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

That Boy company her Money initially have to stick together is up to the Hand – cue  tax- Savings. What points should you consider in order to wrest unnecessary contributions from the tax office as early as possible?

5 tips on how start-ups and young companies can save money and taxes

Anyone founding a company needs three things above all: a well thought-out business plan, sufficient start-up capital and a lot 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 mind for most of them. Because there is already in advance of Foundation einige ways for startups that Costs to reduce and especially in the area of ​​taxes, elementary considerations can pay off. If you keep an eye on the legal situation with regard to taxes from the outset, you will not face unexpected difficulties later on and you can save good money straight away. The start-up has more capital available, which in turn also stabilizes the overall business.

Quit though a study by the state development bank KfW according to her, most founders Shop for personal reasons, but at least a quarter do it because of a lack of profitability. Last but not least, this is probably due in many cases to a clumsy handling of tax issues. After all, according to the KfW study, young entrepreneurs see the tax burden as one of the most difficult conditions. Experts therefore recommend that you seek professional tax advice right from the start. Irrespective of this, however, you can already observe a few points yourself, with which the financial Success your start-up is not endangered:

1. Choose the right legal form

Already at the Wahl the legal form of the new Company the expected tax burden plays a central role. There are major differences between sole proprietorships and partnerships on the one hand and corporations on the other. Sole proprietorships 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 shareholder bears the tax burden as a person. His income from the company and other investments are subject to income tax and, in the case of commercial activity, to trade tax. Allowances of EUR 8.354 or EUR 24.500 can be used. In addition, trade tax can sometimes even be offset against income tax.

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.

You should be out of your new Company So if possible make a partnership in order to keep the basic entrepreneurial taxation as low as possible. If you still want or need to set up a corporation for certain reasons, you can at least make sure that you choose a municipality with the lowest possible trade tax as the location. One Overview by federal states is offered by the Association of German Chambers of Industry and Commerce, which evaluates 700 towns and communities in an annual survey. Incidentally, the solidarity surcharge for companies has not been eliminated with the reform that has been in force since the beginning of 2021. Here you have to continue 5,5 percent up Income– and plan for corporate income tax.

2. Think about an exit right away

Thanks to the right financial planning hopefully be spared. Nevertheless, it may be that sooner or later you want to part with your "child" again, for example because it is unprofitable or you simply don't have one Fun have more to it. In this case, however, keep in mind that the capital gains arising from the sale of the company or your shares are 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 already consider a more favorable exitStrategy to think. Tax consultants are happy to recommend setting up a holding company in which the capital of 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, setting up a holding company is also possible with a small amount of start-up capital and becomes a side investment that can literally pay off later. Anyone who creates the holding company after founding the actual company will only be able to enjoy all the tax advantages again after seven years. Incidentally, these also apply to any distributions made by the corporation, which are normally also taxable.

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

Are you not only invested in your own company through your holding company, but support as Business Angel also other companies with venture capital, 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.

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 your company will probably exceed the limit of EUR 22.000 in sales in the previous year or EUR 50.000 in the current year, you cannot make use of the small business regulation. Consequently you must Value added tax apply to your bills. It is important to constantly check all invoices for correct identification. It shouldn't just include sales tax on your self-issued company invoices clear be listed. 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 they started their business as input tax reimbursed as part 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 may reclaim the sales tax due on so-called input services from the tax office by deducting input tax. Such services may include deliveries or services carried out by other entrepreneurs for their own. Aside from input tax deduction, founders should also focus on accuracy when making tax prepayments. If the first tax assessment is made around two years after the start of the company, you could face unexpectedly high additional payments fast lead to financial distress. The reason for this is the underestimated advance tax payments, which your company has to pay to the tax office on a quarterly basis. A voluntary increase in the prepayment amount over the course of the year protects you from overwhelming additional payments. If you accept this temporary surcharge, you can even hope for a refund 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 one Investment does not cost more than 800 euros and is one of the "depreciable movable assets", it can be claimed in the current tax year. This typically applies to office equipment such as furniture or coffee machines. In the case of non-depreciable goods - such as software - what matters is how the company got hold of them. So there is at Deduction of the homepage costs tax differences between a purchase from external service providers or the creation of 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 consultant in the accounting. And if you with his Performance especially satisfied are and to thank him a small one Attention want to do, this can also be removed. gifts to customers, employees and business partners can be written off up to 35 euros per person and year.

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