Self-employed persons must keep all submitted invoices for 10 years so that they can be presented to the tax office during a tax audit.

Step 4: Social contributions. All people who earn more than 450 € per month have to pay a social contribution (about 23% of their salary). If you have a mini-job, you do not pay a social security deduction, but a flat rate of 30% of your salary). Freelancers can choose whether or not to belong to the social security system. Since freelancers do not have an employer, they must pay their own contributions to the pension fund. If you become a freelancer, you have the right to apply for a 50% refund of contributions for the first three years of employment.

Becoming self-employed. Is a self-employed person allowed to hire employees?

In Germany, only those who do all the work themselves are considered to be self-employed. However, if the professional responsibility lies with salaried employees, the status as a freelancer can also be denied. In such a case, the business is considered a commercial enterprise, for which you may have to pay trade tax.How do you properly leave the freelance system? If you want to end your activity as a freelancer, you must deregister with the tax office using a special form on the authority’s website. If a freelancer leaves the system within a calendar year, he or she must also file a tax return for that year.

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