Baldessarelli & Partner


Glossary - Part 2


Financing refers to all processes that involve the procurement, provision and reimbursement of financial resources. This can be the procurement of capital in the economic sphere, an earmarked loan, for example when it comes to the new acquisition of a vehicle or a property, or a series of payments from the perspective of finance. In companies, financing usually involves maintaining the business through equity and debt capital and managing the entire cash flow. The aim of financing is to make investments, enable purchases and avoid insolvency. Related to financing is the maturity, which determines the duration of a financing. Thus, there is short-term, medium-term and long-term financing with different terms for a loan. Long-term financing is the case when the period is more than five years.

Business tax

Within accounting, trade tax is an income-based municipal tax, also known as a real or property tax. It is regulated in the Trade Tax Act, always relates only to the tax object and is levied by municipalities with regard to the objective earning power of a company. Municipalities can determine the assessment rate themselves, so that there are differences in the amount from region to region. This is why trade tax is one of the most controversial taxes, since not only the assessment rates vary, but also the exclusion of various value-creating sectors is a point of criticism. Basically, the amount of trade tax always depends on the profit of the company per business year. For sole proprietorships and partnerships there is an allowance that does not have to be taxed, while freelancers are completely exempt from trade tax. On average, trade tax amounts to about 15 per cent of profits. Tradespeople claim the tax in their income tax return and pay less income tax on it.

Liability limit

Liability means the obligation of a debtor to perform towards a creditor or the standing of a person for the debt of another. Accordingly, liability means an obligation to perform, which takes place differently in different forms of business. A liability limit reduces the scope of liability or restricts the standard of care. The latter concerns the factual side, a limitation of the scope of liability exists on the legal consequence side. Instead of being liable for the entire damage, the limit of liability includes exceptions or reductions in certain situations. There is also liability when using a credit card, which is where the limit of liability comes into play. It becomes valid whenever a credit card is lost, stolen and blocked. The liability limit refers to the amount that the credit card holder must pay out of his/her own pocket in the event of misuse of the card or until the card is blocked. As a rule, it is 50 euros, while after the blocking the bank is liable for all further damages. Therefore, the liability risk with credit cards is lower than with EC cards.


Insolvency refers to a company's inability to pay when it is no longer able to meet payment obligations and liabilities to creditors. In addition to current insolvency, other reasons are impending insolvency, which indicates that debts are unlikely to be paid, and over-indebtedness, when the company's assets are less than its debts, based on actual values. If one of these three reasons exists, the company must file for insolvency. If the declaration of insolvency is not made in time or is not made at all, this is called insolvency delay, for which there is a prison sentence of up to three years. As a result of an insolvency, court insolvency proceedings are initiated, which set the guidelines for determining the insolvency estate and regulate the claims of creditors.

Annual financial statement

The annual financial statement is part of bookkeeping and accounting and is prepared at the end of a financial year. They consist of the balance sheet and the profit and loss account, comply with the principles of accounting and require a clear and concise statement in order to give a true and fair view of a company's financial position, earnings and assets. In addition, the annual financial statement shows where the financial resources come from and how much debt a company has. If information is missing from the annual financial statements or if the annual financial statements show serious deficiencies, the accounting is considered to be improper. Partnerships, corporations and limited liability companies are obliged to prepare annual financial statements with double-entry bookkeeping. An exemption is possible for sole traders, freelancers and small traders. These only have to do simple bookkeeping in the form of an income-surplus account.

The Baldessarelli & Partner economic-business office is always happy to assist you with bookkeeping and annual accounts, for example. Simply contact us and together we will find the best solution.

Small businesses

Small businesses are all businesses that have an annual turnover of less than 22,000 euros in the previous year and expect a turnover in the current calendar year that does not exceed 50,000 euros. Thus, the small business regulation is a special regulation for founders and micro-entrepreneurs who do not have to pay VAT to the tax office, which eliminates a large part of the administrative work. This means small entrepreneurs issue their invoices without VAT and can thus offer lower prices than their competitors. The disadvantage remains that at the beginning of self-employment there are usually larger investments and purchases to be made, and small entrepreneurs cannot claim the VAT paid from the tax office, which other forms of business are refunded.


When a business converts its capital into liquid (cash) assets, it is called a liquidation. This can involve cash as well as other assets that are converted into cash. The liquidation process marks the start of a statutory lock-up year, which serves to protect creditors and includes a stricter ban on distributions. It is customary that only claims of third-party creditors may be settled. Liquidation is part of a company dissolution, for example. When a GmbH is deleted from the commercial register, there are always three steps: dissolution, liquidation and deletion. In contrast to insolvency, liquidation is a voluntary process that is initiated independently within the company. Creditors to whom the company still owes money have one year to file and assert their claims.

Wage tax

For all employees, wage tax is the most important tax and is levied on all income from non-self-employment. It is deducted directly from gross wages by the employer each month and paid to the tax office. In return, the employee receives a wage tax certificate listing the wage tax amounts for a calendar year. The amount of wage tax depends on the earnings and the respective tax class of the employee. Thus, the wage tax is an advance payment on the income tax and is offset against the actual tax liability when the income tax return is filed. The tax office reimburses taxpayers for amounts paid in excess.

Payroll accounting

Payroll accounting is part of business accounting and includes the recording, accounting and posting of wages. It covers the entire processing of wages and salaries within a company, as well as statutory and voluntary deductions and bonuses. As a duty, payroll accounting is linked to the duty to pay payroll taxes. Its purpose is to record the salary entitlement of employees in a given period, both in gross and net terms, and to prepare the associated social expenditure for onward charging in the company accounts. Premium wages, timesheets, employment contracts or piecework figures, among other things, are necessary for the preparation, on the basis of which the recorded wage periods are evaluated and calculated with the applicable wage rates and services rendered. For payroll accounting, a payroll account is obligatory for each individual employee, which contains payrolls, master data and tax characteristics.

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