1. Separate business and private accounts It is not mandatory for partnerships, but it is sensible. For one thing, it helps the accountant and the tax office. For another, it helps to keep an overview and thus fulfil your most important entrepreneurial function. If you work with an accounting tool like SevDesk or Lexoffice, you can import the transactions from your business account – this also speaks for a separate account – because otherwise you have to clean up all the private transactions before you can properly sort the receipts. 2. Banks for start-ups Local banks can sometimes be sensible if you need financing later or immediately – it helps build a certain trust. There are many online banks, and the banking landscape is constantly changing. I don't want to make any bank recommendations, but I have often heard positive things about N26. It belongs to Deutsche Bank and reportedly has very good conditions for start-ups of all sizes (account comparison: https://n26.com/de-de/konten-vergleichen). A bank based in Germany is advisable and speaks for quality. And make sure the bank you choose can be linked with your accounting software (for example, N26 works with SevDesk). Then you have maximum comfort. Reserves for back payments and other expenses can be managed manually but also smartly automatically by some online banks like N26, which can calculate the tax burden for you and separate the money in so-called spaces. Spaces are essentially mini sub-accounts that you can flexibly open and close via the app. 1. Withdrawals from the business account for back payments Self-employed people should withdraw a maximum of 50 per cent of the income less expenses (i.e. profit before tax) into the private sector. The rest should remain on the account or be separated for tax back payments, increasing health and pension insurance contributions, etc. due to increasing profits. These are, of course, back payments to be made privately. How you handle the withdrawals or separation is best determined by yourself. You know yourself best and know what works best for you to avoid too many private withdrawals. If you can pay yourself a salary like with a GmbH, you don’t need the withdrawals for living expenses. You can also park part of the income in separate accounts to prevent too much withdrawal. This can even be done cleverly automatically with online banks via so-called spaces: see point "Banks for start-ups". If you withdraw more than these – very roughly set – 50 per cent, you risk – with increasing profits or higher profits than in the first estimate to the tax office – not being able to pay future obligations from taxes, pension insurance, and health insurance! And that can have VERY unpleasant consequences! You can roughly estimate the upcoming tax back payments yourself if you know your annual profit before tax; there are online tools for this (e.g.: https://www.bmf-steuerrechner.de/ekst/eingabeformekst.xhtml). Then you can set the money aside. Pension insurance adjusts the contributions only after you have submitted the tax assessment. Health insurers, however, calculate retrospectively. With contribution rates and contribution assessment ceilings, you can roughly calculate back payments and refunds. 2. Distribution of receipts on the private account Create a reserve system as mentioned above! You should distribute the money on the private account with iron discipline as follows (except in absolute emergencies) to build up wealth. You can NEVER start building wealth too early! Make a plan. We recommend the following distribution of private withdrawals or salary (after you have separated money for possible back payments, taxes, and health insurance!): 2.1 Basic account (current account): 50 per cent for the ongoing necessary costs of the month. Examples: rent, food, necessary payments such as instalments. 2.2 Investment account: 20 per cent (for future investments, further training, emergencies) Examples: car, washing machine, technology. 2.3 Wealth account: 20 per cent (wealth accumulation) No withdrawals from this! Never, except in an absolute emergency. Consider beforehand: can I save on current costs? Calculate the savings over 12 or 5 years; then you will see how it pays off. 2.4 Fun account: 10 per cent (holiday, entertainment, luxury, etc.) Dear reader, the information is compiled with love. Do you find something that is not right? Would you like additions? Then please get in touch; I look forward to feedback! info@beatehackmann.com Much success and happiness at all times! Beate Hackmann This information does not claim legal validity and completeness and does not replace legal or tax advice.