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Freelance self-employed checklist: legal form, taxes and security

The start of self-employment is uncomplicated for freelancers and, in contrast to tradespeople, a few steps are detoxified. If you want to become self-employed as a freelancer, the ways to your first job are short:

1. Report to the tax office

First, you register with your responsible tax office no later than 4 weeks after starting your work. This can be done informally in a short letter stating the activity with a brief description. The tax office may request additional documents to check your status as a freelancer. You will then receive the "questionnaire on tax registration", which requires further information, including on expected future sales and profits. You can also access the questionnaire online using the form management system of the Federal Ministry of Finance on the Internet, fill it in and send it to your tax office via email.

2. Tax number allocation

After receiving your tax number, you can basically start. Check your income at least every quarter and whether you can possibly apply the small business regulation. In any case, you should also be prepared for the opposite in order to be able to service originally underestimated sales in the context of additional tax claims. It is generally recommended to declare 30 to 40 percent of each invoice as a tax deduction and, for example, to keep it in a separate account until the next tax return.

3. Legal form

A large number of legal forms are conceivable for freelance self-employment. If you do not explicitly opt for a separate legal form, this will automatically apply when you report to the tax office one-man business as a valid legal form. It does not have to be entered in the commercial register or in the partnership register. You also do not need a minimum share capital, but you are liable for claims against your company with all of your private assets.

In the case of the GbR at least two people work together. This can already be a joint external presentation up to joint projects. The GbR does not have to be entered in the commercial register or partnership register and you do not need a minimum share capital. However, here too, every partner is liable for liability claims against the company with all of their private assets.

The Partnership company is similar to the GbR and is aimed at all freelancers who want to cooperate with partners (e.g. within the framework of a practice community). Both partners are jointly and severally liable for the partnership's obligations. Unlike with the GbR, however, not in every case, but limited: If, for example, only one partner was involved in the processing of an order or several partners, only these persons are always liable for any recourse resulting therefrom. The establishment of a partnership company is somewhat more extensive. The contract between the partners must be certified by a notary and the company must also be entered in the partnership register at the generally competent local court.

The also possible Limited Liability Company (GmbH) can be used by freelancers as solo self-employed persons as well as in association with partners aka shareholders. In the case of liability claims against the company, liability at the GmbH is limited to the company's assets. The partners are only liable with their private assets in the case of loan liabilities. However, this obvious advantage is not free of effort. The articles of association must be notarized and the GmbH entered in the commercial register. (At this point, the legislature promises to reduce bureaucracy in the application process in the future) You also need starting capital of at least EUR 25,000. As a partner in a GmbH, you are also obliged to close each financial year with a profit and loss account plus a balance sheet.

The "little sister of the GmbH" is that Entrepreneurial company (limited liability) (UG). The UG can be chosen individually or as a group as a legal form. Compared to the GmbH, it is administratively detoxified and can be established using a sample form. With as little as EUR 1 start-up capital, you can start your freelance work. Remember, however, that the legislature has obliged you to create company assets: A quarter of the annual profit must therefore be put aside until 25,000 EUR company assets are reached. There is no time limit or corresponding pressure on sales.

4. Security

Freelancers must be insured with either statutory or private health insurance. Self-employed artists and publicists are required to be insured through the artists' social insurance (KSK), to which you pay contributions for health and long-term care insurance. Depending on the specific occupation, many freelancers are also compulsory members of their respective employers' liability insurance association as the statutory accident insurance provider.

Compulsory insurance in the statutory pension insurance are the following liberal professions and activities:

  • independent teachers
  • Educators, trainers, lecturers and lecturers who give lessons on their own account and who do not employ any employees who are subject to compulsory insurance
  • Caregivers who work in sick, weekly, infant or child care and who regularly do not employ an employee who is subject to compulsory insurance in connection with their self-employed work
  • self-employed midwives and obstetricians
  • Freelance sea pilots who work on a public mandate
  • Artists and publicists
  • Self-employed with a client

In the Chamber professions the registered freelancers are usually compulsorily insured as members with their chamber. These include a total of twelve independent professions - doctors, dentists, veterinarians, pharmacists, psychotherapists, notaries, lawyers, patent attorneys, tax consultants, auditors, architects and consulting engineers. An exception applies to psychological psychotherapists in Berlin, for whom there is no pension fund within their chamber. You are completely free of insurance and have to organize your retirement provision individually.

Self-employed engineers can, but do not have to be, members of their chamber. If you decide to become a member of the chamber, you must also take out pension insurance through your pension fund. If you do not belong to any chamber, you are also exempt from insurance and have to make individual provisions.

There are also others professional pension funds, such as the pension fund of the press for many occupations in the field of communication and media. In addition to the statutory pension insurance, members can take further measures to provide for old age.

5. Admission

In order to be allowed to work independently as a freelancer, a special license is required in some professional groups. This applies cardinally to the 12 independent professions:

Doctors, dentists, veterinarians, pharmacists, psychotherapists, notaries, lawyers, patent attorneys, tax consultants, auditors, architects and consulting engineers.

Members of the profession must register with their competent chamber by submitting the following documents:

  • Proof of qualification (usually successfully completed studies)
  • Proof of professional liability insurance
  • criminal record certificate

In other professions, membership in the professional chamber is optional. This includes engineers and architects. Here, however, the voluntary chamber membership has some advantages. Job titles such as "consulting engineer" or "architect" may only be used publicly if there is a membership in the chamber. This is to guarantee a quality standard. If you are not a member, you are only allowed to refer to yourself in public under your professional qualification as e.g. "Diplom-Ingenieur".

All other liberal professions are chamber-free and do not require a separate professional license. Either you receive your professional license from public institutions (alternative practitioners e.g. at the health department; publicly appointed and sworn experts at the IHK and the relevant court) or you are completely free of admission. (e.g. journalists or artists).