How safe is it to be a freelancer as a freelancer

Freelance work: you need to know that to get started

Like many others, you dream of working as a freelancer or making money on the side, but you have no idea how to proceed in order to correctly register your freelance activity? Then you've come to the right place - I'll explain step by step what you have to consider when starting a self-employed activity.

If you have already found out about self-employment, you may have asked yourself: Am I actually a freelancer or do I have to register a trade? Because in fact, these are two different things. Although both groups are professionally independent, there are formal differences between them, but also similarities:

  • As a freelancer, unlike a businessperson, you do not have to register a business, you only have to start your freelance activity through a informal writing report to the responsible tax office.
  • In contrast to tradespeople, the entry of the self-employed activity at the trade office and in the commercial register is voluntary. As a freelancer, you are not subject to trade tax, but you are ...
  • ... just like business people are equally obliged to submit income and sales tax returns punctually and to pay taxes if you exceed the tax-free allowance.

How you distinguish yourself as a freelancer from a trader

First of all, you have to determine whether the self-employed activity you are aiming for is one of the liberal professions or whether you need to register a trade. This distinction is often not very easy. To clarify which category you fall under, it will help you to take a look at § 18 EStG.

In this paragraph the Differentiation of a business person from the freelancer regulated with the help of a catalog that lists all professions that characterize you as a freelancer. If you cannot find your job there, you have to register a trade for your self-employed activity.

The liberal professions generally include scientific, artistic, teaching, educational and writing activities that are carried out independently. In addition to the Income Tax Act, the Partnership Act (PartGG) can help you to clarify whether your self-employed activity really gives you the status of a freelancer.

Let's take as an example ... me: I work as a freelance journalist. So as long as I make a living just writing and blogging, I'm a freelancer. But since I am with no startup Maintaining cooperation with sponsors and generating income through affiliate marketing, I count among the traders at this point.

Important: There is a difference between freelancers and freelancers. A freelancer is an entrepreneur who carries out orders for other entrepreneurs and thus acts as a kind of subcontractor. A freelancer can therefore be both a freelancer and a trader.

But now to the actual procedure: Registering a self-employed activity as a freelancer is not as complicated as you might think. I will explain step by step how to proceed if you want to take the plunge into self-employment with a free activity:

  1. Use Section 18 of the Income Tax Act and the PartGG to find out whether the self-employed activity you would like to carry out is one of the catalog professions that identify you as a freelancer. If you are not sure, you can get free advice from any tax office.
  2. Write a letter to the tax office responsible for you informing about your freelance work. You don't have to do this right away, you have four weeks to do it after starting your job.
  3. When the tax office has received your letter, it will give you your tax number and send you a questionnaire, which you have to fill out - of course only with truthful information - and send it back to the tax office.
  4. The tax office will now require you to provide evidence of your professional activity and check your professional qualifications. Once that has happened, you are officially a freelancer and therefore self-employed.
  5. You can now officially work as a freelancer - if you haven't already done so four weeks before registering with the tax office 😉

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What you have to consider with the tax

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As a freelancer, you are exempt from trade tax, but not from sales tax. That means: Basically, as a freelancer, you are subject to the VAT liabilitybecause you provide services for which you can be paid and do your job not only once, but professionally sustainable. However, there are exceptions for freelancers.

The sales tax rate can vary depending on the type of liberal profession. While it is usually 19 percent, freelancers who - like me as a journalist - work in the creative field benefit from the reduced sales tax rate of just seven percent. Some liberal professions are even exempt from sales tax.

If your annual turnover does not exceed 17,500 euros, you fall under the small business regulation and are exempt from sales tax. This is particularly interesting for you at the beginning, when your company is still in its infancy. You can find detailed information on tax matters relating to freelance work here.

Your life as a freelancer - lots of freedom, a high level of personal responsibility

Working as a freelancer brings you many advantages. You can work independently, choose your clients yourself and are not tied to strict working hours and special locations. A wonderful life. But you have to be aware that freelance work demands a high degree of personal responsibility and that you have to take care of a lot yourself. Otherwise it would be too nice, wouldn't it?

As for everyone else, this also applies to you Compulsory insurance. If you work as a freelance artist, you should take out your health insurance with the artists' social insurance fund. She kindly pays half of the contribution - just like an employer usually does. Of course, you can decide for yourself whether you want to take out statutory or private health insurance, or whether you want to take out private provision in addition to statutory health insurance.

As a freelancer, you often don't have a fixed salary, but instead earn more and less depending on the order situation. Therefore, you should really think about whether an accident and occupational disability insurance would not make sense for you. If you do not only want to earn money with your freelance work on the side, but also want to carry it out full-time, it is important that you think in advance about how you will have to earn sooner or later in order to make ends meet. I've already written something about that here.

The most important thing about freelance work at a glance

Now you know what you need to know and consider when registering a freelance job. To give you another overview, I have summarized the most important information for you again in compact form:

  1. Both freelancers and traders are self-employed.
  2. In order to register your freelance activity, an informal letter to the tax office is sufficient.
  3. Freelancers are exempt from trade tax, but not from sales tax. Under certain conditions, you are also exempt from sales tax as a freelancer (small business regulation)
  4. The distinction between freelancers and tradespeople is regulated by § 18 EStG and the PartGG.
  5. It doesn't work without insurance. As a freelancer, you are subject to health insurance. Also think about an accident and occupational disability insurance and possibly take pension provision (statutory and / or private).
  6. Remember that the many freedoms that you enjoy as a freelancer come with a high degree of personal responsibility.

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