If you do not require limited liability, you start business as an entrepreneur. The advantage is that the formalities are not as strict. For instance, the requirements for bookkeeping are greatly reduced compared to the GmbH. This means that a balance sheet is not needed and basically cash flow is used for the profit and loss statement. You could also use excel or other simple software instead of expensive bookkeeping software. However, more and more declarations and forms have to be send electronically to the tax office and other Financial Authorities. You can do this via elster online but in this case you might have to put in the details again. So, depending on the scope of your invoices, it might be easier to get into a bookkeeping program and send everything (advance VAT declarations, income tax declaration, yearly VAT declaration, trade tax declaration, profit and loss statement, EU summary statement etc.) directly from the program.
Please also be aware that at this moment the rules for electronically bills are unbelievable strict. Until laws are changed I can only recommend to pay a little more and receive bank account statements and phone bills in paper form. At this moment it is not accepted if you only print out the invoices and the bank statements. If the tax auditor is very strict he might not accept these documents and you could lose your VAT on incoming bills.
As a lawyer and tax consultant in Duesseldorf Germany I will support you founding your company and help with you with bookkeeping and tax declarations. Please see the details for starting business as a foreign entrepreneur in Germany in the following articles:
1. Start business – Trade office and trade tax
2. Start business – Questionnaire Financial Authorities
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