Category: Self-employment & Funding  |  Author: Daniel Schäfer  |  Reading time: 9 min.

From part-time to full-time self-employment: When is the right time – and how can you avoid losing money?

You have registered your business as a side activity, your business is running – and now you are asking yourself: When should I quit my job and switch to full-time self-employment? Thousands of aspiring self-employed people in Germany ask themselves this question every year. And it is a crucial one. Choosing the wrong time can cost you several thousand euros – and permanently forfeit important funding opportunities.

In this article, I will show you step by step what you need to consider, which mistakes you should definitely avoid, and when the optimal time for your transition is. I speak from personal experience: I was a civil servant myself, made the move to self-employment – first on the side, then full-time – and lost valuable funding because I did not know better.

Contents

1. What does part-time versus full-time self-employment mean – and why is the difference so important?
2. Mistake 1: Resigning without a termination agreement
3. Mistake 2: Registering as full-time self-employed while still employed
4. Why ALG I (German unemployment benefit) is the key to everything
5. The AVGS voucher: Free start-up coaching for you
6. BAFA funding as an alternative
7. The optimal time for your transition – step by step
8. What you can do now
9. Conclusion

What does part-time versus full-time self-employment mean – and why is the difference so important?

If you are self-employed on a part-time basis, you officially work less than 15 hours per week in your self-employed activity. You remain in employment subject to social insurance contributions – and therefore retain your entitlement to benefits such as unemployment benefit I (ALG I) if your employment relationship ends.

If you exceed this 15-hour threshold, you are officially self-employed on a full-time basis. This has far-reaching consequences for your eligibility for funding – and can become very costly if you make this transition at the wrong time.

“The wrong timing will not only cost you money – it will cost you funding that you will never get back.”
Mistake 1: Resigning without a termination agreement

The most common and costly mistake: You simply resign from your job – without a termination agreement, without a verifiable reason, without legal protection.

The result is a waiting period imposed by the Employment Agency. Specifically, this means you will not receive any unemployment benefit for 3 months. Only after this period does your entitlement to ALG I begin. In total, you can quickly lose between €4,000 and €6,000 – money that will be missing during your start-up phase.

What you should do instead:

• Talk to your employer – and arrange for them to dismiss you or to conclude a termination agreement with you.
• Have the termination agreement reviewed or drafted by a lawyer, especially if there are health or operational reasons involved.
• Ensure that the reason for leaving is clearly documented – this protects you from the waiting period.

Mistake 2: Registering as full-time self-employed while still employed

Your business is going really well, you need bank financing, your tax advisor recommends standard VAT taxation – or you want to switch to a GmbH or UG. All these can be reasons why you might consider switching from part-time to full-time self-employment early. This sounds logical. But it is a serious mistake.

Because: If you are officially self-employed for more than 15 hours per week while still employed, you lose your entitlement to ALG I – completely. And without ALG I, you are also not entitled to the start-up grant (Gründungszuschuss) and many other funding opportunities.

“Anyone who registers full-time self-employment too early not only loses money – but also their entitlement to government start-up support.”

The rule is clear: While you are still employed, your business may only be registered as a part-time activity (less than 15 hours per week) – and this must remain the case until you have your ALG I approval notice in hand.

Why ALG I (German unemployment benefit) is the key to everything

The start-up grant (Gründungszuschuss) is one of the most valuable government funding programmes for entrepreneurs in Germany – and it is exclusively tied to ALG I status. If you are not entitled to unemployment benefit I, you cannot apply for this grant.

The start-up grant is paid in two phases: In the first phase, you receive your previous ALG I level for 6 months plus €300 per month for social insurance. In the second phase, a further €300 per month is possible for an additional 9 months. In total, this can amount to over €10,000 – money that gives you real flexibility for your start-up.

The conclusion: Securing ALG I status is not only sensible – it is the basic prerequisite for almost every relevant start-up funding programme in Germany.

The AVGS voucher: Free start-up coaching for you

In addition to the start-up grant (Gründungszuschuss), there is another form of support you can secure: the AVGS voucher (Aktivierungs- und Vermittlungsgutschein) for pre-start-up coaching.

With this voucher, you can access professional start-up consulting – including a business plan, financial plan, expert opinion, and everything else you need for your application. The value: up to 80 training units, fully funded.

Important:

• You can only apply for the AVGS if you have ALG I status (German unemployment benefit) or are registered as seeking employment.
• Your business must be registered as a secondary occupation (less than 15 hours per week).
• Entrepreneurs in full-time self-employment are not eligible for funding – not even retrospectively.

At X-Group, we support you nationwide in applying for and making the best use of your AVGS voucher – for your business plan, financial plan, expert opinion, and all other topics related to marketing, tax, and legal matters.

BAFA funding as an alternative

If you do not receive an AVGS voucher – because your caseworker does not issue one or only provides a small one with few training units – there is another option: BAFA funding (Federal Office for Economic Affairs and Export Control).

With the BAFA funding programme, you do not receive a 100% subsidy as with the AVGS, but at least 50 to 80 percent of the consulting costs are covered. This applies to conceptual consulting services such as your business concept, financial concept, and marketing concept.

Here too, we support you as a certified consulting partner – up to three funded consulting sessions are possible.

The optimal time for your transition – step by step

Now it gets specific. Here is the process you should follow to avoid losing out on funding:

Step 1: Keep your business registered as a secondary occupation (less than 15 hours per week)

As long as you are employed, your business remains a secondary occupation – no matter how well the business is doing.

Step 2: End your employment – but do it correctly

Arrange a termination agreement with your employer or a dismissal by the employer. Seek legal advice for this.

Step 3: Secure your ALG I approval notice

Register as unemployed immediately and apply for ALG I. Only once you have the approval notice can you proceed.

Step 4: Apply for the AVGS voucher

Now apply for your AVGS voucher at the Employment Agency – and take advantage of professional start-up consulting.

Step 5: Complete your business plan, financial plan & expert opinion

You absolutely need these documents for your start-up grant application.

Step 6: Apply for the start-up grant

Apply for the start-up grant at the Employment Agency – together with all the required documents.

Step 7: Switch to full-time self-employment

Only now, after approval of the start-up grant, do you officially register your full-time self-employment.

What you can do now

You now know which mistakes to avoid – and what the ideal path to full-time self-employment looks like. The next step is up to you.

At X-Group, we support you nationwide in setting up your start-up process correctly. We guide you through applying for the start-up grant, AVGS, and BAFA funding, work with you to create a professional business plan and financial plan, and ensure your documents make a strong impression at the Employment Agency, the bank, and the funding institution.

Many of our consulting services are fully eligible for funding – so you have the opportunity to secure high-quality support without having to pay out of your own pocket.

Conclusion: Timing is everything – don’t leave money on the table

The transition from part-time to full-time self-employment is a crucial moment in your entrepreneurial journey. If you plan it correctly, you can start your business with government support amounting to several tens of thousands of euros. If you approach it incorrectly, you will lose exactly this money – permanently.

Remember: First secure ALG I (German unemployment benefit), then apply for your business plan and start-up grant (Gründungszuschuss) – and only then switch to full-time self-employment. In this order, and with the right advice, you will lay the most stable possible foundation for your business.

“The best time to switch to full-time self-employment is not when business is going well – but when all funding applications have been approved.”
Would you like to approach your transition to full-time self-employment the right way? Together, we will analyse your current situation – and which funding opportunities you are entitled to.
Book your free initial consultation now →
Tags: