Starting a company in Germany - advantages? Not really.

Anyone who is just starting out on their own and lives in Germany is considering which legal form in Germany is best for founding their startup? The same approach often applies to entrepreneurs who have already had several companies. Do I convert my UG into a GmbH, or even switch from my sole proprietorship to a corporation? Or should I consider the holding company in order to supposedly save some taxes?

Focusing too much on the legal structure prevents most company founders from seeing what truly matters:
With an average of 50% taxes taxes are the largest expense for most businesses!

Isn’t there a 100% legal way to do this significantly better?

The entire decision-making process takes place in Germany. Dubai is frowned upon anyway because of its poor working conditions and the double taxation agreement between Germany and the UAE has been completely stopped, making emigration the only option.

Most company founders are simply unaware that 9 out of 10 startups fail in Germany—primarily due to excessive costs and the fact that, with a 50% tax rate, they spend half the year working just for the state.

In recent years, a multitude of tax-saving workshops run by so-called tax coaches have suddenly appeared. Whether it’s Alex Fischer’s tax coaching, Investmentpunk’s ‘Tax Savings Elite Training’ by Gerhard Hörhahn, Immocation’s ‘Tax Class – Tax Strategy is a Leadership Matter,’ or even Leo Gärtner calling Germany a tax haven.

Of course, there are other tips on how to deduct business expenses more effectively, or save a few percentage points. But it's not a really big relief. It doesn't make much difference whether I pay 45% or 50% tax.

Once again: Isn’t there a way to pay only 1-10% in taxes —100% legally, with minimal effort and cost?

Yes, you can find out in our video! Or read about it in the blog.

Now to the 5 biggest mistakes when starting a company in Germany:

1st Mistake: High tax burden

The fact is, once annual profit distributions reach €100,000, which should be a reasonable amount to secure your future and build wealth, around 50% tax is due. Whether it’s a sole proprietorship, GmbH, or even a holding structure, you can’t avoid handing over nearly half of your earnings to the state—give or take a few percentage points.

Even with smaller profits, a tax rate of 30-40% applies. But do I really want to limit my growth just to pay less tax?! which, after all, is still a significant amount.

2nd Mistake: Employees

At some point, every entrepreneur reaches the stage where they need full-time employees—or would at least like to have them, However, since this represents a significant financial burden that only a few self-employed individuals can sustain long-term, the question arises: How can one successfully transition from being self-employed to becoming a full-fledged entrepreneur?

Good employees often generate EUR 3-6 thousand per month in actual revenue. The employee-friendly environment, with extensive rights, numerous vacation days, and generous sick leave policies, makes the decision even more challenging. On top of that, the government provides a competing alternative—unconditional citizen's allowance without requiring anything in return. No wonder, given all these hurdles for employers, that there is a widespread labor shortage.

3rd Mistake: Increased competitive pressure

Just 20-30 years ago, there were only a handful of people who became self-employed. This was also because real salaries were enough to provide a comfortable life for oneself and one's family. Wages are hardly increasing in proportion to the general rate of inflation.

It is obvious that more and more people are trying to become self-employed. Due to the EU free movement agreement, there are significantly more men and women from abroad in Germany. Whether a foreigner gives it a try and doesn’t strictly adhere to tax regulations and guidelines—knowing that, in case of failure, they can either claim citizen’s allowance or return home—is up for debate. This statement is not intended to be judgmental in any way.

However, there are plenty of such cases, just as there are companies that can operate at a loss for years just to secure market share.

"How are you supposed to compete with the competition if you comply with all the regulations and pay all your taxes in Germany?"

4th Mistake: Conformity

In Germany, you register your business and start your self-employment journey with a sole proprietorship, UG or GmbH. Yes, this is the common German way - but most people are not aware of the costs, taxes and difficulties that will arise in the long term. This is why 90% of all companies fail.

Alternatively, live abroad in the EU for 1-3 years and run a business with extremely low taxes, and return as a wealthy man or woman.

Or build up an EU company with substance and continue to live in Germany, as hundreds of thousands of medium-sized companies do - and pay very little tax. 100% legal and compliant.

5th Mistake: Starting a business too quickly without extensive knowledge and support from experts

How often do you hear the sentence: If I had known this earlier, I could have saved myself thousands of euros. Such insights only come with experience. Even after years of hands-on learning as a business owner, you can’t get everything right.

This is why there are business consultants and tax experts. If an expert were always at your side and always got you the best possible tax savings and warned you about beginners and even tax mistakes, you will agree with me that your income would definitely be much higher than if such optimizations had not taken place.

Unfortunately, a tax advisor in Germany is trained by the state and is not primarily encouraged to save taxes, and is not even trained to do so.

If you are now at the point where you really want to make a change to your company's high tax burden or even have an alternative to paying only a fraction of the taxes before you start your company, then listen carefully now.

Didn't we talk about an alternative at the beginning – with an alleged tax burden of only 1%? Absolutely right. Congratulations on making it to this part of the article.

For all entrepreneurs and self-employed people who are looking for a way to save taxes, we at GO EU offer a solution that is fully recognized by the local tax office and does not require any change of residence. This is our 1% tax model!

With the 1% tax model, you only pay 1% tax up to an annual turnover of 250,000 euros and are even exempt from sales tax for a turnover of up to 60,000 euros per year.

And all of this within the EU, without dubious grey areas, shady offshore structures or having to relocate your place of residence. This model is fully recognized by your local tax office, i.e. in Germany, Austria or Switzerland, and you can even have this recognition confirmed in advance!

Does this sound interesting to you? Then click on the link below "Inquire now"! We look forward to hearing from you!