Jörg Dennis Krüger knows from experience that running a GmbH in Germany is very time-consuming. That's why he looked around for something else and has some great tips and information ready today.
TRANSCRIPTION OF THIS EPISODE OF THE PODCAST
Hello, my name is Jörg Dennis Krüger, and, as my interpreter at the reception desk rightly said:
Yes, I am the conversion hacker.
Good morning to the new edition of the "Conversion Hacker Podcast" and this time something of our own, namely about the digital citizenship of Estonia.
Yes, Estonia. Perhaps not many people know Estonia. Estonia is a small country in the European Union, and Estonia is highly digital. Why do I say that? My company, JDKRÜGER-OÜ, OÜ, a limited liability company in Estonia, is an Estonian company. I also have a JDKRÜGER E-Commerce OÜ through which I operate stores, and I have already founded one or two other OÜs to operate other stores. It's important to note that this only works for dropshipping or models where you don't store any goods yourself. But I would like to briefly explain why my consulting business is based in an Estonian company and not simply in Germany.
I also have a German GmbH, Conversion Boosting GmbH, my first big company in the field of conversion optimization. I think I said in mid-2019 that I would withdraw from it. I still have a stake of just under 25 percent in Conversion Boosting GmbH via a small investment company that I also own. But I'm no longer doing anything operational, I'm now doing proper consulting for e-commerce. And of course I need a nice shell company where I can build everything up nicely. And I already knew from the past that it's incredibly time-consuming with a GmbH in Germany.
A GmbH costs a lot of money to set up, and that's not even the share capital, you have to bring the money with you anyway. But what you have to pay to the notary and possibly also need a lawyer. The set-up costs are enormous. You're talking about hundreds, maybe even thousands of euros. Then you have to go to a notary, have something read out, you have to sign something, then it takes an eternity for it to be registered. Then at some point you get the statement. To pay in the share capital at Deutsche Bank, you have to open an account beforehand. It's a huge amount of work to open an account.
The savings banks don't get it, the Volksbank doesn't get it. I've made relatively good progress with Deutsche Bank so far, but it's still always a huge effort. If everything goes well, you have your GmbH up and running after 4 weeks, and then the work really starts. You have a lot of stress, with tax registrations, with expensive annual financial statements, and if you have to change something, even the move, then you go back to the notary, pay money again for the notarization and commercial register entry, and it all takes a long time.
Estonia is extremely digital. They installed a complete digital infrastructure some time ago. This means that what we still don't have in Germany, with proper digital signatures for every citizen and so on, is possible in Estonia. If I want to do something in Estonia, I first have to become a "digital citizen". In principle, anyone in the world can become one. You apply for it on an Estonian website, upload a few details such as your CV, information about your criminal record, a photo and so on.
You are then checked by the Estonian police. They also contacted me during my exam, for example. Because there were problems with my ID. I had lost it and reported it lost. But it was returned to me and I didn't report it found. That's why it was still out for negotiation. They noticed that and asked what was going on. After I explained it to them, the process could continue and then you can pick up your digital identity card at an Estonian embassy. For Germany, this is Berlin, where I picked up my ID card.
I had to leave my fingerprints, a photo and sign etc. The whole thing also costs something, 100, 150 €, I think, it's not that much. And then you get a small card reader and a digital identity card. I have it in front of me right now, it's a small blue card that says "Jörg Dennis Krüger". I have a personal code, a document number. My ID card is valid here until 21.02.2024, and it also says: "Elektronic use only" or in Estonian I can't read out loud, "Ainult elektrooniliseks kasutamiseks"
However, it says "Electronic use only", and on the back it says "This Card provides Access to thousands of E-services", and that's really the case. I have two pins with my card and my card reader, one is the four-digit identification pin, the other is the six-digit signature pin. I can do an incredible amount with this card. If I set up a company in Estonia, then I have the corresponding articles of association. You can click them together in the Estonian commercial register, the standard sets with the most important things. Of course, there is no great effort involved.
You can click on various statements, options, etc. When you're ready to sign, you insert your card, enter your code, and then the document is signed accordingly. Then you pay, I think €50 or something, for the initial registration, and then they register the whole thing. After it has been checked by the court, the company is registered. This can usually take three to four days.
You can use it directly, you can log in to the commercial register and the tax authorities and you can also give your tax advisor direct digital access using the tax advisor's number. You may also want to give a lawyer access to the commercial register so that they can change various things. Everything is completely encrypted with the ID card via all the portals that Estonia has. An extract from the commercial register, for example, can also be downloaded directly from the register free of charge, or to be more precise, digitally signed for one euro.
And yes, it's all highly digital. Tax returns are done in exactly the same way, with the ID card. Estonia doesn't have such a huge bureaucracy behind it. Sure, they also want their monthly tax returns and annual financial statements. But it's all much less complicated than in Germany. This means that not only is everything quicker, but it's also cheaper. So tax advice for a limited liability company in Estonia is extremely much cheaper than for a limited liability company in Germany. In this respect, you save money.
Where you can't save money is on taxes. VAT in Estonia is higher than in Germany, even if it is only one percent, i.e. 20 percent instead of 19 percent. But there are no taxes, e.g. trade tax, which you pay on profits that are still in the company. Estonia has a very simple structure. Only the money that is taken out of the company is taxed. And the money that is taken out, which is not a payment to a service provider or for a product or something similar, is of course paid as normal from the revenue. And only when you make distributions to shareholders, for example, are they taxed.
So it's all much simpler, much less complicated than a German GmbH. But actually with the same advantages, because it's a GmbH, you have everything you need, but you don't have all the administrative work. And if I look at it this way, of course, if I pay myself money from JDKRÜGER-OÜ, then I have to pay tax on this in Germany. And my expenses in Germany for my sales, which usually only consist of one invoice a month, are more work with the tax office than the entire tax and the entire processing of the story in Estonia.
Although I'm based here in Hanau and work in Hanau for the most part, I'm basically flexible in terms of location, and even more so thanks to the OÜ. And that's why I have my company in Estonia and can use a wonderful Estonian digital ecosystem, because there are a bunch of providers, specialized in Estonia, with technologies for Estonian companies that really take advantage of the whole digital system. Unfortunately, we Germans are still a long way from being as digital as Estonia. Some time ago, the Estonian Minister of the Interior expressed his astonishment that Germany in particular has not managed to even come close to Estonia in terms of digitalization. In principle, we have a digital ID card, but it is so complicated and somehow doesn't work and is now supposed to be simplified. It's all already done in Estonia and works wonderfully, and this whole structure, with notaries and all the effort involved, is simply not needed there.
And in my view, Germany is actually quite regressive in some areas. I have close friends in Colombia and have also noticed that many things are much, much more digital in Colombia than in Germany. Where in Germany we still stamp things and submit paper applications, in Colombia I upload things to a website, get a signed document back and that's it. It's much quicker and cheaper. Even during the pandemic, the system worked much better than having to go to someone or send something there now. So from my point of view, in order to take advantage of competitive advantages, online retailers should always look at how they can be as digital as possible.
We should continue to look for innovative ideas for online retailers with goods. Even if an Estonian company or a company abroad in general does not offer any advantages for an online retailer, because you are forced to pay tax in the country where you store your goods. However, you could, for example, set up an e-commerce GmbH in Estonia, which does all the breathing and similar work and takes all the digital advantages with it, and set up a fulfillment GmbH in Germany. Then you can really concentrate on the respective advantages of both.
But well, I'm not giving tax or legal advice here. I just want to say that the OÜ for JDKRÜGER is a wonderful model. I recommend it to everyone, mainly consultants or freelancers, to use the digital model. It's much better than an English limited company was back then, and it has no disadvantages. Quite the opposite. In particular, collecting debts in Estonia is much, much easier than collecting debts in Germany. Because you can register your claim directly with the court using the digital ID card. It is then immediately entered in the commercial register of the company against which the claim is made. It is public, accessible to all, much simpler, faster and more transparent, as it should be.
This is a short excursion on my own behalf. I hope you enjoyed it, if you have any feedback or questions about it, drop me an email at email@example.com. And yes, if you liked it, leave a few stars on Apple Podcast, subscribe to the podcast on Spotify, Google or wherever, and be back next time when it's called the Conversion Hacker Podcast.
All the best, yours, Jörg Dennis Krüger.