Phase 2 of the Gründungszuschuss.

What phase two is.

§ 94 SGB III puts it in one sentence: the grant can be paid for nine more months at €300 a month if you show your business activity with suitable documents. The €300 are meant for social insurance, which is why phase two is sometimes called the social-security flat rate. It is not an extension that happens by itself. The calculator shows what both phases add up to for your benefit. You apply, the agency decides, and the agency’s rules say the decision is discretionary.

What the agency checks.

The agency’s internal rules name three things.

• Intensive business activity, full-time. The rules ask for “intensive Geschäftstätigkeit und hauptberufliche unternehmerische Aktivitäten”. A business that exists on paper while you work elsewhere does not qualify.
• A written report. You hand in a report on the activity so far: what you did, and the income and expenses of the past months. The rules suggest adding an outlook for the coming months, a list of orders received, and what you did to win orders.
• Viability after the grant. It must still be plausible that the business carries you once the money stops. If the agency has substantiated doubts, it can ask for a fresh statement from an expert body. And if your income already covers your living and your social insurance, the rules say there is no further need, and phase two is normally refused.

How to prepare it from day one.

1. Keep a monthly log. One page a month: what you worked on, who you talked to, what you sent out, what came in. Phase two is decided on exactly this, and reconstructing six months in one evening produces a thin report.

2. Book income and expenses as you go. The same numbers go to the tax office. The Landesamt für Steuern has a checklist for founders; your tax adviser will have a template.

3. Collect orders and offers. Signed orders, offers sent, enquiries received. A folder, dated.

4. Apply before phase one ends. The rules allow an application after phase two has begun, but asking in month five, with the report attached, avoids a gap in the money.

Two rules people miss.

• The grant is tax-free. The rules state that the Gründungszuschuss is exempt from income tax and does not raise your tax rate on other income. Your business income is taxed as usual.
• No second grant within 24 months. If the business fails and you later want to start another with a grant, the rules set a waiting period of 24 months, with exceptions only for personal reasons such as illness, not for a bad order situation or a change of mind. One more reason to validate before you start.

And after month fifteen.

The grant ends; the business goes on. Health insurance, tax prepayments and the voluntary unemployment insurance, if you applied for it in the first three months, are the fixed costs the plan must carry by then. That is the number the viability review looked at, and the one the monthly accountability sessions after the program keep in view, if you choose them.

General information, not tax advice. The tax treatment of your income is a question for your tax adviser.