What should I do as a freelancer
Becoming a Freelancer: 7 Facts You Need To Know
Compared to traditional self-employment, there are special basics and requirements for freelancers that must be observed. Becoming a freelancer is not a free decision; there are legal regulations that regulate it. And that brings us to the first fact you need to know.
Fact 1: You become a freelancer through work or training
The legislator has stipulated in the Income Tax Act (EstG) which occupation belongs to the so-called catalog occupations. Paragraph 18 para. 1 number 1 EStG specifies these specifically:
- scientific, artistic, literary, teaching or educational activities
- Doctors, dentists, veterinarians, alternative practitioners, because testing, physiotherapists
- Lawyers, notaries, patent attorneys
- Surveyors, engineers, architects
- Commercial chemist
- Auditors, tax consultants, advisory economists and business economists, sworn auditors, tax agents
- Journalists, photo reporters
- Interpreters, translators
Anyone who belongs to one of the named professional groups or performs one of the named activities is automatically freelancers. Special training is not always necessary to be able to work as a freelancer. For example, writing activities may well originate from “unskilled” authors who are then classified as freelancers.
Fact 2: The demarcation from commercial activity is not always unequivocally possible
In some activities, the distinction between freelance and commercial is not possible without a doubt. This applies, for example, to scientific, artistic, literary, teaching or educational activities.
example: If a text is created according to strict specifications because the client specifies the content and form, this is not a writing activity that can be classified as a freelance work. Rather, it is about a commercial commissioned work.
Fact 3: Freelancers do not pay any trade tax
However, freelancers have to pay sales tax on their sales unless they are recognized as small business owners. Profits from freelance work are taxable at the personal tax rate. Trade tax is not due.
Fact 4: The tax office determines whether someone is freelance or commercial.
Anyone who believes they are freelance should register with the tax office as a freelancer. A Business registration is not required. This means that there is also no trade tax - that is usually the reason why many want to be classified as freelancers. But in the end, the tax office determines whether it is actually a freelance activity or not. The problem: If, for example, it takes years in the course of a tax audit to determine that a freelancer is commercially active from the point of view of the tax office, he must pay the trade tax for the previous years retrospectively. The only way to protect yourself from this scenario is to immediately upon registration to ask the responsible tax office what type of activity is involved. This is the only way to prevent additional claims that threaten the existence of the company.
Fact 5: If several freelancers join forces, they form a partnership
Whenever several freelancers get together, from a purely legal point of view, a partner company results. The partner company does not need start-up capital, each partner is liable with his own Private wealth. The law on partner companies (PartGG) forms the legal basis for merging several freelancers.
Fact 6: Freelancers do not have to register in the commercial register, but they are allowed to
There are quite a few things that freelancers need to do when starting their own business. However, it is not part of their duties to be entered in the commercial register. However, they have the right to do so and can be entered in the commercial register if desired.
Fact 7: Not all freelancers have to belong to a professional association
Not every freelancer has to register with an employers' liability insurance association, but there are also compulsory memberships. Employer's liability insurance associations have the task of avoiding operational accidents, illnesses and dangers and of taking action in matters of occupational safety. Which professional association is responsible depends on the activity of the freelancer. It is highly recommended to find out about membership requirements.
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