Side business or full-time self-employment in Germany: what suits you

If you start a side business, you keep your job or your benefits and build the business alongside. That suits you if you want to test your idea first or are looking for a second income. Full-time self-employment means the business becomes your main source of income. That suits you if it needs to support you soon. Coming from unemployment benefit, the start-up grant can support this.

No legal entitlement: The employment agency or job centre alone decides on the AVGS, at its own discretion.

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Contents

1. How many people start a side business?
2. What counts as a side business and what as full-time?
3. Side business or full-time: the comparison
4. Can you start a side business as an employee?
5. What applies on unemployment benefit?
6. What applies on basic income support?
7. Which duties apply in both cases?
8. How do you decide?
9. When does AVGS start-up coaching fit?
10. Frequently asked questions

How many people start a side business?

The large majority. According to the KfW-Gründungsmonitor 2026 (in German, chart 1), there were around 690,000 founders in Germany in 2025. Of these, 483,000 started on the side and 206,000 full-time. The share of side businesses rose to 70 %.

Many keep their job. Six in ten side-business founders were employed before and stayed employed after starting (chart 3). On average they worked 16 hours a week on their business, compared with 45 hours for full-time founders (chart 19).

The switch to full-time happens less often than planned. 21 % of the 2025 side-business founders wanted to switch within a year. Over the long-term average, only around 8 % actually switched one year later (chart 4).

What counts as a side business and what as full-time?

There is no single threshold. It depends on who is asking:

• Your health insurer checks case by case whether self-employment is your main occupation. If you regularly employ at least one person beyond a mini-job, that is presumed (§ 5 (5) SGB V, in German).
• The employment agency draws the line at 15 hours a week for unemployment benefit (§ 138 (3) SGB III, in German).
• The tax office taxes both incomes together in one income tax return. Your salary goes on Annex N, your profit on Annex G or S (German start-up portal, in German).

Side business or full-time: the comparison

	Side business	Full-time
Income	job or benefits continue	depends on the business
Risk	low, you can test on a small scale	higher, but more room to grow
Time	evenings and weekends	full working hours
Health insurance	usually through your job	you arrange it yourself
Support from unemployment benefit	no start-up grant	start-up grant possible
Growth	slower	faster possible

Which option suits you depends mainly on your situation: how much time and savings you have, and how quickly the business needs to support you.

Can you start a side business as an employee?

Yes, as a rule. Clarify three points first:

• Your employment contract. Many employment and collective agreements require you to report a side activity or have it approved. Civil servants usually need approval (§ 99 BBG, in German; the federal states have their own laws).
• Competing with your employer. As long as your employment continues, you generally may not compete with your employer. For commercial employees this is stated explicitly in the law (§ 60 HGB, in German).
• Your working time. The business must not affect your work in your job. Plan it so that you stay rested there.

If you want to switch fully later, note that there is no start-up grant from ongoing employment. It requires an entitlement to unemployment benefit (§ 93 SGB III, in German).

What applies on unemployment benefit?

You may work self-employed alongside unemployment benefit as long as it is less than 15 hours a week. Several activities are added together. At 15 hours or more, you no longer count as unemployed. For that time you receive no unemployment benefit (§ 138 (3) SGB III, in German).

Your profit is offset against your unemployment benefit. A flat 30 % of your revenue is deducted as business expenses, and you can prove higher expenses. After that, €165 a month stays exempt (§ 155 (1) SGB III, in German).

A simplified example without taxes and contributions: you take in €600 in a month. After deducting 30 %, €420 remains. Of this, €165 is exempt and €255 is offset.

Did you do the activity alongside your job for at least twelve months before becoming unemployed? Then more can stay exempt (§ 155 (2) SGB III, in German). You must report a side activity to the employment agency (§ 60 SGB I, in German).

If you want to move fully into self-employment, the start-up grant (Gründungszuschuss) may be an option. It requires a full-time business. When you start, you must still have at least 150 days of unemployment benefit left. You need a statement from an expert body on viability and must show your knowledge and skills (§ 93 SGB III, in German). The employment agency decides on the grant at its discretion.

What applies on basic income support?

You can also start a side business while receiving basic income support (Grundsicherungsgeld, called Bürgergeld until June 2026). Your income is offset, and part of it stays exempt through allowances. Your job centre calculates how much you keep. You report your self-employment to the job centre (§ 60 SGB I, in German).

There is no start-up grant on basic income support. For a business meant to take you off benefits, the job centre can pay a start-up allowance (Einstiegsgeld). It is paid for up to 24 months (§ 16b SGB II, in German).

Which duties apply in both cases?

• Registering. You register a trade with the trade office when you start (§ 14 GewO, in German). A freelance activity you report directly to the tax office. In both cases, you send the tax office the tax registration questionnaire within one month (§ 138 AO, in German).
• VAT. Under the small business rule (Kleinunternehmerregelung), you charge no VAT. Your turnover must not have exceeded €25,000 in the previous year and must not exceed €100,000 in the current year (§ 19 UStG, in German). In your founding year, your actual turnover must not exceed €25,000 (IHK München, in German).
• Tax return. As an employee, you file a tax return once your other income exceeds €410 a year (§ 46 (2) EStG, in German).
• Bookkeeping. You record income and expenses, even small amounts. For many sole proprietors, simple cash-basis accounts are enough (§ 4 (3) EStG, in German).

Which registration steps come in which order is shown in the start-up checklist (in German). The difference between a tax number and a VAT ID is explained in Tax number vs. VAT ID.

Admin takes time. In 2025, side-business founders spent an average of 3.6 hours a week on legal requirements (KfW-Gründungsmonitor 2026, chart 19). They most often named winning customers (22 %) and red tape (21 %) as their main problem (chart 18).

How do you decide?

These questions help you:

• How soon does the business need to support you? If you need a full income soon, a full-time start with a solid plan makes a lot of sense.
• How much time do you have? With only a few hours a week, a business grows more slowly.
• Are you registered as unemployed? Then check the support for a full-time business before you start.
• How solid is your idea? If you have not tested it yet, a small start on the side is a good test. How to test it is explained in the guide Find and test a business idea.

Either way, a business plan is the next step. It shows you whether and from when the business will support you.

When does AVGS start-up coaching fit?

AVGS start-up coaching prepares you for a business you want to live from. It may be an option if you are unemployed or registered as job-seeking, for example because your job ends soon. With us, it is meant for a full-time business. The coaching is in German and requires German at B2 level or above. The Fit Check shows whether it suits you. The employment agency or job centre decides on the voucher at its own discretion.

Frequently asked questions

Do I have to register a side business?

Yes. A side business has the same registration duties as a full-time one. Freelancers register with the tax office, everyone else with the trade office.

How much can I earn on the side while receiving unemployment benefit?

€165 of profit a month stays exempt, the rest is offset. You may work less than 15 hours a week.

Can I get the start-up grant for a side business?

No. The start-up grant requires full-time self-employment that you start from unemployment benefit.

Can I switch from a side business to full-time later?

Yes. Every year, 20 to 30 % of side-business founders plan to, but only around 8 % have actually switched after one year (KfW-Gründungsmonitor 2026). Before switching, review your numbers and your insurance.