Starting a Business as a Pupil, Student, or Out of Unemployment - Becoming Self-Employed Step 4
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In doing so, I describe special requirements, restrictions and go into exemption limits, insurance, and grants.
Since the topic was more extensive than expected, this part is about setting up a business as a pupil, student, and unemployed person. In part 5 I will deal with the special case of part-time self-employment.
Starting a Business as a Pupil, Student, or Out of Unemployment
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| Starting a Business as a Pupil, Student, or Out of Unemployment - Becoming Self-Employed Step 4 |
I founded a relatively normal company if you can say that. Fortunately, after the end of my employment relationship was in sight, I still had a relatively large amount of time to prepare for the seamless transition to self-employment.
Many start-ups also go this way. Either after finishing school or studying, but also immediately after being laid off or given notice of the previous job.
But there are other cases as well. So you know the stories of 14-year-old American students who got rich with a website or on YouTube. Whether you always have to believe something like that is of course another matter, but there are a few things to consider if you want to be self-employed as a student.
The same applies, of course, to students and to set up a business out of unemployment (including continued receipt of benefits and grants).
Therefore, I would like to go into these specific cases below and provide you with tips and links. But here's a hint that you should always contact the respective contact person at the employment agency, health insurance, the IHK, and so on to discuss your special situation.
Starting a Business as a Student
Most young people will probably only think about making money when they have to. :-)
But there are also young people and even children under 18 who would like to start their own business.
Why Should You Be Self-Employed as a Student?
There are students under the age of 18 who want to build something and are interested in business. Often it is also the desire to be creative and earn some money with it.
For schoolchildren, starting a business is a challenge that must not harm school performance, but of course, it also offers opportunities to gain great new experiences and helpful knowledge, as well as simply getting to know the practice.
In addition, you can find out for yourself what you would like to do later and what you don't like.
For young start-ups, there are some special features to consider in Germany.
Schoolchildren must also register a business if they are self-employed. It does not matter whether this is just a part-time job or full-time self-employment in terms of the time required.
Since you only become fully legally competent in Germany at the age of 18, these requirements are required:
- Consent from both parents
- Family court approval
If you have written an application and presented the business idea including the qualifications of the child / young person and the business plan, both parents must sign. The family court then examines the application and, if necessary, clarifies the suitability in a personal interview. In practice, children from the age of 14 are usually only admitted to self-employment, even if it would theoretically be possible from the age of 7.
If the family court has approved, then the business registration follows. Then the self-employed child can do almost anything, except taking out loans. Otherwise, it is treated as a normal self-employed person. It is also fully liable and there are no special regulations.
Of course, it is also treated for tax purposes like any other self-employed person and also has the same option when choosing the legal form (e.g. small business regulation).
But the income limits are also important :
- There has been no income limit for entitlement to child benefits since 2012.
- The income limit for free co-insurance in family insurance ( health insurance ) is 470 euros per month (as of 2021)
If you exceed the income limit, then as an independent student you have to take out health insurance yourself. Therefore, you should talk to your previous health insurance and pension insurance company beforehand to clarify any open questions.
#1 Alternative = Simulation Games
Since you cannot earn that much anyway before services are discontinued or additional costs arise (and the entrepreneurial risk must not be underestimated), you should consider an alternative.
In every federal state, there are student companies, simulation games, and also start-up awards for students.
Just ask the Chamber of Commerce and Industry and then you can learn a lot through such a playful approach and prepare yourself for real independence.
#2 Alternative = Family Member
I've also heard of cases where the company was not registered with the child but with a parent. The company was later transferred to the child (then 18). This eliminates some formalities.
However, this should not necessarily be in the interests of the inventor and perhaps also not in the interests of the child. Therefore, we should carefully consider this approach before there are any legal consequences.
#3 Alternative = First of All, Don't Earn Any Money
A trade is only necessary if it is aimed at making a profit and is a long-term independent activity.
If you set up your website without any income, you don't need a business registration. And whoever provides a service for free now and then certainly doesn't need a business.
During this time, however, you build up to something, gather experience and know-how, expand your reach, make contacts and then possibly already have some references. That means you don't start your own business from scratch at the age of 18.
Starting a Business as a Student
Starting a business as a student looks like this. Students must also register a business if there is an intention to make a profit and it is permanent self-employment.
Since a student is usually over 18 years of age, he or she can register a business in the normal way and is then, for example, subject to normal taxation. But there are special features.
Why Should You Be Self-Employed as a Student?
There can also be many reasons for this. In addition to gaining experience and knowledge, as a student, you can prepare for the time after your studies in this way.
You make a lot of new contacts and in this way, you can simply try out whether the corresponding independence is something for you or not.
Last but not least, it is of course a good opportunity to earn money on the side and lay the foundations for full-time self-employment after graduation.
#1 Family Insurance
As long as the activity is not carried out full-time, i.e. does not take more time than is required for studying (no more than 20 hours per week), you can usually stay with family insurance. However, this is decided by the insurance company.
And the student must not earn more than 470 euros per month and be no older than 25 years. If the income is higher, then you can get statutory health insurance as a student if you are not self-employed full-time. That is much cheaper.
However, if you are self-employed as a student full-time, you have to take out normal statutory or private health insurance.
After giving up self-employment, you can return to family insurance during your studies.
#2 Child Benefit
There is the possibility of receiving child benefits up to the age of 25. However, this does not apply if the student earns more than 470 euros per month (2021).
Another special feature of students is that BAföG is not included in income. This applies to both child benefit and family insurance.
#3 BAföG
Keyword BAföG. If you earn more than 4,410 euros in profit before taxes per year, the BAföG entitlement is reduced. If there is less, there is no impact on BAföG.
On bafoeg-rechner.de can be expected by that.
#4 Pension Insurance
If you earn more than 450 euros per month, you usually have to take out pension insurance. You should speak to the pension insurance provider about this.
Here you can find an interview with the experiences of a freelance student.
Starting a Business Out of Unemployment
The following situation is more common than the first two special cases. You become unemployed and want to earn something more.
Why should you become self-employed as an unemployed person?
Most people want to be active and create something. If you can't find a suitable job or if you want to determine what to do yourself, self-employment for the unemployed is a good option. Here you have the free choice of what you want to do and can start from unemployment with a certain degree of security (support from the Employment Agency).
Especially if you have previously worked in a job that you did not like, setting up a business from unemployment offers the opportunity to try something out and gain experience. This allows you to find the right path and not only to earn good money in the long term but also to become happy.
In itself, starting a business from unemployment does not work much differently than with “normal” self-employment. But there are a few things to consider here too.
Starting a Business with Unemployment Benefits 1
Recipients of unemployment benefit I can work on the side for a maximum of 15 hours per week. If you exceed this time, you are no longer considered unemployed and the services of the employment agency cease to exist.
The additional income limit is 165 euros net income (after deducting business expenses, taxes, and, if applicable, social insurance). Any additional income will be fully deducted from ALG I.
Insurance
The employment office pays the social insurance while receiving ALG I. If you work more than 15 hours at least at times, you have to register with the employment office for this time, and then you have to pay the social security yourself.
Starting a Business with Unemployment Benefit 2 (Hartz IV)
There are a few more points to consider.
Part-Time
You also have to report to the employment office if you are self-employed.
If you are self-employed as a part-time job (no more than 15 hours a week), you should consider that additional earnings over 100 euros per month are offset against your own Hartz IV rate. In addition, there are certain percentage offsets (e.g. 20% allowance between 100 and 1,000 euros).
Those who only become self-employed as a part-time job still “belong” to the employment office, including further training measures and job placement.
Full-Time
Of course, you can also become self-employed full-time from Hartz IV.
If the employment office recognizes the full-time character of self-employment, then you are, so to speak, released for at least 6 months. During this time you do not have to take part in support measures and you are not placed in jobs. In addition, you get 6 months start-up grant in the amount of the last received unemployment benefit + 300 euros for social insurance.
After the 6 months, there is a reassessment and if things go well in the eyes of the Employment Agency, then you get the 300 euros to grant for another nine months.
If the employment office does not recognize the full-time job, you can still do it, but then you have to be available to the employment office as normal and you will not receive a start-up grant.
Documents for Starting a Business
This article describes very well which documents are required to apply to the employment office for part-time or full-time work parallel to the Hartz IV reference.
This is all the more true as there are also some support measures for people starting of unemployment. I will come to the funding opportunities in detail in a later part of this series of articles.
Insurance
Health insurance, long-term care insurance, and pension insurance must be taken over by yourself, with the allowance of 300 euros per month being exactly for this.
Additional Information
Reasons for unemployment are a complex topic with a lot of regulations. You should therefore definitely seek a conversation with your advisor at the employment agency before you commit certain mistakes that subsequently cause costs or even cost you the right to ALG I or II.
You should also keep in contact with the Employment Agency during the establishment and the funding period.
So It Goes on
The next part of the article series Doing yourself is about part-time self-employment. I then explain in detail what you have to pay attention to and when is it worth doing part-time self-employed.
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