US LLC v GmbH, etc.

37 posts in this topic

Just to wrap up my own thread from months ago... I ended up creating an LLC in the US. The Finanzamt told me that since I'm the only owner of the LLC, they will treat it as a Personengesellschaft which ends up meaning that I'm a Freiberufler (I'm an engineer). So I got the limited liability I wanted in the US (where my customers are), and no separate tax return or accounting requirements in Germany that a GmbH or UG would have required. Since I live in Germany, I could create the LLC in a state with the best liability protections and cheapest fees. Thanks to everyone for your help!

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GReat update - will help a lot of other Expats, I am sure. Thanks!

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Hi StephenGermany,

 

I'm in a nearly identical situation to yours, except that I will be selling software (that I have programmed myself) over the internet. Do you report and pay Gewerbesteuer? My German tax advisor indicated that if I am running a single-member LLC business primarily from Germany (meaning that most of the business decisions are made while I am in Germany), then I not only have a Betriebsstätte in the US but one in Germany as well and thus must pay Gewerbesteuer on the profits from the business. The profits of course must also be reported on my German income-tax returns, under Einkommen aus Gewerbebetrieb; the Double Taxation Treaty with the US should apply to this income, however, so that I will not be taxed twice for it.

 

Does the Gewerbesteuer affect your business? Or are you classed as a Freiberufler? (Edit: I can see above that you concluded you are a Freiberufler, but did the Finanzamt actually tell you that or is it instead an inference based on the LLC's classification as a Personengesellschaft? The latter would not automatically imply a freiberufliche Tätigkeit, to my knowledge.)

 

Thanks and greetings,

Emory

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I'm a Freiberufler. I don't pay Gewerbesteuer. I'm sorry, I don't know whether you need to pay it or not, given you are selling a product, which makes your situation rather different from mine. Good luck!

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Hi Guys! 

 

I didn't find a thread that fit my questions exactly but I felt like this discussion was along the right direction. 

 

I have just moved to Germany from the UK. I have been working as a freelance designer however now I will start to trade my furniture pieces commercially. I have been researching online and it seems like if I want to set up a trading company my best option for now is a mini-GmbH. However reading through this thread I was not sure if maybe there is a simpler option I can take for now...

 

I will have some pieces being sold through a physical shop in Berlin and other pieces being sold directly through my online webshop. 

 

I will work at the sole employee and the business will be registered to my home address where I have one room as a studio. 

 

Any help on the right direction to take would be greatly appreciated, I am a little bit lost in a sea on information available online. 

 

Thanks!! 

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Yes, simply get a Gewerbeschein (you can apply online) and apply for a tax number by filling in, printing and submitting to your local Finanzamt by snail mail or by handing it in your Fragebogen zur steuerlichen Erfassung.

 

You would have to decide whether you want to:

  • mark line 133 in the Fragebogen zur steuerlichen Erfassung --> be a Kleinunternehmer (possible if your yearly turnover is up to 17,500€) and not charge VAT, or
  • mark line 134 in the Fragebogen zur steuerlichen Erfassung --> not to be a Kleinunternehmer and therefore opt to charge 19% VAT on all you sell (but in turn also getting bcak the VAT on raw materials and other stuff/services that you bought for your business). This decision would bind you for the next 5 years.

 

Since you sell furniture, you are a Gewerbetreibender (= single trader).

You would not be an employee, but would simply have to tax the profit that you have that year as income, with the first 9,000€ (= Grundfreibetrag in 2018) of your yearly income being free of income tax (= Einkommensteuer).

A single trader only owes Gewerbesteuer on profits that exceed 24,500€ a year.

 

As long as your profit is under 60,000€ a year and your turnover under 600,000€ a year, you won't have to do double-entry accounting, even as a Gedwerbetreibender.

 

*******************************************************

 

If you could manage to get your pieces of furniture classified as "works of art", you might even manage to get the sought after, privileged classification as a Freiberufler instead of as Gewerbetreibender, which would mean no Gewerbesteuer and no double-entry bookkeeping, no matter how much you make:

 

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Thanks so much for the reply Panda! Really helpful information! 

 

I expect to have a turnover of around €16,000 in the first year, however I see the turnover exceeding the €17,500 limit in the following years (but possibly still under €50,000). Would I be better to start as a Kleinunternehmer and then change the following year, or would you suggest to just start with VAT from the beginning? I understand it can be more paperwork, but I do want to set up properly from the beginning. 

 

I am just making my online Gewerbschein application and I was still unsure which option to select in the first drop down menu for 'Rechsform' , which type of business I am starting, is it still a mini-GmbH, is the abbreviation UGmbH?

 

The furniture I am making are indeed more art pieces, sculptural objects that work as side tables and plant tables. I have not heard about this classification as Freiberufler. So I could be classified as freelance and still trade? What kind of proof do they need to show that the pieces are "works or art"?  Under this status could I still apply to the public health system through my own company, I have been talking to TK about registering as a self employed person and then applying for Künstlersozialkasse.

 

Sorry for so many questions! Thanks again for your help! 

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4 hours ago, yazzle said:

I expect to have a turnover of around €16,000 in the first year, however I see the turnover exceeding the €17,500 limit in the following years (but possibly still under €50,000). Would I be better to start as a Kleinunternehmer and then change the following year, or would you suggest to just start with VAT from the beginning? I understand it can be more paperwork, but I do want to set up properly from the beginning. 

 

If you opt for charging VAT: can you deal with the additional bureaucracy of having to submit a VAT announcement every month? See the section "With Elster you can do": https://www.toytowngermany.com/wiki/ELSTER

 

4 hours ago, yazzle said:

I am just making my online Gewerbschein application and I was still unsure which option to select in the first drop down menu for 'Rechsform' , which type of business I am starting, is it still a mini-GmbH, is the abbreviation UGmbH?

 

It is: Einzelunternehmen

 

4 hours ago, yazzle said:

The furniture I am making are indeed more art pieces, sculptural objects that work as side tables and plant tables. I have not heard about this classification as Freiberufler. So I could be classified as freelance and still trade? What kind of proof do they need to show that the pieces are "works or art"?

 

You would have to ask someone who managed to pull this off.

Let's ask him: @BayrischDude, please tell us what proof you had to submit.

 

4 hours ago, yazzle said:

Under this status could I still apply to the public health system through my own company, I have been talking to TK about registering as a self employed person and then applying for Künstlersozialkasse.

 

You are eligible to join German public health insurance since you are coming directly out of another EU country's public health insurance system, the NHS. This right is totally independent from what kind of business you set up, but it only exists within the first 3 months of you having moved from the UK to Germany. You could live off your savings and still have the right to join public health insurance.

 

Techniker Krankenkasse (TK) will charge you (see this TK contribution calculator) 404.23€ a month for public health insurance, since they assume for non-KSK self-employed a minimum profit of Bezugsgröße * 30/40 = 2,283.75€, on which they charge their 17.7% contribution, no matter how low your profit is in reality.

If you have nearly no assets, and explicitly apply for it, you can get that reduced to 269.48€ a month (= 17.7% * 30/60 * Bezugsgröße = 0.177 *  30/60 * 3,045€):

 

To join the Künstlersozialkasse, you will need to prove that your income comes mainly from "artistic" sources, so for you it is very important to first manage to convince the Finanzamt to classify you as a Freiberufler, i.e. that they recognise that you are producing art, and not normal items for daily use.

 

Once the Künstlersozialkasse accepts you, you will have to pay in total around 19.025% of your real profit (9.3% public pension + 7.3% public health TK + 0.9% Zusatzbeitrag TK + 1.275% public nursing TK + 0.25% extra for nursing since you're over 23 and don't have a child) to them.

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3 hours ago, yazzle said:

I expect to have a turnover of around €16,000 in the first year,

 

When you start your business in February you have to stay under 16.041,xx€ anyway, the 17.500 is for full 12 months.

 

3 hours ago, yazzle said:

however I see the turnover exceeding the €17,500 limit in the following years (but possibly still under €50,000). Would I be better to start as a Kleinunternehmer and then change the following year, or would you suggest to just start with VAT from the beginning? I understand it can be more paperwork, but I do want to set up properly from the beginning. 

 

Some additional food for thought:

 

3 hours ago, yazzle said:

The furniture I am making are indeed more art pieces, sculptural objects that work as side tables and plant tables.

 

How realistic is it to stay under 16.000€ turnover with your products? What would it cost me to buy such a piece of art?

 

 

 

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2 hours ago, PandaMunich said:

You would have to ask someone who managed to pull this off.

Let's ask him: @BayrischDude, please tell us what proof you had to submit.

 

ich war's nicht!  Oh, sorry.  Wrong thread! :lol:

 

@yazzle & @PandaMunich:   For the most part this only involved the Finanzamt.  The one entity this entire country bows to.  

 

Please keep in mind that where I live truly is 'Arsch der Welt'.  Each time I grudgingly walk into the Finanzamt, there is no line.  No appointment necessary.  I can take all the time I need.

 

I needed to show them that what I make is unique and me own designs.  I showed them my website and photos on me handy to give them an idea.  I explained, I think, rather well, that while 'this is a belt' and 'this is a wallet', the designs on both are unique and artistic. I don't use templates.  The tooling and colouring of the leather, along with various metal parts that I order specifically from a Schmied, are unique and made to order.  There seems to be nothing written in effect, but their opinion, along with the opinion of the Finanzamt in Kempten, that so long as 75% of the items I make and sell follow the lines of being unique then they would consider me an artist, whose medium is leather.  Since I photograph near every item, cataloguing is easy should they ever inquire.

 

Took about two weeks for the final decision, but verbal was rather immediate.  The Bundesfinanzamt had the final say, but based on the determination of the local beamte.

 

After that, there was a stop at the Rathaus.  This was tougher - surprisingly so.  The questions were more aimed at me and why I chose to do this as it disrupts. 

 

HWK was even more difficult.  They hung on to the Feintäschner title, regardless of the Finanzamt document I scanned and sent.  When the bill for my worthless membership arrived, I walked over to the lawyer, showed the bill along with the Finanzamt document and he sent them a letter.  Rather than contacting me, the HWK contacted the lawyer and after a short argument, the HWK gave in and I am no longer a member!  Juhu!

 

I did hear that the HWK also contacted the Finanzamt and argued with them.  If Hondo makes a shoulder bag or any bag at all he is a Feintäschner.  The Finanzamt argued on my behalf that German courts have determined otherwise. 

 

End of story.

 

Oh. Cost?  Nothing!  Money saved?  Near 200€ per year.

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@BayrischDude & @PandaMunich: Thank you, Thank you! 

 

I have read through the threads and your process with the Finanzamt @BayrischDude . So helpful and has really opened a great possibility for registering my work! 

 

I will definitely make an attempt to squeeze myself into this fine line of Freiberufler artist. I can prove that at least 75% of my pieces are unique designs hand produced by me. Each piece even if the same shape is still one-off and nothing is commercially produced. I have both my website and catalogue of the pieces I have made. 

 

If I understand correctly, I should fill in the Fragenbogen zur Steuerlichen form and take it in person to the Finanzamt. There I explain to the person that I will sell my items but they are unique art pieces and not normal items for daily use?  Is it that I am claiming that my work is offering artistic services in some way rather than trading products? 

 

If I understand correctly it is all about making a convincing case during this meeting?

 

Also If I take this route from my initial registration and never apply for a Gewerbeschein, do you think I will have the same hassle with the HWK?

 

Sorry again for so many questions, I am just very happy to have found someone who has gone through this! :)

 

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42 minutes ago, yazzle said:

If I understand correctly it is all about making a convincing case during this meeting?

 

Also If I take this route from my initial registration and never apply for a Gewerbeschein, do you think I will have the same hassle with the HWK?

 

Sorry again for so many questions, I am just very happy to have found someone who has gone through this! :)

 

 

 

Aye, that was my route.  Convince them of what you exactly do.  No need to apply for the Gewerbeschein.  Once the Finanzamt has you down as an artist, there is no need for the Gewerbeschein.  Sadly, I did the Gewerbeschein first, as I mistakenly listened to others.  Those who make simple belts, bags and such. 

 

You are entering the cold and unfriendly world of Germany's self-employed.  Where there is nearly no dialogue, no support and everyone wants to stick their nasty fingers in your wallet, to ensure you can only afford one packet of ramen noodles each day.  Bloody Brilliant! :blink:

 

My support network:  Google.  I no longer have the link, but there was a court case in north Germany (Bremerhaven?), in which the court ruled that to define art is more than painting a canvas, molding clay, etc.  Anything can be considered art and they based it upon several factors, that I cannot recall at present.  And yes, this had to do with the self-employed. 

 

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haha... I am well aware of the ramen noodle world I am entering into... however a leap of faith and some determination and lets see what happens! It definitely feels like this route is a little softer on some of the bureaucracy... I think I have my case for proving that the artistic value of the work outweighs the craft-commercial.

 

I wonder though, do you only sell directly to customers in Germany through invoices (i.e working a bit like a freelancer would), or do function as a trader- selling in shops/online and able to give receipts for purchase?  Do you add VAT to your products or deduct VAT from material purchases? 

 

Will look into this court case, sounds very interesting! 

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@yazzle my customer base is presently Bayern, B-W, Eastern Austria and the northern area of Switzerland.  I would say that 90% is custom items.  I really don't have an inventory.  I have examples I use to either show a potential customer a particular item or when we have various markets here (Verkaufsoffenen Sonntag / Feiertag, Weihnachtsmarket, etc).  If I have a new idea for something, aye, I'll make it and keep it on hand.  But these are generally not for sale.

 

Basically, I have a website, but there is no means to purchase items.  It shows ideas in styles, colours, types of leather used, etc.  But no means to purchase.

 

I have considered changing that and still might if it suits and I have more time and space.  To offer online, I would need to maintain an inventory and that requires space, which I currently don't have.

 

I do make small things that I can give away with my logo on them.  Keyfobs made from restleder, are great.  I include those as advertising, which I list on me books for the Steuerberater.

 

And everyone is offered a receipt.  Most don't seem to care, but when I post an item, it is in the package.  If it is collected or delivered, some opt out. 

 

Last year, I did 15.000,00+ in sales, so no VAT. 

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@BayrischDude @PandaMunich Really Appreciate you guys taking the time to respond to me! All the forms are in and lets just see what I get back :)

 

Just for anyone looking to fill in these forms, I found a great website: 

 

https://www.hannalisahaferkamp.com/blog//how-to-register-a-business-in-germany

https://www.hannalisahaferkamp.com/blog//how-to-fill-out-the-fragebogen-zur-steuerlichen-erfassung-when-you-register-a-business-in-germany-guide

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