Why entrepreneurs should have five bank accounts in Germany or: The problem of terminated German bank accounts

updated on 6. August 2019 9 minutes reading time
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Entrepreneurs should maintain at least five bank accounts: two corporate current/checking/cheque accounts at different banks, two business instant access savings accounts (geschäftliches Tagesgeldkonto) either at the bank that offers current accounts (Girokonto) or another banking institution, and a private current account at another bank. But why all this effort? Because it gives the entrepreneur more financial freedom, flexibility, protection and independence. This is an article of real-life lessons learned by German startup expert and business lawyer Marek Schwiesau.

Why having accounts at different banks is essential: A cautionary tale

Let’s imagine a scenario where the bank closes your business bank account, it balances the outstanding claims on the private account and then promptly terminates the business relationship. Suddenly, as an entrepreneur, you are not only unable to make any transactions but are also having difficulties opening an account at a different bank. This may sound like an unbelievable story, however, for a business partner of mine, this was his reality.

The moral of the story? Every entrepreneur should not only have separate business and private accounts but also open accounts at different banks. Why go to such an extent you ask? Because in this case, my business partner maintained his only accounts at a single bank. And, when the bank decided to abruptly terminate its relationship with him, he was financially hamstrung. You can avoid this nightmare scenario by diversifying your bank accounts!

Opening accounts with multiple banks offers advantages such as the ability to keep a relationship with a bank strictly business. This means that the entrepreneur usually gets a better decision when applying for a business loan as the bank is unaware of his or her private transactions. Having different bank accounts at different banks also ensures that entrepreneurs have the ability to pay and act in crisis situations for themselves and their family.

Summary: Opening bank accounts at multiple institutions, is comparable to the wisdom of diversifying your investment portfolio. It’s a risk to have all your liquid cash sitting in just one place and is just common sense to have more than one account.

When it comes to bank accounts never mix business with pleasure (spending). It’s never a good idea to let the bank that you have a business relationship with have access to your personal spending habits.

A Sparkasse is the banking safety-net your business needs

Each bank – except a savings bank (Sparkasse) – may terminate the current account contract (Girovertrag) with a business customer, without having to give a specific reason (judgment: OLG Bremen from 9.12.2011, Az. 2 U 20/11). Since a current account contract involves ‘services of a higher sort’ (ie business relationship), the contractor must be able to dissolve the account without stating reasons, judges have ruled. Therefore, entrepreneurs should always maintain a second bank account at a Sparkasse because they’re unable to simply terminate the current account contract according to their terms and conditions without having an objective reason (BGH, judgment from 11.3.2003, Az. XI ZR 403/01).

Summary: If you open a business current account contract (Girovertrag), the bank you open it with has the legal right to close it down without giving you a reason. On the hand, if you open a bank account at a Sparkasse, your account cannot be terminated without a legitimate reason, which makes it a good backup.

Three current accounts at three different banks is the basic requirement for a business person in Germany

As an entrepreneur you should open the following accounts:

  1. A business current account/Girokonto at a Sparkasse,
  2. A second business Girokonto at a second bank.
  3. A personal Girokonto at a third bank.

If you want to avoid bank fees for the personal account, transferring a fixed monthly wage (eg €1,500) to it usually does the trick.

But wait there’s more: Liquidity, interest and transparency with two instant access savings accounts

The entrepreneur should also maintain two instant access savings accounts (geschäftliches Tagesgeldkonto). One of which is exclusively for tax returns (eg value-added tax/Umsatzsteuer) and has the purpose of removing the temptation to spend money that needs to be paid to the tax office. In addition, he or she collects up to 2% interest (see www.tagesgeldvergleich.de) for the funds deposited in the account, in contrast to the current account/Girokonto.

The second instant access savings account should act as a capital buffer, ideally being enough to cover six months of current operating costs. Ensure that the instant access savings account is free, always credited and liquid.

Summary: Opening a geschäftliches Tagesgeldkonto (instant access savings account) and depositing your VAT there will partition this money so that you don’t get caught out come tax time. Plus it has the bonus of collecting interest. Also, having an emergency fund that is 100% liquid is essential to weather any storms your business may face.

Finale: Things you need to know about business bank accounts in Germany

#1: Although it is possible for some entrepreneurs to handle all their business transactions via the private account, the tax office then treats the private account as a business account.

This is important to take into consideration as there is a mandated ten-year retention period for bank statements (German article) in Germany. In the case of a tax audit, the tax office would get to pry into an entrepreneur’s private finances, as not a single transaction may be blacked out.

#2: Entrepreneurs should always make sure they have their business account’s original bank statements (by post or from a statement printer/Kontoauszugsdrucker) and not just save as a PDF file. This is because the printout of an electronic account statement on paper does not meet the retention requirements according to Article 147 of the German Tax Code (AO).

Summary: If you take only one thing away from this article, may it be that you never use a bank account for both personal and business transactions. Not only does it needlessly complicates things but it also means that the tax office gets access to your personal stuff if you get audited.

According to Article 147 of the German Tax Code (AO), you need to keep official bank statements (ie that have come from a statement printer/Kontoauszugsdrucker) of all the bank accounts you’ve used for business transactions for a least ten years.

About the author:

Marek Schwiesau is a strategic positioning consultant (Positionierungsberater) and business economist (Betriebswirt) with a focus on startup and corporate management, as well as a business lawyer. He has specialised in the positioning and loan financing of entrepreneurs for almost a decade.

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