Becoming self-employed on the side - The most important points at a glance


Whether employee, student, pensioner or job seeker, more and more people are choosing the path to self-employment. Start-ups do not always have to give up their main job to do so. With sideline startups, founders pursue their main job on a full-time or part-time basis while taking the step into professional self-employment on the side.

In order to maintain your financial security and at the same time realize your business idea within the framework of a part-time job, you should consider some important aspects, which are explained in more detail in this article.

Advantages and disadvantages of sideline self-employment

Illustration Freelancer der in seiner Wohnung an seinem laptop seine eigene website erstellt

Probably the biggest advantage of part-time self-employment is the secure and regular main income from the main job. Some are afraid that the step into professional self-employment will turn out to be a flop and drive them into financial ruin. This is countered by the source of income from the main profession by providing the founder with financial protection. At best, you can even earn a little extra through your secondary self-employment and increase your overall income.

Others want to test the economic feasibility of their start-up project first before they become self-employed on a full-time basis. With a sideline start-up, you can take your time, since you don't have to worry about securing your livelihood.

One drawback is that part-time founders don't have the time flexibility that is important for quickly addressing urgent customer concerns. As a result, ongoing business can be negatively impacted.

Apart from that, full-time founders can invest significantly more time in their business model than those who are only part-time self-employed. This makes it even more difficult for sideline founders to drive the small business forward with the necessary commitment and, if time management is poor, can also quickly lead to being overwhelmed, which can have a negative impact on mental health in the long term.

TIP: With good time management, you can better manage your working hours, work much more efficiently overall, and minimize stress and overwhelm. You can find numerous time management tips online.

Formal rules of part-time self-employment

As with setting up a full-time business, you must also deal with the formalities of setting up a part-time self-employed business. Special attention must be paid to the registration, information, notification and registration obligations as well as the issue of bogus self-employment.

Obligation to report social security

As a part-time self-employed person, you enjoy the advantage of continuing to be covered by social insurance as usual. This means that as an employee, you will continue to be insured through your main job due to the social insurance obligation. If you are a student, you remain covered by family insurance or student insurance. Recipients of unemployment benefits 1 or 2 will still be co-insured via the employment agency.

It is important to report your sideline self-employment to your social insurance agency. This is because it must first be examined and recognized within the framework of an individual case evaluation.

These are basic criteria, but they may differ in individual cases:

  • The income from sideline self-employment is only of secondary economic relevance for you.

  • You do not work more than 20 hours a week on a self-employed basis and do not employ any staff - with the exception of one mini-jobber at the most.

  • You do not claim any subsidies from the employment office for the start-up project.

  • The income from your partial self-employment does not exceed 75% of the monthly reference amount.

IMPORTANT: The monthly reference amount is redefined every year. Currently, it is €3,290 per month (as of 2021).

However, this regulation does not apply to students who have family insurance. They are allowed to earn a maximum of 450€ per month on average. Otherwise, they must take out student insurance and comply with the prescribed income limit.

If you are then ultimately classified as a full-time self-employed person (e.g. due to exceeding working hours), you must take out either voluntary statutory or private insurance.

TIP: To avoid having to pay additional health insurance contributions, inform your health insurance company as soon as possible about your start-up plans.

Duty to inform employer

As a founder, you have some reporting obligations about your part-time self-employment. In principle, your employer may not prohibit you from working part-time. However, you are obliged to inform him about your part-time start-up. Your employer may only contradict this in exceptional cases.

The situation is different for civil servants and employees in the public sector. According to the Federal Civil Servants Act (BBG), they must obtain prior approval for paid sideline activities (e.g. a part-time job or part-time self-employment) (Section 99 BBG).

Obligation to register in unemployment

Recipients of unemployment benefit 1 (ALG 1) must report their part-time self-employment to the employment agency. In order to be able to retain benefits in full, you must comply with the tax-free amount of 165 euros (as of 2021) and the regular maximum working hours of 15 hours per week.

IMPORTANT: In the case of part-time self-employment, 30% of the income is counted as operating expenses.

Unemployed persons who receive unemployment benefit 2 (ALG 2 or Hartz 4) must also immediately report their self-employed sideline activity to the job center. Regulations apply to you, such as the proportional reduction of your unemployment benefit claim depending on your projected income.

Until you convert your self-employed sideline into a full-time self-employment, you must also continue to adhere to the agreements with the employment agency or the job center (e.g. with regard to job applications).

TIP: In individual cases, these requirements may differ. Ask the employment agency directly for more detailed information.

illustration freelancer der an seinem laptop eine website erstellt

Application and registration

Formalities concerning the registration and registration of sideline self-employment apply analogously to full-time self-employment. Where you have to register your self-employment depends on the type of self-employment.

Various authorities such as the tax office, the IHK or the local trade office must be visited. Depending on the legal form of the business, registration in the commercial register may also be required.

In the case of a small business that is run as a sole proprietorship, there is normally no obligation to register. However, there are some cases in which merchants do have to make an entry in the commercial register. You will find a great deal of information on the Internet about entering sole proprietorships in the commercial register.

TIP: In advance, you can find some articles here that can help you with registering your business:

Recognize and avoid bogus self-employment

A bogus self-employed person is a person who has the status of a self-employed person, although in reality he or she performs tasks as if in an employment relationship.

This issue primarily affects freelancers - regardless of whether they work part-time or full-time - and is strictly prohibited by law. Otherwise, your clients can face severe fines, which can put you and your work in a bad light.

There are no clear criteria for bogus self-employment. Nevertheless, there are some clues that distinguish a bogus self-employment from an actual self-employment.

Some indications for a bogus self-employment:

  • You work predominantly for a client.

  • You have no autonomy with regard to your working hours, your place of work or the use of your own work equipment and are therefore bound by instructions.

  • You are required to be present at the client's premises and are treated no differently than employees in a salaried employment relationship.

  • Your employee from the main job is also your client from your secondary self-employment, whereby the tasks are very similar.

  • You receive fixed monthly payments.

TIP: In order to be able to actually determine a bogus self-employment, an individual case assessment must be made. The best way to do this is to contact the German Pension Insurance (DRV).

From the business idea to the business plan

In contrast to the business plan (German: Geschäftsplan), the business idea is only a rough sketch and thus not a realistic basis for the start-up project.

A business plan is usually drafted for a period of 3 to 5 years and is a comprehensive written document containing assumptions about upcoming opportunities and risks on the target market as well as other information about the start-up project.

It is used to assess the economic viability and prospects for success of the entrepreneurial venture - but not only for founders, but also for funding agencies, suppliers and authorities.

IMPORTANT: The preparation of a business plan becomes unavoidable especially if you need external financing (e.g. government grants, subsidies, loans) for your partial self-employment. Without a business plan, you will hardly be able to prove to your counterpart that your start-up project is economically viable and well thought-out. You can find more details on this in 5. grants and subsidies.

Checklist for your business plan:

  • a brief summary of the most important aspects of your start-up project (called an executive summary in the jargon)

  • a detailed description of the products/services you want to offer

  • the unique selling proposition in the target market

  • the customer benefits

  • the price structure

  • the opportunities and risks on the target market (by means of market and competition analysis)

  • the planned marketing and sales activities

  • financial planning (consisting of investment, financing, financial requirements, liquidity, profitability and earnings planning)

Grants and subsidies

If you start your own business as a sideline, you can use your savings or any part of your main income for your start-up as a sideline. However, if this is not enough, you can benefit from government grants and subsidies as well as loans for start-ups.

TIP: Even as a recipient of unemployment benefits, you can claim a start-up grant from the Federal Employment Agency for your part-time self-employment. Contact the employment agency and get advice.

Your business plan will give the respective financial backers a good impression of your start-up project. If they are convinced and recognize an economic potential, they will support you financially.

TIP: As a sideline entrepreneur who is aiming for full-time self-employment, you can, for example, apply for a start-up loan from the KfW (Kreditanstalt für Wiederaufbau).

illustration freelancerin die mit ihrem Kind vor ihrem Laptop sitzt um eine website zu erstellen


The step into part-time self-employment carries significantly fewer risks than full-time self-employment. Even if you can maintain your financial security and therefore do not have to worry about your livelihood, you should be aware from the outset that you will have to put all the more effort into your entrepreneurial venture.

Whether your business idea will really be economically viable often depends on the industry. Digital business models, for example, are particularly well suited for sideline employment, as you can work across spatial and temporal boundaries. This means you can devote yourself fully to your part-time self-employment outside of your fixed working hours and, ideally, increase your earned income.

If you have a main job, you won't have too many hours left in the week to pursue your part-time self-employment. However, this should not deter you. With good self-management and time management, as well as a large portion of motivation and initiative, nothing stands in the way of building up a second mainstay.

LAST TIP: With a homepage construction kit you can create your own website for your business for as little as 0€ and without any previous knowledge. You can find more tips under the heading "Tips for self-employed".

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