Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Bootstrapping a SaaS Business in Germany: How I did it

lukashermann.dev

Post reply on HN
Print view View original

51–60 of 110 posts

Re: Bootstrapping a SaaS Business in Germany: How I did it

#51

Post by slow_typist »

pudo wrote: post #17
jacomoRodriguez wrote: post #16

Question regarding the "Einzelunternehmer" vs "GmbH" topic: in terms of liability, going for the former seems a bit "optimistic" as you are personally liable, no? Depending on your business it might vary how high the dangers in this regards are, but for a SaaS business, DSGVO fines immediately come to mind.

I worry that Lukas is about to find out about the business end of the Umwandlungssteuergesetz: converting a Einzelunternehmen to a GmbH is a surprising amount of faff, and once you've done it you (normally) end up with a company you can't easily sell for 7 years without paying some pretty hard-core taxes. I got to do this whole dance early this year, and it took a big bite of momentum out of the little bootstrap I wa…

While bootstrapping, you do not know whether you would ever want to go full GmbH. So biting the bullet is a little bit like betting on the future. You have considerably higher cost and hassle from day one on and would need a tax consultant for doing your yearly balances. Of course all the cool kids have GmbHs but do you really need it? Its main advantage is that you can sell it at once or in pieces if you need financing, but even that is manageable with an Einzelunternehmen.

With regard to risk, the CEO of a GmbH is still personally liable for a lot of risks and liabilities including the social insurance payments of employees.

Also, all risks you can get insurance for you should get insurance for regardless of the form of the enterprise.

Agree that the UG is the worst choice since you are basically announcing you have zero savings behind and can generally not be trusted.

If you want to get more serious with your Einzelunternehmen, you could also consider becoming an „e.K.“ (eingetragener Kaufmann). Same tax rules but full HGB (Handelsgesetzbuch, special law that governs interactions between companies) applies.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#52

Post by Roritharr »

jkaplowitz wrote: post #48
Roritharr wrote: post #45

Earlier quoted context omitted.

What most people do not understand about muhaaa's comment is the dry-income problem. How to bankrupt yourself in 3 easy steps: 1. Incorporate a UG (small limited liablity entity, sometimes called baby GmbH) with 100€ capital base and you owning 100% of stock. 2. Raise Venture Capital, let's say 1M€ for 10%, making your company worth 10M€. 3. Move out of Germany. 4. Receive a letter from the Tax Authority that you are…

How would that be different if you did all steps 1-2 with a foreign corporate entity while being personally tax resident in Germany? Step 4 would be the same except if you were hiding the existence of the foreign corporate entity from the German tax authorities - but my understanding is that reporting steps 1 and 2 to the German tax authorities is legally mandatory for any German tax resident.

Correct, there is no way to escape this if you have made this mistake of being either born as a german tax resident (your tax number is the first document you receive from the government) or having made the weird choice of choosing to become a german tax resident.

Personally this specific situation is in the top 3 reasons for me to leave Germany as soon as possible.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#53

Post by throwaway60722 »

slow_typist wrote: post #43
throwaway60722 wrote: post #31

Earlier quoted context omitted.

There are states with much lower taxes that also pay for education. Why should Germans pay so much? There are people who didn't go to university doing business too.

In the eighties, income tax in Germany could go up to 56%. It is much lower know. Taxes are somewhat relative in space and time.

Just over the border is a country with effective income tax for self-employed businessmen around 5-15%.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#54

Post by Atropos »

pudo wrote: post #17
jacomoRodriguez wrote: post #16

Question regarding the "Einzelunternehmer" vs "GmbH" topic: in terms of liability, going for the former seems a bit "optimistic" as you are personally liable, no? Depending on your business it might vary how high the dangers in this regards are, but for a SaaS business, DSGVO fines immediately come to mind.

I worry that Lukas is about to find out about the business end of the Umwandlungssteuergesetz: converting a Einzelunternehmen to a GmbH is a surprising amount of faff, and once you've done it you (normally) end up with a company you can't easily sell for 7 years without paying some pretty hard-core taxes. I got to do this whole dance early this year, and it took a big bite of momentum out of the little bootstrap I wa…

If you are planning on VC-like returns by selling your company, you should start with a holding GmbH and an operative GmbH below (or crazier structures like a Holding GmbH & Co. KG). But: This way you have the maximum administrative costs and complexity in the beginning...

I think starting as an Einzelunternehmer makes sense in certain situations. I'm not a tax lawyer, but I'm a lawyer in a firm that advises startups and I have seen a lot of "Starts as Einzelunternehmer -> Does asset sale to own GmbH" type deals... "Normal" lawyers / tax advisors will never recommend this, because it is not a "simple check the box" exercise, and "sophisticated" lawyers are incredibly expensive.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#55

Post by Roritharr »

djoletina wrote: post #50
Roritharr wrote: post #45

Earlier quoted context omitted.

What most people do not understand about muhaaa's comment is the dry-income problem. How to bankrupt yourself in 3 easy steps: 1. Incorporate a UG (small limited liablity entity, sometimes called baby GmbH) with 100€ capital base and you owning 100% of stock. 2. Raise Venture Capital, let's say 1M€ for 10%, making your company worth 10M€. 3. Move out of Germany. 4. Receive a letter from the Tax Authority that you are…

Or don’t move out because you operate a business out of Germany and none of this is relevant. How many businesses do you think ever reach a phase where this is a problem, let alone actually reach it *and* want to move elsewhere.

I've just described a very simple case, it could be much more nuanced and just as problematic.

Let's say you were one of the founding members of a startup in your 20s, you join and get 20%. After 3 years of not seeing much success you leave, hungry for cash in your pocket. The remaining two founders continue and grow the business substantially over the subsequent 5 years. Your 20% stake never meant much because the company didn't look into VC and was just bootstrapped. Now the company is making 5M ARR with an average of 500k profit over the last three years. Great Success but not unusual or enormous, but totally unrelated to you, you aren't even aware of these numbers.

Now you decide to move to the US, or even another State in Europe, for the love of your life. Suddenly your holdings get evaluated, the 500k profit now get multiplied by 13,75 (Ertragswertverfahren) for a company evaluation at 6.875M€, putting your holdings at 1.375M, leading you to owe 412.500€ to the Tax Authority.

Now you could try to sell your shares to the other two founders before trying to move, which doesn't exactly simplify your life at this point. The founders most likely will not have the cash on hand, and might even not be interested since they do not plan on either raising VC, selling the company in it's entirety or IPO.

The only entity interested in your shares is the german tax authority.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#56

Post by heipei »

Roritharr wrote: post #45
muhaaa wrote: post #11

Why a GmbH in Germany? Sorry, that was not a good idea and will costs you money and nerves to fix that. Now you are locked into Germany even if your business can be operated from everywhere around the globe. If you move the GmbH out of Germany you have to pay GmbH fair value ; fair value according to German Tax Authority! Do a Holding GmbH + Operative GmbH to accumulate wealth tax efficiently. You could have your com…

What most people do not understand about muhaaa's comment is the dry-income problem. How to bankrupt yourself in 3 easy steps: 1. Incorporate a UG (small limited liablity entity, sometimes called baby GmbH) with 100€ capital base and you owning 100% of stock. 2. Raise Venture Capital, let's say 1M€ for 10%, making your company worth 10M€. 3. Move out of Germany. 4. Receive a letter from the Tax Authority that you are…

Yes, the recently introduction of a stricter exit tax bit me too, before that I would have entertained the idea of moving across the border to Belgium or Netherlands (both literally less than 5km away). My tax accountant was of the opinion that the recently passed German exit tax will eventually be overturned by EU courts since it contradicts freedom of movement within the EU, but that will likely take years...

For what it's worth, the exit tax applies to all corporate ownership above 1%, foreign or domestic.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#57

Post by nforgerit »

LeanderK wrote: post #27
varispeed wrote: post #25

Earlier quoted context omitted.

Why would you look to avoid paying tax though? I can understand doing so in a country that is squandering money - like the UK, where you pay through the nose and get very little in return, but Germany? I heard public services and basically what you get for your tax is pretty decent.

why is this even the first thing that comes to mind when thinking about the legal form? This is highly unethical in general and really just super selfish. F*k you if you avoid taxes, especially in a country like Germany where society paid for your university studies etc.

German here. You mean the German education system that has been going down the last 2-3 decades? Are you even aware that the German tax system is redirecting tax income from smaller companies to richer ones (e.g. if they soon introduce "reduced electricity prices" for some heavy industry companies)? Are you aware that the system taxes employees relatively high and companies and capital income pretty low with thousands of tax exempts? Are you aware that government service cost are skyrocketing because they didn't reform anything in the recent 2 decades? Are you aware they poured ~4bn EUR into "digitization" of government services and nothing's working?

The whole system has been broken by corporate lobbies and unethical politicians who just wanted to be voted for. Now tell me about the great social system in Germany that is worth all the tax money.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#58

Post by Luc »

throwaway60722 wrote: post #53
slow_typist wrote: post #43

Earlier quoted context omitted.

In the eighties, income tax in Germany could go up to 56%. It is much lower know. Taxes are somewhat relative in space and time.

Just over the border is a country with effective income tax for self-employed businessmen around 5-15%.

Why not name the country?

Re: Bootstrapping a SaaS Business in Germany: How I did it

#59

Post by jandrewrogers »

PedroBatista wrote: post #12
gumballindie wrote: post #2

This is such a european startup story - where most energy is spent setting up a company and navigating bureaucracy rather than building a product. If anyone wonders why europe has such a lower number of startups this is why. And it’s not the government at fault. It’s the culture. Like seriously just pay someone 200€ to do this on your behalf and focus on stuff that matters not the “legal gray area” of earning pocket…

This varies wildly from country to country and Germany is known for their anal retentive bureaucracy and obsession with paper. In many other countries who didn't have the mental anesthetics of "we are Germans, we are the best" and had to make a living and get competitive the process is much simpler ( not all, far from it ). Also, "in the US is very easy and cheap" is a fallacy. First companies don't exist "in the US"…

The experience does vary widely with the State, but the process in the US is generally pretty easy and forgiving when you are a small company in my experience. In some States they were friendly, helpful, and accommodating when I made mistakes or didn't file some form I didn't know I needed, they understand that happens. California is the only State where I found the process to be consistently hostile.

Re: Bootstrapping a SaaS Business in Germany: How I did it

#60

Post by mbrain »

Roritharr wrote: post #55
djoletina wrote: post #50

Earlier quoted context omitted.

Or don’t move out because you operate a business out of Germany and none of this is relevant. How many businesses do you think ever reach a phase where this is a problem, let alone actually reach it *and* want to move elsewhere.

I've just described a very simple case, it could be much more nuanced and just as problematic. Let's say you were one of the founding members of a startup in your 20s, you join and get 20%. After 3 years of not seeing much success you leave, hungry for cash in your pocket. The remaining two founders continue and grow the business substantially over the subsequent 5 years. Your 20% stake never meant much because the c…

> Now you could try to sell your shares to the other two founders before trying to move, which doesn't exactly simplify your life at this point.

Just curious, could you just give it away for free or do they also have some value that will be taxed even though you didn't get any money?

Post reply on HN