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Ask HN: Should I incorporate a company for software side projects?
61–70 of 73 posts
Re: Ask HN: Should I incorporate a company for software side projects?
#62As a German, I would strongly advise against incorporating too early (at least in Germany). I once made the mistake of founding a UG for a small side project and had to realize at some point that all the required bureaucracy was keeping me from doing the actual work. Let me break down the work for you because I hadn't been fully aware of what was awaiting me: - double-entry bookkeeping: This is easier than it sounds…
I did this a few times and I disagree. The tax consultant can do all this work for you (book keeping, all the tax work, etc). It is not free (I would say ~3k per year for everything a small GmbH needs), but in return you get a limited liability company.
Well, if OP is making so much that he can easily afford spending 3k/year on a tax consultant and still be left with a considerable amount (say 2-3 times this amount), then I'd say he's already ramen-profitable. ;)
Re: Ask HN: Should I incorporate a company for software side projects?
#63You have to pay taxes in Germany, it doesn't matter if you found a company in the US, Estonia or somewhere else, you are living in Germany and that's the important thing that decides you need to pay taxes there. In Germany you could do a "Nebengewerbe or Einzelunternehmen", where you can write invoices in your name, this is a fast way to get started. Otherwise you have the UG, which can be created with 1 EUR "Stammka…
One thing I still haven't completely figured out yet is the difference in liability between a UG (Haftungsbeschränkt) and Einzelunternehmen in Germany. As an Einzelunternehmen, you (as the sole proprietor) are liable with your private assets for any outstanding bills etc, I get that part. But is there anything else you're on the hook for? Am I'm missing something?
Let's say I started a SaaS company as an Einzelunternehmen. What's the risk for me personally since I can always spin up and immediately cancel cloud resources with hourly billing as customers come and go. I don't see a lot of financial risk in terms of customer churn. Again: What am I missing?
Re: Ask HN: Should I incorporate a company for software side projects?
#64You have to pay taxes in Germany, it doesn't matter if you found a company in the US, Estonia or somewhere else, you are living in Germany and that's the important thing that decides you need to pay taxes there. In Germany you could do a "Nebengewerbe or Einzelunternehmen", where you can write invoices in your name, this is a fast way to get started. Otherwise you have the UG, which can be created with 1 EUR "Stammka…
One thing I still haven't completely figured out yet is the difference in liability between a UG (Haftungsbeschränkt) and Einzelunternehmen in Germany. As an Einzelunternehmen, you (as the sole proprietor) are liable with your private assets for any outstanding bills etc, I get that part. But is there anything else you're on the hook for? Am I'm missing something? Let's say I started a SaaS company as an Einzeluntern…
Customer and legal problems put you at great financial risk. E.g. customers get out of paying one way or another and you cannot cover operational costs, you lose customer data and get sued for damages, you screw up on GDPR and get fined, etc.
Bugs in your infrastructure could also cause you to accidentally spin up a shitton of instances far exceeding your operational budget, but that isn't the primary concern.
Re: Ask HN: Should I incorporate a company for software side projects?
#65Earlier quoted context omitted.
I don't think this is legal. If you are based in Germany and incorporate in a different country you have to tell the german authorities. For example if you found a Limited in the UK, you have to tell the German authorities and the Limited will be seen as a German GmbH. It will be more expensive in the end because, for example, everything has to be translated and signed by a notary.
You and your company are separate entities. Many Germans incorporate abroad and it seems to work. What you have to report to the authorities is your personal income drawn from foreign companies you own or work for.
No, that's simply false information.
Re: Ask HN: Should I incorporate a company for software side projects?
#66You have to pay taxes in Germany, it doesn't matter if you found a company in the US, Estonia or somewhere else, you are living in Germany and that's the important thing that decides you need to pay taxes there. In Germany you could do a "Nebengewerbe or Einzelunternehmen", where you can write invoices in your name, this is a fast way to get started. Otherwise you have the UG, which can be created with 1 EUR "Stammka…
One thing I still haven't completely figured out yet is the difference in liability between a UG (Haftungsbeschränkt) and Einzelunternehmen in Germany. As an Einzelunternehmen, you (as the sole proprietor) are liable with your private assets for any outstanding bills etc, I get that part. But is there anything else you're on the hook for? Am I'm missing something? Let's say I started a SaaS company as an Einzeluntern…
There is also always the chance of getting sued. If you lose in court as a Einzelunternehmen, you personally will have problems If your UG or GmbH loses in court, you personally don't have any problems.
Re: Ask HN: Should I incorporate a company for software side projects?
#67Earlier quoted context omitted.
One thing I still haven't completely figured out yet is the difference in liability between a UG (Haftungsbeschränkt) and Einzelunternehmen in Germany. As an Einzelunternehmen, you (as the sole proprietor) are liable with your private assets for any outstanding bills etc, I get that part. But is there anything else you're on the hook for? Am I'm missing something? Let's say I started a SaaS company as an Einzeluntern…
Customer and legal problems put you at great financial risk. E.g. customers get out of paying one way or another and you cannot cover operational costs, you lose customer data and get sued for damages, you screw up on GDPR and get fined, etc. Bugs in your infrastructure could also cause you to accidentally spin up a shitton of instances far exceeding your operational budget, but that isn't the primary concern.
OK, I get that lawsuits would be a good example of "liability", but my question is this: Are you really not liable for the things you mentioned (GDPR, customer data) if you're the CEO of a UG/GmbH and it falls back on you because you're the one that designed the whole product?
Re: Ask HN: Should I incorporate a company for software side projects?
#68Earlier quoted context omitted.
Customer and legal problems put you at great financial risk. E.g. customers get out of paying one way or another and you cannot cover operational costs, you lose customer data and get sued for damages, you screw up on GDPR and get fined, etc. Bugs in your infrastructure could also cause you to accidentally spin up a shitton of instances far exceeding your operational budget, but that isn't the primary concern.
OK, I get that lawsuits would be a good example of "liability", but my question is this: Are you really not liable for the things you mentioned (GDPR, customer data) if you're the CEO of a UG/GmbH and it falls back on you because you're the one that designed the whole product?
Only if they can prove that you willingly or carelessly neglected your duties as a CEO. These are very narrowly defined, though: https://de.m.wikipedia.org/wiki/GmbH-Geschäftsführer-Haftung
Re: Ask HN: Should I incorporate a company for software side projects?
#69Earlier quoted context omitted.
You and your company are separate entities. Many Germans incorporate abroad and it seems to work. What you have to report to the authorities is your personal income drawn from foreign companies you own or work for.
No, that's simply false information.
No, you're the one peddling misinformation here. It's true that you have to tell German authorities about your foreign business (not just your income from that business) for tax purposes if you're actually operating your business from within Germany (i.e. you're running a "Gewerbe"). There are also some rules to follow you're merely conducting business with German customers, i.e. how to collect VAT etc.
In any case, however, you certainly don't have to "convert" your business into a GmbH.
Re: Ask HN: Should I incorporate a company for software side projects?
#70You should first check your employment contract very carefully. There may be a no-compete clause that could prevent you from doing related work on your own. If there isn’t one, then it really is no business of your current employer whether you start a company while employed. Still, you should be very careful of anything that might be construed as taking advantage of confidential information gained through your employ…
> Are you prepared to travel to Tallinn and visit local banks in person to try convince one to open you a business account? This can be deferred though. You can open an account with Transferwise or Holvi online and recieve payments/pay yourself a salary. You only need a bank account once you want to pay the share capital or withdraw dividends. Also, if you use leapin.eu they get you a "pre-acceptance" from LHV bank _…
> > If you pay a dividend at the end of the year, it’s taxed as capital gains
> Really ?
Yeah, really. At least this is the way it is in Germany. One should note, though, that taxes on capital gains are just another form of income tax and the boundaries are somewhat blurry. In particular, it doesn't necessarily mean you're paying more in taxes only because it's capital gains. (See also: https://de.m.wikipedia.org/wiki/Abgeltungsteuer)