How should I register a company
Who doesn't have to register a business?
Business is used to describe any independent, planned, long-term, profitable activity. There are a few exceptions to this, which are presented in more detail below. Liberal professions such as writing activities and original productions such as agricultural or forestry work are not counted among other things as trade.
A distinction between tradespeople and freelancers cannot be clearly identified in many cases, since freelancers also usually work with gainful intent and the criteria overlap. Nevertheless, some basic criteria are decisive for a freelancer, such as intellectual and creative work.
Freelance employment does not constitute a trade if a university or technical college degree is required to pursue it. These include the so-called catalog professions such as doctor and lawyer. Artists and writers do not have a business either. In order to carry out these activities, you need special professional qualifications and achievements and, in particular, personal contribution. This means that catalog or catalog-like professions cannot be compared with a trade. A freelance activity is therefore an independently practiced scientific, artistic, literary, teaching or educational activity that is characterized by professionalism, public welfare, self-control and personal responsibility. Here you will find a list of all catalog professions and some catalog-like professions.
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Tax advantages of the liberal professions
In Germany, the liberal professions and artists are particularly encouraged by tax law and supported by measures. These concern, for example, the wage tax deduction, tax exemption or tax reduction. Freelancers work on their own account for companies and other people. In order to be able to issue invoices, you have to apply for a tax number at the tax office. You are exempt from registering with the trade office and thus from trade tax and therefore neither have to pay taxes to the municipalities nor use double-entry bookkeeping. The income or profit from self-employment results from the difference between operating income and operating expenses. Only this profit has to be taxed. Taxation is carried out by the tax office after the end of the calendar year by way of income tax assessment, with wage tax and any advance payment being offset.
In the income tax return, freelancers can claim the same allowances as traders for their pension plans or other special expenses. No sales tax has to be paid for other income that is tax-free according to § 3, because these payments are not payment for a service, including, for example, the honorary salary for artists as well as donations from funds from the German Artists Aid, scholarships to promote research or to promote scientific or artistic training or further training, amounts from the artist's social security fund and payments from public funds or funds from a public foundation that are approved because of need or as aid for the purpose of education or training, science or art directly to promote.
Membership in the IHK, the Chamber of Industry and Commerce is not mandatory. Self-employed freelancers are not subject to social security contributions. However, you should check whether you are required to take out statutory pension insurance.
Advantages at a glance
- Tax benefits
- No business tax as no business registration is required
- In individual cases exemption from sales tax (small business owners)
- Partner company possible
- Income-surplus calculation possible
2. Original production
Primary production includes agriculture and forestry, viticulture and horticulture, beekeeping, animal breeding, hunting, fishing and mining. All forms of primary production are not classified as trade. This primary sector of the economy supplies raw materials from the harvest such as wood or energy through the use of hydropower. It is therefore subject to its own rules and depends on the soil and weather conditions. Companies in the primary sector are allowed to sell their products without registering a trade.
3. Manage your own assets
The management of one's own assets is not a commercial activity as long as the scope of private asset management is not exceeded. This includes, for example, renting and leasing real estate, which is considered a common use of the property. In this context, a trade is only present when the use of one's own assets reaches a level that is comparable to a trade, so that a need for supervision arises, such as when renting holiday homes.
The information published on our site is all written and checked by experts with the greatest care. However, we cannot guarantee the correctness, as laws and regulations are subject to constant change. Therefore, always consult a technical expert in a specific case - we will be happy to put you in touch.
firma.de assumes no liability for damage caused by errors in the texts.
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