Start Your Side Hustle: Becoming a Sidepreneur in Germany

Tom
Tom January 2022 Content Creator 8 min

Table of contents

Many of us dream of getting that chance to abandon the 9-5 at the office and go our own way. It’s an attractive lifestyle, but there are a few hurdles in the way. It takes confidence in your venture to support you, and enough earnings to give you that confidence.

One way over these hurdles is to approach them in steps. Instead of hoping to establish complete financial independence with your idea in one great leap, work towards it with a gig outside your normal hours–a side hustle. Paired with part-time work, a side hustle has the potential for you to test out your idea without too much risk and even to make some extra cash that’ll help you when you finally go independent. 

We’d like to help you over these hurdles. Read on for our advice on how to become a sidepreneur.

What is a side hustle?

In Germany, if you’re self-employed on a part-time basis, your self-employed hours must not exceed 20 hours a week. Your earnings are also restricted: what you receive from your side hustle must not be more than what you make as an employee. 

Becoming a sidepreneur pays off

Around half of startups in Germany today are part-time. The 2020 KfW Start-up Monitor shows that there are almost 439,000 part-time startups in the country. 

Many of these part-time companies are driven to turn their side hustles into full-time ones. While the market is competitive and you may have to work at it for a long time, there’s no reason you can’t at least make a comfortable living out of your second income and spend half your work time doing what you love. 

And who knows? In time, with dedication and smart decisions, you might see your side hustle take centre stage.

What are the advantages and disadvantages of being a sidepreneur?

Weighing up the good and the bad of a proposed business venture is the first step any budding sidepreneur should take. Take a look at our list of advantages and disadvantages for advice on how to approach your side hustle. 

AdvantagesDisadvantages
Financial securityBigger workload
Less riskSabotage your main income
More enjoyable workHealth problems
More money for private life

Advantages of side hustles

Financial security

With a side hustle, you’re less likely to need to rely on loans or investments. This means you’re not beholden to anyone or at risk of accumulating debt. You’re still earning from your employment and any profits made with your part-time work you can invest straight back into your business, helping it grow. 

Less risk

Less risk means less stress. Having one source of reliable income means the second source can fluctuate–you have the room to experiment, fail, succeed, and try new things, all without worrying where the next paycheck is coming from. 

More enjoyable work

And with less risk comes more room for enjoyment. It’s a tragic reality for some that their dream venture breeds so much financial stress and hardship that they lose sight of the passion that inspired them to pursue it. As a sidepreneur, you can keep your enjoyment in focus. Pressure taints the things we do; you won’t have this problem.

More money for your private life

Expect to extend this enjoyment in your work to your private life as well. With an extra income and fewer financial responsibilities shackled to it, you can put this money towards taking trips, sprucing up the old homestead–whatever you like.

Consider setting up a business account to manage your finances. Even if they are supplemental, keeping track of them is bound to make it easier to put them to good use. Penta allows you to choose between three business accounts–find the one that suits you best.

Disadvantages of side hustles

Disadvantages aren’t supposed to scare you off. Think of them as food for thought when considering how best to approach your side hustle, and if now is the right time to do so.

Bigger workload

Consider the potentially large workload. On top of a main job and side hustle, how many other responsibilities do you have? Family, extra-curricular activities, and home renovations can all compound your workload. It may be too much to take at this point in time.

Sabotage of your main income

You’ll also need to pay attention to how much time and commitment you’re dedicating to your side hustle. Late nights toiling away can lead to mental exhaustion and end up sabotaging your main employment, spoiling what was initially so attractive about your part-time venture.

Health problems

If this mental exhaustion is prolonged, it can lead to more serious health problems and troubles in your private life as well. If finding time for your part time activities or making money is causing you stress, you might fight with your partner and fail to enjoy yourself on your days off.

Hopefully it’s clear to you that these disadvantages are avoidable, yet still worthy of consideration as you plan your side hustle. 

5 steps to your side hustle

Now that we’ve got the broader stuff out of the way, it’s time to narrow down and tackle the tasks specific to becoming a sidepreneur in Germany. These are the five steps you’ll have to take to reach that desired destination:

  1. Deciding on an idea and creating a business plan
  2. Clarifying the necessary prior knowledge and resources
  3. Notifying your employer
  4. Notifying the insurance company
  5. Registering your activity at the tax office and, if necessary, at the trade office

While these are the basic steps for most everyone, your situation can differ depending on which legal form you need to fill out. If you’re working as a freelancer for example, there’s no need for you to notify the trade office. 

Still looking for a business account for your side hustle? Penta offers you highest security standards, innovative features and a Mobile App.

Starting your side hustle: the registration

As stated above, this depends on whether your side hustle requires you to become a part-time freelancer or to register a part-time business. Freelancers need only register at the tax office and fill out the tax registration form which you’ll receive by mail.

You’ll need to register with the trade office if you’re registering as a business. You can do this once you’ve received your tax number at either the IHK or the HWK, depending on the nature of your activity.

Legal forms for sidepreneurs

The legal form you fill out will determine how you pay your taxes, so it’s crucial you pick the right one and fill it out correctly. Your choice depends on what best suits your business or activity.

The form for sole-proprietorship is the simplest one. Considerably less bureaucratic than the others, you need only register your self-employment status. 

Founding a company with several people requires the civil law partnership (GbR) legal form. This requires no share capital. You need only to provide a written agreement between the founders. While not necessary for the registration, it’s a good idea to draw up a partnership agreement detailing assigned tasks and projected profits and losses.

Also suitable for individuals, the GmbH form requires a share capital of €25,000. Registering as a GmbH comes with certain accounting obligations, but you are protected as being no longer liable for the company with all your assets.

Similar to the GmbH, the UG registration has a less complicated formation process and only requires €1 of share capital. The idea is that this will increase through reserves.

Side hustling as a freelancer?

If you plan to register as a freelancer, you’ll have a few things to clarify to Germany’s tax organisations.

When registering your secondary activity you’ll need to clarify what you’ll be doing. To register as a freelancer, what you do must fall under one of these categories:

  • Healing professions
  • Legal and business consulting professions
  • Technical-scientific professions
  • Media and language professions

Taxes and insurance for the part-time self-employed

Every self-employed person in Germany pays Einkommensteuer (income tax) and Umsatzsteuer (sales tax). If your earnings are less than €22,000 per year, however, you qualify for small business regulation (Kleinunternehmerregelung)  and will be exempt from Umsatzsteuer.

Whether you also pay Gewerbesteuer (trade tax) will depend on which legal form you fill out. If you have any doubts about this, consult a tax advisor before making any big decisions. 

When it comes to insurance, as a sidepreneur you’re still insured through your main job by your employer. You should still however cover the services you provide in your side hustle with business liability insurance. 

Do you need to inform your employer about your side hustle?

Your employer is not allowed to prohibit you from working as a freelancer, but there are a few caveats to this:

  • Your self-employed work must not be in competition with your employer
  • The quality of the work you do in your main job must not suffer as a result of your sideline
  • You may not work for your own company while on sick leave
  • Even though you’re not required to, you should still inform your employer of your side hustle to be on the safe side

Hopefully we’ve helped provide some guidance on your path towards sidepreneurship and possibly on to full-time entrepreneurship. Above all, keep your goals in sight, expectations in check, and always fill out the required paperwork on time and correctly. The remaining steps are for you to take.

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