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How to become self employed?

Becoming self-employed – first steps: 

For many people, setting up a business is the path to professional independence. Nevertheless, becoming self-employed embarks on an entirely new track, which is partly laid out with brittle ice. This article deals with the possibilities of becoming self-employed, the essential steps towards self-employment, and what costs await.

In addition, it contains essential data and facts about self-employment in the Federal Republic of Germany. It provides crucial information on suitable legal forms, responsible institutions, and other stations, as well as possible funding.

What do you have to consider on the way to self-employment?

Many people who have the idea of starting their own business fail because of the lack of information and successful preparation for the upcoming self-employment. However, the process of setting up a company should not deter anyone who is well informed and armed from the hurdles that a person faces when starting their own business. Entrepreneurship is an adventure that, in part, involves the potential dangers of a threat to existence.

First of all, you should always look at the initial situation, i.e., from which professional position do you want to start your own business? And equip yourself accordingly for the form of professional independence that best suits your situation. According to this, the intention that affects this independence plays a role:

Becoming self-employed: essential questions:

If you want to start your own business, you should deal with these questions:

  • Would you like to be self-employed full-time or only part-time?
  • Should trade be registered, or is it sufficient to write a freelance activity with the responsible tax office?
  • What are the ten most important steps to take, and what are the costs?
  • Where do you register your self-employment?
  • How do you decide which legal form?
  • Are there suitable funds?
  • Where do you work? Do I have to set up an office?
  • How can you motivate yourself to achieve the desired success?

Opportunities for the path to self-employment:

There are special subsidies and grants for people who want to go self-employed after being unemployed. The entry allowance, the start-up subsidy, and the AVGS can be mentioned to promote start-ups out of unemployment. The respective job center offers free advice to recipients of unemployment benefits I and II. Certain technical conditions are associated with the grants and different, in some cases individual, decisions regarding the amount and duration of funding applications.

Starting a business out of unemployment

The employment agency or Federal Employment Agency offers financial help to people who want to break out of unemployment by starting a self-employed or freelance job or setting up a company. There are different funding instruments for this – depending on whether you receive unemployment benefit I or Hartz IV. According to funding statistics from the Federal Employment Agency, almost 25,000 recipients of ALG I or SGB II benefits received funding for self-employment in 2018. These were either so-called integration benefits (since 2012) or the entry fee for self-employment or a start-up grant (since 2006), or a start-up grant, also known as Ich-AG (source: IAQ).

If you want to start a business out of unemployment and are currently receiving unemployment benefit I, the essential requirement for funding in the form of a start-up grant is met on the condition that you strive for self-employment. The responsible employment office accepts applications in this regard, provided that the applicant has received ALG I for at least one day and is still entitled to ALG I for at least 150 days. Details of subsidies for people in unemployment follow under the next heading.

Quit your job and become self-employed full-time

If you already employed under an employment contract, other requirements apply to taking up self-employment. The current employment contract terminated for a business start-up from an already existing employment if the self-employed activity started full-time or a company founded. This, of course, a bold step and should carefully considered to minimize risks. The feeling of security associated with a permanent position does not exist in self-employment.

Of course, it is up to you to decide whether you can go into business for yourself and live with this situation, and take responsibility for essential company decisions or not. In most cases, it only becomes clear afterward whether you are an entrepreneur. The dream of your own company and the executive chair includes a challenging start-up phase. Problems and difficulties that suddenly arise in your own company, as well as conflicts with others, i.e., with associated companies, customers, staff, etc., cannot rule out. In addition, it a question of time whether the business plan holds and can successfully implement. The advantages and disadvantages of the start-up idea should therefore carefully calculated.

Bottom Line

Accordingly, measures must prepare: At this point, subsidized advice on the start-up process can use, which particularly important when creating a suitable business plan. The coaching fund up to 80% by the state, and an experienced consultant helps create a bankable and realistic business plan that includes a financial plan. This minimizes risks and protects against unrealistic projects and thus ultimately also against the failure of self-employment.

In addition, specific start-up capital should be available from the remuneration of the existing activity, which a bank loan can supplement. Bank loans for business founders usually require a certain, for example, a percentage, personal contribution. For example, if you want to apply for a start-up loan of 100,000 euros, you should have your gift of at least 10% of the total desired start-up capital. In this case, this corresponds to 10,000 euros.

Become self-employed during your studies

There are various offers for starting a business from student status. The university imparts highly valued technical knowledge, which often seen as an advantage for starting a business. But the path to self-employment also harbors financial risks and advantages and disadvantages for academic staff, students, and graduates. Nevertheless, statistics show that when looking at the total number of founders, the proportion of visionary founders is significantly higher than that of non-academic founders – most of them with an innovative business idea.

As a person who would like to go self-employed from university, one thing should consider—the lack of professional experience in the economic sector. Suppose you don’t come from a family with a corporate culture yourself. You don’t know the expected skills and unspoken rules in the job market. Or you don’t know enough, and so you set out to explore unknown territory. It would therefore be more advisable to first (even if only for a short time). Gain professional experience in the labor market to enable empathy and thus also to facilitate later communication with and with your staff or to avoid understanding difficulties and to prevent conflicts as far as possible.

Part-time self-employment:

If someone only wants to become self-employed as a part-time job. The conditions a little more relaxed compared to full-time employment. It is sufficient to register with the responsible tax office about taking up a part-time self-employed or often freelance activity. If there no contractually agreed information obligation. It up to the employee whether or not this communicate to the employer. A business plan not necessary here, but it also recommended.

Becoming self-employed: What funding is there?

The start-up grant applied directly at the responsible employment office and intend for ALG I recipients. In the first phase, the funding period is six months, and in the subsequent second phase 9 months. Thus, the start-up grant includes a maximum funding period of 15 months, in addition to the previous unemployment benefit, a lump sum of 300 euros for health. And social insurance will paid to the founder in the first phase.

The second phase only includes this flat rate – ALG I is not available. Further prerequisites for receiving a start-up grant are that one takes up self-employment full-time. Or that a part-time self-employed or freelance activity converted into full-time employment. It is not possible to receive the start-up grant again within 24 months. A realistic business plan, for example, checked by the Chamber of Industry. And Commerce or a tax consultant must present. And the responsible case manager at the employment office must convince of their professional suitability.

What are the ten most important steps to self-employment?

If some one desires to start their own business, the first thing they need is a good business idea. Good business ideas demand-oriented and not daydreams. While looking for a business idea, you can also take inspiration from existing companies.

Also read: how to earn money online in india

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