What are the business liabilities in self-employment?

Business liabilities consist of borrowed capital and equity. The equity counts towards the taxable assets of the self-employed.

The accounting and valuation of business liabilities have a significant impact on corporate profits. This has direct effects on income tax, as the income of self-employed individuals consists of the profit from the business (= net profit). The liabilities side of the company's balance sheet shows with what funds the company's assets (business assets) are financed. The liabilities side consists of capital provided by third parties (borrowed capital) and from own funds (equity).

Borrowed Capital and Equity

Borrowed capital consists of debts (e.g., loans from a bank) and provisions. On the balance sheet date, all foreseeable debts and provisions must be included in the balance sheet, otherwise the equity and profit are reported too high. For the self-employed, equity is composed of the capital account and reserves. Reserves are set up to finance future acquisitions or to cover upcoming expenses. Delineation is crucial because equity counts towards the taxable assets of the self-employed. The difference between the assets and the debts as well as the tax-recognized provisions thus results in the taxable equity.

• Further information
   
• Calculate offer for fiduciary