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Guide to self-employment

 

 

Our guide to your independence

For ambitious architecture students and aspiring architects who want to take the step into self-employment, careful preparation is the key to success. From choosing the right tax and accounting tools to correctly creating invoices, there are many aspects that need to be taken into account in order to avoid legal pitfalls and create a solid foundation for your business.

In this guide, we not only present you with recommended tools for your accounting and tax matters, but also give you a comprehensive overview of all the steps you should take into account on your way to becoming self-employed as an architect or architecture student. From the first registration with the tax office, to deciding on the appropriate legal form and the necessary insurance coverage, to opening a business account and correct bookkeeping - we have created a checklist that will make it easier for you to get started.

Hinweis

If you click on a recommendation *, this supports our work. Odepla then receives compensation. We make recommendations based on our own experiences.

the essentials in brief 

  1. Independence: Check out these Playlist to get a good insight into all the important points about being self-employed as an architect.
  2. Tax registration: Report to the tax office within four weeks of starting your job. Use this Elster online portal and look at this Tutorial to this.
  3. Legal form and liability: Think carefully about whether you want to be a sole proprietor, a freelancer or start a company. Take a look at this 👉🏼 Video at.
  4. Insurance: You are normally covered by your parents' health insurance until you are 25 years old. Otherwise, you will need to insure yourself and consider professional liability insurance. As an architecture student, however, you usually only create designs that cannot be approved. Therefore, check whether you need professional liability insurance.
  5. Business account: Separate personal and business finances – that Finom account* can be a good choice.
  6. Accounting: Keep accurate records of income and expenses. Accountable* is your go-to tool for taxes and accounting. The Academy It also explains everything you need to know about tax matters. We use LexOffice* for Odepla.
  7. Steer: Find out whether you are subject to sales tax. As a small business owner, there are relief options (below 👇🏻 you can find more information). Pay attention to the correct handling of sales tax.
  8. Invoice creation: A valid invoice contains a number of mandatory details. Regular payments are also important for those liable for sales tax. On Odepla we offer you an automated template.

1. Tax registration

  • Freelancers have to no later than four weeks after starting work report to the responsible tax office to request and fill out a questionnaire for tax registration.
    • By submitting the tax registration questionnaire, you will receive a tax number that you must use for your tax matters.
    • It is important to comply with your tax obligations, otherwise you could violate tax law and face penalties or fines.

2. Legal form/liability

    • Although it is not necessary to register a business, it is advisable to weigh up all the advantages and disadvantages. Decide whether you want to carry out your self-employment as a sole proprietor, freelancer or in the form of a company (e.g. GmbH). This can help you Video help.
    • The choice of legal form affects your liability, tax burden and other legal aspects.

3. Insurance coverage

    • Health insurance
      • As a student, you are usually insured through your parents until you are 25 years old.
      • From the age of 25 you have to insure yourself-
    • Architect’s liability insurance (Optional) & Professional liability insurance (Optional)
      • Since you, as an architecture student, mainly... non-approvable designs you will create, which cannot be implemented within the meaning of the applicable building regulations and therefore does not require any guarantee or liability for the feasibility of the design, there is usually no reason for liability.
      • Useful links 🔗
    • General
      • As an architect, check whether you need to take out professional liability insurance. As an architect, you have a certain responsibility towards your clients, and insurance protects you from possible claims for damages.

4. Business account

    • Open a separate business account to keep your business finances separate from your personal finances.
      • We recommend this for this Finom account*, which we use ourselves.
      • Finom is a great online bank, especially for freelancers, as it offers an account for €0 per month!
    • Separating business and personal finances makes bookkeeping easier and ensures transparency. It also creates a professional impression towards your customers and business partners.

5. Accounting and records

  • Carefully record all business transactions and income in an accounting record. This includes creating invoices, documenting expenses and managing bank accounts.
  • Proper accounting is necessary to meet your tax obligations and pass potential tax audits.
  • For this we recommend you as a freelancer Accountable*. We recommend that you set up a corporation, such as a GmbH or UG LexOffice* – which we use ourselves. It has an interface to Finom, so all bookings from Finom can be transferred and booked directly into LexOffice.
  • Useful YouTube videos 📹

6. Taxes

  • Software recommendations
    • accounting
      • Accountable.de* (we recommend especially for freelancers)
        • Short explanatory video
        • With Accountable, as a freelancer, you can record all bookings and complete your annual tax return and preliminary VAT returns.
      • LexOffice* (we recommend particularly for corporations)
    • Business account
  • value added tax
    • What is sales tax?
    • What is advance sales tax return?
    • Check whether you are subject to sales tax. As a freelancer in the architectural field, you could be exempt from sales tax if certain requirements are met.
      • Small business regulation 
        • Creates the legal basis for sales tax exemption § 19 Para. 1 UStG. It was stipulated there that Entrepreneurs whose sales were below a certain amount last year and are expected to be below a certain amount in the current year, are exempt from sales tax (be sure to look at the legal text - you will find the exact amounts there).
        • This regulation allows you not to show sales tax on your invoices. However, you are not allowed to claim any input tax.
        • In order for you to be able to use this, you must indicate in the tax registration questionnaire when registering with the tax office that you want to use the small business regulation.
        • As a freelancer, it is sufficient to use the income surplus regulation (EÜR) to determine your profit.
    • Incorrect handling of sales tax can lead to back taxes and legal consequences. Get advice from a tax advisor on this.
  • Trade tax
    • As a freelancer, you don't pay trade tax; you only have to pay it if you register a business.
    • What is trade tax and do I have to pay it?
      • If you as a trader have a profit of over €24,500, you have to pay trade tax. This tax is the most important source of income for your municipality and finances many public services.
      • Trade tax is a tax on your profits, not on your sales. It is 3.5% of your profit, multiplied by the local tax factor (assessment rate). The assessment rate is different in every city. In Berlin, for example, the assessment rate is 410 %, so the trade tax is 14,35% of your profit, which is above the tax exemption of €24,500.
      • However, if you pay trade tax, you get a tax credit of 13.3% on your income tax, so in total you only pay the difference of 14.35% - 13.30% = 1.05% in taxes (for Berlin). If your municipality's assessment rate is 400% or less, trade tax does not result in additional taxes for self-employed businesses.

7. Invoicing

  • Creating invoices is important for your accounting and for the tax office. A valid invoice must contain certain data. Since this can be complicated depending on the order, We have integrated an invoice generator, which creates a valid invoice for you and your customer.

  1. Mandatory information on the invoice
    • Your full contact details: name, address and, if applicable, other contact details (e.g. telephone number, email address).
    • Your customer’s full contact details: name, address and, if applicable, other contact details.
    • A consecutive invoice number to uniquely identify each invoice.
    • The invoice date, i.e. the date on which the invoice was issued.
    • The service description: A clear and detailed description of the service or delivery provided.
    • The invoice amount, which includes the net amount (excluding sales tax) and, if applicable, the sales tax amount.
    • The applicable sales tax rate if you are subject to sales tax.
    • The payment term or payment date by which the invoice amount must be paid.
    • When applying the small business regulation: a note that you do not report any sales tax in accordance with Section 19 UStG.
  2. value added tax
    • If you are subject to VAT, you must indicate the VAT amount shown on your invoice. This is usually calculated using the corresponding sales tax rate (e.g. 19 %).
    • Please note that in this case you also have to submit the advance VAT return and VAT payments regularly to the tax office.
  3. Retention obligation
    • Keep copies of your generated invoices for 10 years. This is required by law and serves to ensure the traceability of your business transactions.
  4. Invoicing to companies abroad
    • When invoicing companies abroad, additional requirements apply, such as specifying the customer's international sales tax identification number (VAT ID).
  • After completing and paying for the design service on Odepla, you can create the invoice in the last step.
  • We support you in creating the invoice and fill all known data into the generator in advance. At the end you just have to check this data and you can then download the invoice for your accounting.