Nebengewerbe: What you need to know about starting a side (hustle) business in Germany

Contents

• What is a side business in Germany?
• How do I start a side business?
• Bureaucracy
• Side businesses & health insurance
• Pros & cons
• Side hustles vs. Kleingewerbe
• Want to know more?

What is a side business in Germany?

A side business/hustle – or Nebengewerbe in German – is, naturally, something you do alongside your main occupation. If set one up it may not exceed your main occupation, either economically or in terms of time. That is, 18 hours per week is currently the upper limit to which self-employment is still considered part-time.

What is a side business if I’m unemployed?

If you are unemployed, 15 hours per week is the limit for your main occupation. The limit for additional earnings may not exceed €165 (ALG I) or €100 (ALG II) per month, otherwise, you are no longer considered unemployed which then cancels your unemployment benefits.

What is a side business if I’m a student?

For students, your side business can’t exceed 20 work hours per week. Any income you generate is counted towards Bafög and Kindergeld, and the benefits you receive are adjusted if the allowances are exceeded. Students are allowed to earn up to €4,880 per year, which is about €406 per month. If you have to pay semester fees or the like, you can also apply for a higher tax-free income.

Do I have to inform my employer?

If you’re an employee, informing your employer that you’re hustling on the side is not only recommended but mandatory. Your employer won’t accept it interfering with your job. And, under no circumstances can your side business compete with your employer. (Competition, in this case, means offering similar or the same products as your employer).

How do I start a side business?

Part-time self-employment begins at the Gewerbeamt (trade licensing office) when you have to tick on your Gewerbeanmeldung (trade registration) form whether you want to become self-employed on a full-time or part-time basis.

However, doing a part-time gig says nothing about your legal form. Indeed, you can form a side business using the following legal forms:

• GmbH (limited liability company)
• UG (entrepreneurial limited liability company)
• GbR
• Einzelunternehmen (sole proprietorship).

Bear in mind, that the legal form you choose determines how many hoops the German authorities will make you jump through.

What (bureaucratic) hoops do I have to jump through?

Depending on the legal form you have chosen, you will now have to deal with various authorities. Below is a list of what to expect.

Handelsregister (commercial register)

If you start your sideline business as a Kaufmann / Kauffrau (merchant), GmbH, UG or other incorporated company, you must register with the Handelsregister before taking any other steps.

Gewerbeamt (trade licensing office)

If you don’t have to enter your business into the Handelsregister, your first step is registering at your local Gewerbeamt. Otherwise, this is your second step. At the Gewerbeamt, you will need to do a Gewerbeanmeldung (trade registration), which involves filling in a one-page form. Most importantly, make sure you tick the box ‘nebenberuflich’ (part-time).

Is your profession subject to authorisation? If so, you must enclose any sector-specific licences when doing a Gewerbeanmeldung.

Finanzamt (tax office)

After registering your business with the Gewerbeamt, the Finanzamt will send you a tax registration form. Once that’s processed, they’ll send you a  Steuernummer (tax number).

If you wish to sell goods or services outside Germany, you will need a VAT identification number. You can apply for this at the Bundeszentralamt für Steuern (federal central tax office).

Arbeitsamt (employment office)

Employing staff? Then apply for a company number from the Bundesagentur für Arbeit (federal employment agency). You need this number to register your employees with the social security and health insurance funds.

IHK or HWK

Once you have registered your business, membership with the IHK (chamber of industry and commerce) or HWK (chamber of crafts) is the next step. Freiberufler (liberal professionals) and agricultural businesses are exempt. Handwerker (craftsmen) naturally have to register with the HWK. All other businesses register with the IHK.

Also, check whether your craft needs to be registered in the Handwerksrolle (handicrafts register). This is a register in which businesses of trades that are obliged to be on this public register are entered.

Berufsgenossenschaft (trade association)

You also have to become a member of the relevant trade association for your profession. A Berufsgenossenschaft looks after your interests as well as the interests of the profession.

Side businesses and health insurance in Germany

Anyone who wants to start a side hustle – whether employed or not – doesn’t initially have to deal with health insurance. Only when the income exceeds the compulsory insurance limit do you have the freedom to choose whether to get either private or voluntary statutory health insurance.

Private vs statutory health insurance

Bear in mind that private health insurance is levied irrespective of income, while statutory health insurance (gesetzliche Krankenversicherung) charges a percentage of your income. If you have statutory health insurance and your income grows, so will your contribution until the income threshold is reached and it maxes out.

Students and health insurance

For students, family insurance usually applies until the age of 25. Even after that, students – even with side business – can count on significantly cheaper health insurance rates. However, as soon as the time limit of 20 hours per week is exceeded and you are thus only a part-time student, you must take out voluntary insurance, which is significantly more expensive than the student rates.

How much does it cost to register a side business?

Since a side business does not differ from a standard business in terms of the formation process – expect the same costs as a full-time founder. The costs vary depending on the legal form – the costs of forming a sole proprietorship or GbR, for example, are significantly lower than those of a GmbH.

What all incorporations have in common are the costs incurred for business registration and notary services. A Gewerbeanmeldung (trade registration) costs between €16 and €60. The notary’s fees, however, can differ significantly depending on the amount of work involved.

What are the pros and cons of a side business?

There are also advantages and disadvantages to part-time self-employment. These can vary depending on the individual situation of your business. Nevertheless, here is a list of all the possible pros and cons:

Bonus: Are side hustles the same as a Kleingewerbe?

The Nebengewerbe (side business) shouldn’t be confused with the Kleingewerbe (small business). A side business can certainly be a Kleingewerbe. And, a Kleingewerbe is often a Nebengewerbe. But, there are Kleingewerbe that are full-time occupations, and Nebengewerbe that are not considered Kleingewerbe.

Kleingewerbe, for example, are never registered in the Handelsregister (commercial register). This means that a one-person limited liability company as a side business can never be a Kleingewerbe, but a sole proprietorship in a side business can have such a classification.

Many homemakers and pensioners start with a Kleingewerbe to be able to start a business at the lowest possible cost and risk. However, if you want to try out a business idea alongside your job, studies or unemployment then pick the legal form that is the best fit for your side business.

Want to know more?

We have a Master List of all company formation-themed articles here. This is a sample of what’s on offer:

• What is a Kleingewerbe?
• The Kleinunternehmerregelung
• An overview of the business structures