Start a Business in Germany [Step by Step - 2024 Guide]

The number of new businesses registered in Germany is over 2 million. So, if you plan to start your business in Germany, this guide is for you!

Entrepreneurship in Germany

Report from Global Entrepreneurship (2006) states that Germany lacks an “entrepreneurial mentality” because of low start-up rates in relation to its population size. But now, Germany has turned out to have the strongest economy and started taking interest in start-ups.

The German government’s “Digital Agenda 2020” has helped IT and E-Commerce to flourish into the economy. Berlin and Munich are home to many big companies. Frankfurt is becoming a hub and a place of interest for finance entrepreneurs.

Starting Business As Foreigner

The German government welcomes foreign entrepreneurs to start new ventures in Germany with some requirements.

• Blend in and spend time with the community.
• Know music and literature.
• Learn German.
• Travel across the country.

Process to Register a Business

Requirements

Steps to create a business depends upon the nature of business. Initial requirements are:

• Business Visa: Plan business framework and complete required documentation within 6 months stay. Proof of financial support, staying whereabouts during this time, short-term health insurance, and business partner’s letter of invitation is required.
• Trade Licence: Get your trade licence and register as a tradesman. Pay €20 fee and specify your company’s area of work.
• Business Registration: Register your business with the Finanzamt and provide a valid visa, a German tax ID number, a functional bank account, current passport, and a residence permit. After registration you will get a Tax number and VAT number of your Business.

Address Registration

Register your address (Anmeldung) and get a certificate (Anmeldebestätigung) and tax ID (steueridentifikationsnummer). Register your business to create an ELSTER account.

Opening a Bank Account

Open a bank account that offers SEPA transfers. A separate business account is necessary to form a corporation (UG, GmbH, AG or KGaA). To start as a Freiberufler or Gewerbe, a business account is not necessary but some banks do not allow personal accounts for business payments so having a separate account is good. Business banks such as Kontist, Holvi and Penta offer easier bookkeeping.

Account Freezing by Finanzamt

If you are unable to pay taxes, Finanzamt will freeze all of your accounts. Account will defreeze in a couple of days and you’ll not be able to do transactions during this time.

A Pfandungsschutzkonto (P-Konto) can be protected, as it allows access to some money in the frozen accounts.

Finding a Tax Advisor

Hiring a tax advisor is expensive, but saves your money. He can help in business registration, tax declarations, accounting, and prevention from mistakes.

Gewerbe or Freiberufler?

The tax office will decide if you need to register as a trader (Gewerbe) or freelancer (Freiberufler).

To become a Tradesman getting a trade licence (Gewerbeschein) and paying a trade tax (Gewerbesteuer) is necessary. Getting listed in the trade register (Handelsregister) is a must and accounting rules have to be followed.

Freelancer doctors, engineers, teachers and architects are Freiberufler and tour guides and food delivery persons are Gewerbe.

Get a Trade License (Gewerbeschein)

Get a trade licence to register as a Gewerbe.

Apply online for a Gewerbeschein if you are in Berlin and have a valid residence permit. Forms are available in other cities and your tax advisor can also help. 

Register with Finanzamt

Declare your business at the Finanzamt by filling Fragebogen zur steuerlichen Erfassung online. Sorted and Firma.de can help to register your business in English if you don’t know German. Submit trade licence (Gewerbeschein), bank account, and tax ID (Steuer Identifikationsnummer) to get VAT number (Umsatzsteuernummer), tax number (Steuernummer), and trade register entry (Handelsregister). It takes 5-7 weeks including 1 week to create an ELSTER account.

Fragebogen zur steuerlichen Erfassung Filling in English

Fragen zur Steuerlichen Erfassung is a 7–8 pages document with a lot of fields. Get help to fill it through GetSorted.

If you want to start your Einzelunternehmer or Kleinunternehmer, GetSorted can help you to fill a form and to submit monthly or quarterly VAT.

Get Residence Permit

To be self-employed, a residence permit is required which is determined by your nationality.

• Citizens from Iceland, Norway, Liechtenstein, and Switzerland or from the European Union are eligible to start a business in Germany.
• Others can start business in Germany by having German permanent residence.
• By having a work visa or blue card, you can get self-employed along with your job which is the main source of income. If residence permit and Zusatzblatt says, “Selbständige Tätigkeit gestattet or Erwerbstätigkeit erlaubt, you can do this”.
• On a student visa, change your residence permit by asking Auslanderbehorde.
• A German freelance visa is necessary.

Get your business registered at the Finanzamt and apply for the residence permit at the same time. It takes around 2-3 months.

Notify Health Insurance Company

Inform your health insurance provider about your business. As a freelancer, health insurance is expensive because of no contribution by the employer.

Public insurance costs depend upon your estimated income. For additional or low charge, get a refund or invoice as per the amount. Private health insurance is better for self-employed people because of reasonable prices and coverage. Get professional advice from a health insurance broker before you decide.

Your revenue (reduced through business expenses) is accounted as the basis of taxation as a sole proprietor.

Register a Business in Germany

The German government supports entrepreneurs a lot. Online businesses have changed the economic world due to which online business owners are contributing in terms of employment growth.

Policies and procedures are developed to accommodate business owners. Flexible employment conditions and government subsidies have created a room for young start-ups. Venture capital is in growth and innovative projects are getting more funds so it is a good time to start business.

Obtain residence permit, get the right visa, and open a bank account in Germany. Visit the tax office (Finanzamt) to register yourself as a tradesman (Gewerbetreibender) or freelancer (Freiberufler) but before that, get a trade licence (Gewerbeschein). Inform your health insurance provider and get started. Follow the German laws related to hygiene, safety, working hours, and accountancy.

Cost To Register a Business

Administrative expenses and start up costs are two main expenses to register a business. Start up cost depends upon required investment and actual cost depends on the business entity if you go for the Small business (Kleinunternehmer), Sole Proprietorship (Einzelunternehmer). For these two entities, seed capital is not required and you can register for less than €50. 

If you go for UG (mini GmbH) or GmbH, you require €400 and €25,000 in seed capital. Create a “mini-GmbH” with an initial investment of €1.

GmbH Defined

GmbH “Gesellschaft mit beschränkter Haftung” is a limited liability company. Once a GmbH is formed, notarize it after completing the registration process.

Final Words

Starting a business in Germany is a bit challenging due to registration requirements and getting your tax ID and VAT number. But the German government is supporting businesses at every step to become an economically stable country.