Hello everyone,
As suggested in the comments under my last post, I have decided to focus on the trading GmbH as my next topic.
There are a few half-wisdoms that have become very popular and I hope that I can clear them up a little. But first the "boring" theory part.
What is a trading GmbH?
Well, a trading GmbH is actually a normal GmbH with a fanzy name. Hence a brief excursion into company law.
What is a GmbH?
The abbreviation GmbH stands for Gesellschaft mit beschränkter Haftung (limited liability company). As a corporation, it is considered a legal entity. This means that the company has its own rights and obligations, which it can exercise through its management. It can acquire property or rights to property, sue and be sued in court (§ 13 Para. 1 GmbHG).
In principle at least EUR 25,000, at least EUR 1 per share capital contribution (§ 5 GmbHG). Only EUR 1 share capital is required for the entrepreneurial company newly introduced as a result of the MoMiG (§ 5a GmbHG).
The form of the company, its formation, its bodies and its position in legal transactions are regulated in a separate law, the GmbH Act (GmbHG). Registration with the relevant professional association is also mandatory for the GmbH company form. Depending on the sector in which the GmbH operates, it must also be registered with the Chamber of Industry and Commerce (IHK) or the Chamber of Crafts (HWK).
What is a trading GmbH?
The purpose of a trading GmbH is, as the name suggests, to create a "more favorable" framework for active trading (in financial products). The only purpose that is actually mentioned, apart from professionalization (recruitment of traders), is the tax advantage of such a structure.
In this context, the trading GmbH is usually equated with the asset-managing GmbH. Raise your hand, who has ever heard of only 15% tax in this context? Or even less?
Unfortunately, I have to disappoint you. Unfortunately, the tax rates are not that low. So if this tax paradise is not true, why do so many people recommend trading/asset management companies?
The GmbH does have some advantages, but it is so heavily advertised because this service is easy to bill. Unless you have general entrepreneurial experience, people will need help from the foundation to the ongoing business. This is because running a GmbH is not like a sideline or sole proprietorship and the GmbH is sold to everyone for a fortune, regardless of whether it makes sense or not.
What are the advantages of a GmbH now?
- More favorable tax treatment of share trading
In fact, this is an unbeatable argument in favor of the GmbH. The sale of shares in corporations is currently 95% tax-free in accordance with § 8b KStG. Only 5% of the profit must be taxed as non-deductible operating expenses = profit. This results in a tax burden of ≈ 1.5% for the profit. However, the profit is still taxed in full with corporation tax and trade tax.
- Further costs deductible
You were at Invest in Stuttgart and spent the night there? Congratulations. If you have a GmbH, you can claim these costs against tax. As you are now an entrepreneur through the GmbH, you can deduct costs that you incur as part of your business. You can use your imagination to think of everything you want to deduct. However, it must be business-related.
- Avoid tax loss limitation
You are really tough dogs who say to yourselves: share speculation is too boring/simple for me, I trade options and certificates like a real man. Now, for example, you make a profit on 99% of the options, but unfortunately you have incurred losses of over €20,000 on the 1%. In this case, the GmbH would make sense, as you don't have the problem of offsetting losses as with income tax. According to § 20 para. 10 EStG, the loss from options and futures transactions is limited to 20,000 per year. This should not be the only reason to switch to a GmbH, despite the fact that this limit is very probably unconstitutional.
- Retirement provision
You can finance a pension entitlement in a tax-efficient way through the GmbH. However, I would never recommend this for an active trading GmbH, if possible, because you then mix your "secure pension provision with the risk component.
- Seriousness
A GmbH like this exudes a certain respectability. This can be helpful in negotiations, and not just for public capital. It is also interesting for some loans.
- Generally more favorable initial taxation
Taxation takes place at a lower rate than the maximum income tax rate as long as no distribution is made and thus develops a positive compound interest effect. This can be further increased by utilizing tax options.
- Car use
All costs can be deducted and you only have to use the 1% method or logbook.
But wait a moment with the Porsche configurator... Unfortunately, the car has to be appropriate and with your start-up with the paltry few thousand euros profit, it is unfortunately not. At the same time, Porsche does not lease to start-ups before publishing annual financial statements... Unfortunately
- Liability
The issue of shielding liability from the outside should not be neglected. The GmbH is well suited to protecting private assets. In this case, you only have to pay attention to the separation and not be guilty of anything as managing director (see disadvantages).
That sounds so positive and you never hear about any disadvantages, so they certainly don't exist, right?
- Losses in share trading
As tax-favorable as share trading in a GmbH is, the losses from these are all the more unfavorable. This is because the losses are not tax-deductible if the profits are tax-exempt.
- Dividends/advance lump sum
If share trading is so tax-favorable, will this also apply to dividends, since they are products of the shares? Unfortunately not, dividends are generally taxed in full (≈ 30%). Only if you own more than 10% or 15% of the company are they tax-privileged and, as with share trading, tax-free with 5% non-deductible business expenses. A dividend strategy is therefore not suitable for a GmbH.
With the possible exception of our UKW clique, if they pool their shares or @Barsten suck out his car.
- Profit distribution
We have now made sufficient profits and want to buy a yacht. If the yacht is purchased in the GmbH, there are many pitfalls for the tax recognition of these costs in order to exclude the private co-incidence that is inadmissible for GmbHs. Therefore, we normally have to take the money out of the GmbH. Unfortunately, this is only possible (without any special arrangements) via a profit distribution. Another 25% capital gains tax plus solidarity surcharge is now paid on this. So you now have a tax burden of ≈ 55% (48.5) or ≈ 27% for share gains. Do you notice anything? These taxes are higher overall than if you had held it privately. That's why a GmbH is only ever worthwhile due to the compound interest effect. The longer the profit is there, the more profit there is.
- Moving away
You have slowly become gray and wizened, but in the meantime you have made good profits with your trading company and have now decided to move somewhere where it is not always winter. So you're moving to South Africa, for example. Congratulations, but the state thanks you too! Because you are pulling down all your tents in Germany, the state wants to impose exit tax on you.
What's that? Well, you fictitiously sell your GmbH to yourself and have to pay tax on the profit. Unfair? Please cry quietly. Almost every country applies such a tax in some way and you can avoid it creatively.
- Many obligations
Say goodbye to your life as a private investor and welcome to the world of entrepreneurs. In addition to bookkeeping obligations and annual financial statements + P&L, you have to comply with many other reporting obligations as well as new tax returns.
- High costs
Not only do you have to pay a relaxed 1,000+ for the foundation (in addition to the share capital you have to pay in), you can also pay a lot for the ongoing operation. At the same time, you now suddenly have to pay trade tax, which you didn't have to before. The IHK also wants its share of the profit. However, the running costs depend heavily on how much money is involved, how much happens and how much help you need.
You can expect to pay between €300 and €500 if you do almost 100% of the work yourself or upwards of €1,000 if you have a tax consultant do the bookkeeping and tax returns for you.
- Liability
Liability is only a side battlefield, but one is happy to accept it to protect one's private assets. However, this liability protection is very easily eroded if you make mistakes/wrong decisions.
- Hidden profit distributions
Did you exaggerate with the costs that you ran through the GmbH or did you fail to comply with formalities? Congratulations, German tax law even has a penalty for this, similar to "double taxation". Does that happen quickly? Yes, if you're not careful, very quickly. Is it fun? Definitely for the tax auditor, less for you and not for your advisor either.
When does a GmbH become worthwhile, which is why I'm reading this post in the first place?
That's difficult to say and depends very much on the circumstances.
If you believe the people on Insta, it's always worthwhile from a higher 5-digit amount. I wouldn't subscribe to that, at most in exceptional cases. An asset-managing GmbH is most likely worthwhile between 0.5 and 1 million assets due to the frequent adjustments that may be necessary. The more often you reallocate, the sooner the GmbH pays off. If you are a day trader or crypto trader and don't do hodl, the GmbH can be worthwhile for less than 100K. It depends a lot on the goal and the person's life. So even for higher assets, a GmbH may still not be the most ideal choice.
I hope you enjoyed this brief (incomplete) overview. If so, please share your thoughts with me, perhaps for future topics. The topic is very complex, which is why it is incomplete in any case, because many points can be optimized, circumvented or mitigated through planning and advice. I have therefore only looked at the general concept in isolation.
This is not tax advice, but merely a contribution to the debate. It does not constitute business, legal or tax advice. In specific individual cases, this content cannot replace individual advice from experts.
