Obligations for Founders: Taxes, Accounting, Invoices (2026)

As a founder, you register your trade business (not as a freelancer), send the tax registration questionnaire to the tax office (Finanzamt) within one month, usually calculate your profit with the cash-basis profit calculation (Einnahmenüberschussrechnung, EÜR) and issue invoices with all mandatory details. Whether you charge VAT depends on the small business regulation (Kleinunternehmerregelung). With your first employee, payroll and social security reports are added.

Starting a business involves more than a good idea and the first customers. In the very first month, reports to the tax office, correct invoices and orderly filing are waiting for you. Setting up these routines early saves you back payments and late-filing surcharges. Costs, legal form and a reserve for taxes should ideally already be part of your business plan. The thresholds reflect the situation in October 2026; this article does not replace individual tax advice.

Overview of obligations: what applies from day one

The most important obligations, who they apply to and by when you complete them:

Taxes: which obligations begin when you start

Trade business owners register their business with the trade office (Gewerbeamt) at the start; freelancers do not need a business registration. The tax office then registers you: within one month you submit the tax registration questionnaire electronically via ELSTER. Your estimate of turnover and profit determines the advance tax payments. Figures that are too high tie up money, figures that are too low lead to back payments later.

Which taxes apply depends on your activity and legal form: income tax (corporation tax for a GmbH or UG), trade tax (Gewerbesteuer) for trade businesses and VAT, unless you use the small business regulation. If you have employees, you also pay wage tax.

If you are liable for VAT, you submit advance VAT returns, each by the 10th day after the end of the period. The quarter is the norm, and the month if VAT in the previous year exceeded €9,000. For businesses founded up to the end of 2026, the expected tax of the first year counts. What applies from 2027 is explained under Legal changes 2027.

Tip: Handle all business payments through a separate account from the first invoice and set aside a fixed share of every payment you receive for taxes. Your financial plan shows how much.

Small business regulation: the thresholds since 2025

Since 2025, new thresholds apply to the small business regulation under § 19 UStG: your total turnover may not have exceeded €25,000 in the previous year and may not exceed €100,000 in the current year. What counts are the amounts actually received, excluding VAT. The very turnover with which you exceed €100,000 is no longer tax-exempt. If your turnover in the current year is between €25,000 and €100,000, you switch to standard taxation from 1 January of the following year.

In the year of founding, according to the tax authorities a stricter rule applies: your turnover may not exceed €25,000 in that year, and the €100,000 threshold does not yet apply. The very turnover with which you exceed €25,000 is subject to VAT.

As a small business, you issue invoices without VAT and refer to the tax exemption, for example with „Steuerbefreiung für Kleinunternehmer nach § 19 UStG“. Anyone who shows VAT anyway owes that amount to the tax office. So check your turnover every month.

Is the regulation worth it for you?

Not always. With high initial investments, standard taxation can be more favourable, because you get the VAT you paid back as input VAT. Private customers look at the final price, business customers usually deduct the VAT. If you opt out of the regulation, you are bound by that choice for five calendar years. So decide before larger purchases.

Accounting for the self-employed: EÜR or balance sheet?

The first question in accounting for the self-employed and founders is: how do you calculate your profit? With the cash-basis profit calculation (EÜR) or with a balance sheet and double-entry bookkeeping. That depends on legal form, commercial register and size.

The cash-basis profit calculation compares business income and business expenses. What counts is when the money flows. It is permitted if no law obliges you to keep books (§ 4 (3) EStG). This applies to freelancers and to most small trade business owners without an entry in the commercial register. You submit it electronically every year as Anlage EÜR.

You have to prepare a balance sheet in three cases:

• GmbH, UG, OHG or KG: commercial partnerships and companies always keep books under the German Commercial Code (HGB) and prepare annual financial statements.
• Registered merchants: Every merchant must keep books. § 241a HGB exempts sole traders from this as long as turnover does not exceed €800,000 and annual net income does not exceed €80,000. For a new business, the first balance sheet date already counts.
• Larger trade businesses: for tax purposes, you become obliged to keep books under § 141 AO if your turnover exceeds €800,000 or your profit exceeds €80,000 a year. The obligation begins with the financial year after the tax office notifies you. This rule does not apply to freelancers.

Double-entry bookkeeping in brief

In double-entry bookkeeping, you record every business transaction in two accounts, as a debit and as a credit. When a customer pays, your bank balance rises and your receivable falls. The basis is a chart of accounts, usually SKR 03 or SKR 04. At the end of the year, this produces the balance sheet and the profit and loss statement. You may always prepare a balance sheet voluntarily, but for small sole proprietorships it rarely pays off.

Accounting for founders: the ongoing tasks

Reliable accounting comes from fixed routines. The law requires bookkeeping entries to be made completely, correctly, promptly and in an orderly manner. Cash receipts and cash payments are recorded daily, and later corrections must remain traceable. This checklist helps in everyday work:

Also keep private and business expenses separate and assign invoice numbers without gaps. A loose collection of paper receipts, email attachments and private bank statements costs you a lot of time when preparing the tax return.

Invoices: mandatory details and e-invoicing

Fixed templates help you record the mandatory details completely. Depending on the case, these include:

• name and address of your business
• name and address of your customer
• tax number or VAT identification number
• date of issue and consecutive invoice number
• quantity and type of goods or scope of the service
• time of delivery or service
• net amount by tax rate, tax rate and tax amount
• reductions agreed in advance, such as a cash discount

For tax-exempt sales, you need a note on the exemption. For invoices up to €250 gross, the issuer’s name and address, date of issue, type and scope of the service, gross amount and tax rate are sufficient. Invoices from small businesses need neither an invoice number nor a date of service, but they do need the tax number or VAT identification number and the note on the tax exemption. Additional requirements apply to instalment payments, services to other EU countries and construction services.

E-invoicing: what has applied since 2025

Since 1 January 2025, new rules apply to invoices between domestic businesses. An e-invoice consists of structured data, for example in the XRechnung or ZUGFeRD format. An ordinary PDF file is not an e-invoice.

• Receiving: since 2025, every business must be able to receive e-invoices, including small businesses.
• Issuing until the end of 2026: paper or, with the recipient’s consent, PDF is still allowed.
• Issuing in 2027: this transitional rule only applies with a previous-year turnover of no more than €800,000.
• From 2028: mandatory for all businesses, except small businesses and invoices up to €250 gross.

Set up a fixed way of receiving them early, such as a dedicated email inbox, and keep the structured original data. A printout is not enough.

Record retention: how long you keep documents

How long you keep documents depends on their type (§ 147 AO, § 257 HGB):

• 10 years: books, records, inventories and annual financial statements.
• 8 years: accounting records such as invoices, till receipts and bank statements (since 2025, previously 10 years).
• 6 years: business letters received and sent.

The period begins at the end of the calendar year in which the record was created, the letter received or the annual financial statements prepared. If documents are still relevant for an open tax assessment, the period continues. Digital documents must remain retrievable and readable the whole time, and e-invoices received must be kept in their original format.

Tip: Create the same folders for your filing every year, for example outgoing invoices, incoming invoices, bank, contracts and tax office, and back them up regularly in a second location. That way you can find every receipt quickly, even during a tax audit.

Staff: obligations with your first employee

Your first hire brings a number of additional tasks. You need an establishment number (Betriebsnummer), submit social security reports and ensure correct payroll. You register mini-jobs with the Minijob-Zentrale.

Under the Verification Act (Nachweisgesetz), you record the essential working conditions such as pay, working hours, holidays and notice periods in writing, some of them on the first working day at the latest. Since 2025, text form is sufficient for this in many sectors. According to a 2022 ruling of the Federal Labour Court, you already have to record working time today.

Since 1 January 2026, the statutory minimum wage has been €13.90 gross per hour and the earnings limit for mini-jobs €603 per month. You document the working hours of mini-jobbers by the seventh day after the working day at the latest and keep the records for two years. Besides the gross wage, also plan for employer contributions, levies and accident insurance.

Whether you do payroll yourself or hand it over depends on the number and type of employment relationships. Our article Outsourcing payroll: when it pays off helps you decide.

Social security: what you cover yourself

Being self-employed does not mean being free of social security:

• Health insurance and long-term care insurance: mandatory, statutory or private.
• Accident insurance: registration with the responsible employers’ liability insurance association within one week; for trade businesses the business registration is sufficient.
• Pension insurance: mandatory for some professions, otherwise private pension provision.
• Unemployment insurance: voluntary insurance is possible, application within three months of starting.
• Daily sickness allowance insurance: cover for longer illness.

Some professional groups are subject to statutory pension insurance, such as craftspeople entered in the register of crafts, midwives, artists and journalists via the Künstlersozialkasse, and teachers and carers without employees subject to insurance. This also applies if, without such employees, you work permanently for only one client; when you start for the first time, you can apply for an exemption for three years.

For shareholder managing directors of a GmbH, the control rights under the articles of association determine the social security status. Anyone who holds at least half of the share capital or can block all resolutions of the other shareholders is usually considered self-employed. If in doubt, the status determination procedure of the Deutsche Rentenversicherung provides clarity early on.

If you start a business while receiving unemployment benefit, the Employment Agency (Agentur für Arbeit) can pay a start-up grant (Gründungszuschuss). Among other things, you need a remaining entitlement of at least 150 days, and you apply before you start.

Accounting software: how to recognise a good solution

Software makes accounting faster and less error-prone. Instead of focusing on advertising promises, check these points:

• Compliance: store receipts unalterably, lock entries, log changes (GoBD).
• ELSTER connection: advance VAT return and Anlage EÜR go directly to the tax office.
• E-invoicing: the program reads and creates XRechnung and ZUGFeRD.
• Bank connection: payments are retrieved automatically and matched to invoices.
• Tax advisor: your data can be handed over in a format your firm can import.
• Growth: switching to standard taxation, payroll or a balance sheet is possible later.
• Data protection and costs: servers in the EU, clear costs, short notice period, export of your data.

Test two or three programs with the real receipts of one month. Whether you then do the bookkeeping yourself or hand it over depends on your time. You clarify individual tax questions with your tax advisor.

Pitfalls: the most common mistakes in the first year

• Missing receipts: without proof, the tax office does not recognise expenses.
• Missed deadlines: late returns can lead to late-filing surcharges, late payments to late-payment surcharges.
• Incorrect invoices: if mandatory details are missing, payment is delayed and your customer cannot deduct the input VAT.
• Unclear VAT: the small business threshold is overlooked or VAT is shown incorrectly.
• Private and business mixed up: a shared account makes every review tedious.
• No reserve for taxes: back payments and advance payments often hit you in the same year.

You avoid most mistakes with a fixed monthly appointment for your accounting.

Self-employed for a while: what changes as you grow

Many obligations change not with the calendar but with your figures. Check once a year whether one of these thresholds is getting closer:

• More than €25,000 turnover: the small business regulation ends from the following year, and immediately with more than €100,000 in the current year.
• More than €800,000 turnover: as a trade business owner, you become obliged to keep books after notification by the tax office (likewise from €80,000 profit), and you issue e-invoices from as early as 2027.
• Your first hire: payroll, reports and time recording are added.
• Switching to a GmbH or UG: from then on, double-entry bookkeeping with annual financial statements applies.

If you have been self-employed on your own for at least two years, our course Accounting and taxes for the solo self-employed may be a good fit: organising receipts, digital tools, invoices, tax obligations and working with your tax advisor. The course can be subsidised through the KOMPASS programme.

Legal changes 2027: what changes for founders

Some changes for the coming year are already fixed (as of October 2026):

• Minimum wage and mini-jobs: the minimum wage rises on 1 January 2027 to €14.60 per hour, the mini-job limit to €633 per month.
• E-invoicing: anyone with more than €800,000 turnover in 2026 issues e-invoices from 2027, everyone else from 2028.
• Advance VAT return: under current law, newly founded businesses without the small business regulation will again submit monthly advance returns in the year of founding and the following year. The current exception only applies until the end of 2026.

Following changes reliably

More reliable than social networks are the tax authorities, federal ministries, social insurance institutions, chambers and professional associations. The free e-book on legal changes from Lexware also offers a compact overview. Distinguish between plans and law in force: the Federal Government’s pension commission recommended in June 2026 compulsory pension insurance for new self-employed people, but it has not been adopted yet. When a rule changes, adjust invoice templates, software settings and checklists at the same time.

Support: who helps you with your obligations

You can find the basics of legal form, business registration and insurance in our guide Starting a business: the 8 most important questions. What comes next once your business plan is finished is shown in After the business plan: the first steps.

If you are starting a business out of unemployment or are at risk of unemployment, the Employment Agency or the Jobcenter can fund AVGS start-up coaching. Accounting, taxes and liquidity planning are a fixed part of it. The funding is discretionary and there is no entitlement to it. After prior written approval, you pay no personal contribution.

Frequently asked questions

Does every business have to charge VAT?

No. With a turnover of no more than €25,000 in the previous year and no more than €100,000 in the current year, you can use the small business regulation. In the year of founding, the €25,000 threshold applies.

Do I need double-entry bookkeeping as a founder?

Usually not. Freelancers and small trade business owners without an entry in the commercial register use the cash-basis profit calculation. A balance sheet is required for a GmbH, UG, OHG and KG, for registered merchants above the thresholds of § 241a HGB and for trade business owners after a request from the tax office (§ 141 AO).

Do I need a tax advisor as a founder?

Not by law. Many founders do their ongoing bookkeeping themselves with software and use a tax advisor for the annual financial statements, tax returns or difficult questions. With a tax advisor, you have until the end of February of the year after next for the tax returns. If you have to prepare a balance sheet, have staff or run a GmbH, working with a tax advisor almost always pays off.

Do founders have to be able to receive e-invoices?

Yes. Domestic businesses have had to be able to receive e-invoices since the beginning of 2025, including small businesses. Issuing them is mandatory from 2027 with more than €800,000 previous-year turnover and from 2028 for everyone else; small businesses and invoices up to €250 are exempt.

How long do invoices have to be kept?

Eight years, under the VAT Act and the Fiscal Code, for all businesses. The period begins at the end of the year in which the invoice was issued.

Does every business need a business account?

For sole proprietorships, a separate business account is not required by law. However, it simplifies accounting, documentation and keeping an eye on your liquidity. A GmbH or UG needs its own account from the start, because the share capital has to be paid in fully or partly before registration in the commercial register.

Is a digital folder enough for filing receipts?

An orderly folder is a good basis. However, the documents must remain complete, retrievable and readable throughout the entire retention period. Back them up regularly and decide who may access them.