5 tax tips for starting a business: How start-ups and young companies save money

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That boy Company Having to keep their money together is obvious - keyword tax savings. What points should you consider in order to wrest unnecessary contributions from the tax office as early as possible?

5 tax tips for starting a business: How start-ups and young companies save money

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Fabian Linden is an online editor with a focus on education, career and technology.


5 tips like startups and young Company Save money and taxes

Anyone setting up a company needs three things above all: a well thought-out business plan, sufficient start-up capital and a lot of discipline. Young managing directors have to consider a wide variety of aspects and it is advisable to always keep the possible claims of the state in the back of the mind for most of them. Because there are already some ways for start-ups to reduce costs in the run-up to the foundation and elementary considerations can pay off, especially in the area of ​​taxes. Those who keep an eye on the legal situation with regard to taxes from the start will on the one hand not come into unexpected trouble later and on the other hand can save good money directly. The start-up has more capital available, which in turn stabilizes the overall business.

Quit though a study by the state development bank KfW According to most founders, they start their business for personal reasons, but at least a quarter do it because of a lack of profitability. Last but not least, this is probably due to an inept handling of tax issues. After all, according to a survey by the KfW study, the young entrepreneurs see the tax burden as one of the most difficult framework conditions. Experts therefore advise you to seek professional tax advice right from the start. Regardless of this, however, you can already pay attention to a few points that will not endanger the financial success of your start-up, at least from a tax point of view:

1. Choose the right legal form

When choosing the legal form of the new company, the expected tax burden plays a key role. There are great differences between sole proprietorships and partnerships on the one hand and corporations on the other. Sole proprietorship such as the registered merchant (EK) or partnerships such as GmbH & Co. KG, OHG, KG or GbR are easier to handle for tax purposes. The respective entrepreneur or partner bears the tax burden as a person. His income from the company and other assessments are subject to income tax and, in the case of commercial activities, to trade tax. Exempt amounts of EUR 8.354 or EUR 24.500 can be used. In addition, the trade tax can sometimes even be offset against income tax.

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In the case of corporations such as GmbH, UG or AG, however, trade tax is always due. In addition, there is corporation tax, since in corporations it is no longer the owners who are taxed as natural persons, but rather the company as a so-called “non-natural” or “legal person”. Corporate income tax is 15 percent of the income. The trade tax is also often close to this rate on average, depending on the assessment rate of the responsible municipality.

If possible, you should turn your new company into a partnership in order to keep basic corporate taxation as low as possible. If you still want or have to set up a corporation for certain reasons, you can at least make sure that the location is a municipality with the lowest possible trade tax. A Overview by federal states is offered by the German Chamber of Commerce and Industry, which evaluates 700 cities and municipalities in an annual survey. Incidentally, the solidarity surcharge for companies has not ceased with the reform that has been in force since the beginning of 2021. Here you still have to budget 5,5 percent on income and corporation tax.

2. Think about an exit right away

Hopefully, thanks to the right financial planning, you can be spared the need for your young company to file for bankruptcy. Nevertheless, sooner or later you may want to part with your "child" again, for example because it is unprofitable or you simply no longer have fun with it. In this case, however, please bear in mind that the capital gain resulting from the sale of the company or your shares is taxable. This can be expensive, especially for corporations, since the tax rate here is at least 25 percent and in some cases even rises to over 40 percent.

It is therefore advisable to think about a cheaper exit strategy right from the start. Tax consultants are happy to recommend the establishment of a holding company in which the capital in your own company is managed. The reason: If you sell your company through such a holding company, the capital gain is almost tax-free. Founded as a limited liability company, the establishment of a holding company is also possible with a low start-up capital and becomes a secondary investment that can literally pay off later. Those who only set up the holding company after the actual company has been founded can only enjoy all the tax advantages again after seven years. Incidentally, these also apply to any distributions by the corporation, which normally also have to be taxed.

3. Make full use of government subsidies for venture capital and investments

If you not only invest in your own company through your holding company, but also support other companies with venture capital as a business angel, the state comes into play. The Federal Office of Economics and Export Control (BAFA) then grants you a grant of 20 percent of the investment amount. When you sell your shares, BAFA provides an exit grant of 25 percent of the profit through a tax refund. Of course, your own start-up can also be funded by other investors in this way if it meets certain criteria that the BAFA explains on its website.

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In addition, the Income Tax Act favors small and medium-sized enterprises (SMEs) with investment subsidies. Future entrepreneurs can claim up to 40 percent of the investment costs as anticipated operating expenses even before the establishment of an investment deduction. That minimizes income tax. The maximum amount that can be credited is 200.000 euros. In addition, SMEs can also apply to your Setting up the digital infrastructure Get support from government funding programs and thus generate tax advantages.

4. Be careful with sales tax and advance payments!

Since you and your company will probably exceed the limit of 22.000 euros in sales in the previous year or 50.000 euros in the current year, you cannot take advantage of the small business regulation. As a result, you will have to collect sales tax on your bills. It is important to constantly check all invoices for correct identification. The sales tax should not only be clearly listed on your company invoices, which you have issued yourself. Invoices that you receive from other companies must also be clearly structured here. If, after submitting the documents, the tax office discovers deficiencies in the information listed, it can refuse input tax deduction. Giving this away as a gift would be particularly annoying for a start-up, because: Founders can have the sales tax they paid before starting the company through their start-up preparation reimbursed as input tax in the course of the sales tax assessment. The preparatory activities that can be credited include the purchase of goods that was necessary to open a business.

In general, the regulation states that entrepreneurs are allowed to reclaim the sales tax on so-called input services by deducting input tax from the tax office. Such services can include deliveries or services that have been carried out by other companies for their own purposes. Aside from the input tax deduction, founders should also focus on accuracy when making advance tax payments. If the first tax assessment is issued around two years after the start of the company, you could face unexpectedly high back payments, which quickly lead to financial distress. The reason for this is then that the tax prepayments are underestimated and that your company has to make quarterly to the tax office. A voluntary increase in the advance payment over the course of the year may save you from overwhelming additional payments. If you accept this temporary surcharge, you can even hope for reimbursements from the tax office afterwards.

5. Use the diversity of depreciation

A start-up in particular incurs a lot of costs during ongoing operations that can be written off for tax purposes. You should be well informed about the various options for deducting tax, because some aspects are not immediately thought of. In terms of deductible business expenses, for example, a tendency to rent instead of buying can be worthwhile for young companies. If, for example, the business premises are initially only rented and not bought directly for large sums that only endanger the liquidity of the start-up, the rent can be fully credited. This also applies to work equipment such as higher-quality PCs, which would have to be depreciated over years if purchased once.

As long as an investment does not cost more than 800 euros and is one of the "wear and tear movable assets", it can be claimed in the current tax year. This typically affects office equipment such as furniture or coffee machines. In the case of non-wearing goods - such as software - the decisive factor is how the company got hold of them. So there is Deduction of the homepage costs Tax differences between buying from external service providers or creating the website by your own employees. Outsourcing processes in the company can not only save valuable time for your start-up, but also money - especially if you permanently involve your tax advisor in accounting. And if you are particularly satisfied with his performance and would like to give him a small gift as a thank you, this can also be withdrawn. Gifts to customers, employees and business partners are depreciable up to 35 euros per person and year.

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