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

updated on 26. July 2021 13 minutes reading time
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A side business/hustle (or Nebengewerbe in German) is, of course, something you do alongside your main occupation. No matter if it’s alongside your job, studies or a way to supplement unemployment benefits, starting one up in Germany is standard across the board.

This article gives you what you need to know about starting a side (hustle) business in Germany.

Contents:

  1. What is a side business in Germany?
  2. How do I start a side business?
  3. What (bureaucratic) hoops do I have to jump through?
  4. Side businesses and health insurance in Germany
  5. What are the pros and cons of a side business?
  6. Bonus: Are side hustles the same as a Kleingewerbe (small business)?

What is a side business in Germany?

First of all, any side business may not exceed your main occupation, either economically or in terms of time. 18 hours per week is currently the upper limit up 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).

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Andreas Munck

  • Startup expert
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For over seven years I have been advising businesses on how to do business in Germany. I will be happy to call you and answer any questions about your formation in a one-on-one consultation. Just click the green button below.

 

 

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, indicating “part-time” says nothing about your legal form. Indeed, you can form a side business with a GmbH, UG, GbR or a sole proprietorship. Bear in mind, that the legal form you choose determines how many hoops the German authorities will make you jump through.

Get the right advice without breaking the bank

Deciding on the best legal form for a business used to involve either a lot of guess work or paying big bucks to a lawyer. With firma.de, you get guidance from a knowledgeable consultant at a founder-friendly fixed price.

 

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 merchant (Kaufmann), 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 to register at your local Gewerbeamt. Otherwise, this is your second step. At the Gewerbeamt, you will need to register a trade (Gewerbeanmeldung), 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 a business licence and any sector-specific licences when doing a Gewerbeanmeldung.

Finanzamt (tax office)

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

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 of an IHK (Chamber of Industry and Commerce) or HWK (Chamber of Crafts) is the next step. Freiberufler (freelancer) 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 take out private or voluntary statutory health insurance.

Private vs statutory health insurance

You should 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. Then the maximum amount applies.

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 compared to 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 situation in which you set up your business. Nevertheless, here is a list of all the possible pros and cons:

Pros Cons
  • With a sideline business, you can test whether your idea has economic potential
  • The financial risk of a sideline formation is minimised by a full-time occupation
  • A business idea can be tested for its potential
  • You can boost your income
  • You have the double burden of two jobs
  • There might not be enough hours in the day to dedicate to your side business
  • You have less flexibility because of your main job
  • Customers, suppliers or partners may not take your side business seriously
  • If the side business fails, you might have to work off any debts with the salary from your main job
  • Possibly not enough resources to cope with larger orders

Bonus: Are side hustles the same as a Kleingewerbe (small business)?

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

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 classification.

Many homemakers and pensioner, start with a Kleingewerbe 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.

 

The information published on our site is all written and checked by experts with the utmost care. Nevertheless, we cannot guarantee its accuracy, as laws and regulations are subject to constant change. Therefore, always consult a specialist in a specific case – we will be happy to put you in touch.

firma.de accepts no liability for any damage caused by errors in the texts.

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