start a business
How to start
-THIS IS NO LEGAL ADVICE-
First of all, it is important to know that in Germany a distinction is made between different types of residence permits for specific purposes, depending on the duration of the stay and the intended activity in the country. For entering the country, a visa is sufficient but for long-term stays and work, e.g. on a self-employed basis, you will need a residence permit. If you, as a foreigner, want to establish and operate a business, a residence permit is required.
The type of residence title required depends on nationality and on the specific area of intended business activity in Germany.
Check the “visa navigator” to get a first impression of the different visa types and make an appointment at the immiration office in Germany after your arrival to find out more about the residence permit.
Business plan :
To come to Germany and establish your start-up, you definitely need a proper business plan. This is a formal document that includes a business description, business goals and how you plan to achieve them. A professional business plan will not only help you get a residence permit, but will also help you provide answers to various stakeholders and do business in Germany.
The ten important components you should take into account for your business plan are:
- Executive summary: Why are you starting this company? What is your experience in this industry? It should summarize what you expect your business to accomplish. It reveals the company’s mission statement, along with a short description of its products and services.
- Company description: It should discuss how your business will stand out from others in the industry and how the products and services you’re providing will be helpful to your target audience and region.
- Market analysis: Do you know the industry? It’s time to show it here. You’ll need to use data and statistics to talk about where the market has been, where it’s expected to go and how your company will fit into the development.
- Competitive analysis: You’ll need to show that you know their strengths and weaknesses and you know how your business will stack up.
- Description of management and organization: Introduction of company managers, summarize skills and responsibilities.
- Breakdown of your products and services: It might be a good idea to include extra information about your products in a separate section from the company description.
- Marketing plan: It’s important to describe how you intend to get your products and services in front of potential clients.
- Sales strategy: How do you plan to sell your products and/or services? Which sales channels do you plan to use? Try to be as specific as possible.
- Request for funding: in this section, you need to disclose your funding sources. This may for instance be a grant, money from an investor of private capital that allows the start-up to kick-off in Germany.
- Financial projections: You’ll have to report your anticipated revenue for the first 12 months and your annual projected earnings for the second, third, fourth and fifth years of business.
You will need a German bank account when you declare your business to the German tax office (Finanzamt), and when you start paying taxes. Take a look at question 5 for our overview of German bank accounts.
Get a trade licence:
If you are a registering your business (Gewerbe anmelden), you must get a trade licence (Gewerbeschein) before visiting the Finanzamt.
Register your business at Finanzamt.
On a regional level the International Entrepreneurship Office partners with IHK as well as the regional business development organization AGIT. They support companies free of charge, in the areas Start-up & Innovation, Economic Development, Business Networks & Local Integration. Check their website for more information about their services, e.g. concerning taxes for start-ups.
- There needs to be an economic interest in, or a regional demand for your product or service.
- Your company will have a positive effect on the economy.
- You are able to finance the implementation of your business concept with your own capital or through a loan commitment.
- If you are older than 45 years of age, this visa can only be issued if you can provide proof of adequate pension provisions.
German Tax ID Number will be sent to you two weeks after registration of your address. The number will not change if you move to another region or marry. It will be attached to you for your whole life.
Self-employed people and businesses need a German tax number. In order to get one, first you need to get your German Tax ID Number. Therefore, you need to fill the “Fragebogen zur Steuerlichen Erfassung” at the Finanzamt of the city where you are registered as a resident. This “Steuernummer” is not permanent in contrast to the German Tax ID Number.
As a trader, you need to get a licence at the local Trade Office (Gewerbeschein). You may need a VAT number if your company grows. The German tax law can become rather complicated so that a tax advisor can become very important as your business grows.
If you want to keep it more regional, you can open a bank account at Sparkasse. Sparkasse works as a commercial bank in a decentralized structure. Each savings bank is independent, locally managed and concentrates its business activities on customers in the region in which it is situated. In Aachen, Sparkasse offers services in English as well as online banking.
Sole proprietorship [Einzelunternehmen]: If you open a business alone, either as a business person or as a freelancer, this automatically translates into sole proprietorship. It is easy to establish a sole proprietorship. This is carried out when business people register their commercial activity with the Trade Office. As a sole proprietor you are fully liable with all your assets, including your private assets. You are required to register your company in the Commercial Register (Handelsregister). By registering in the Commercial Register, you assume all the rights and obligations of a merchant.
Limited liability company GmbH: Company capital must be at least 25,000 EUR. A notarized agreement must be drawn up between shareholders, and the company’s legal existence starts only when it is entered into the Commercial Register.
Joint stock company AG: The minimum required capital is 50,000 EUR. Articles of association, authenticated by a court or notary, are initially required to set up an AG, and it only becomes a legal entity when it has been entered in the Commercial Register. An AG must have a managing board, empowered to decide all matters relating to the operation of the business and appointed by and answerable to the supervisory board.
General partnership OHG: Partners have unlimited liability. Every partner in the company is legally obliged to participate actively in operating the business.
Limited partnership KG: Limitation of liability by having two types of partners:
- The general partner, who has an unlimited liability extending to his or her personal assets.
- The limited partner whose liability extends only to his or her nominal holdings in the firm.
For more information about the difference between private and public health insurance check our FAQs page.
In Germany, society is rather structured and life is conducted according to a set of rules. Talking about cliches; Germans are known for their punctuality, and do not like surprises. Sudden changes in business transactions, even if they may improve the outcome, might be less welcome. Of course this differs among young people in a start-up context. Germans in general prefer to guard their personal space. An arm’s length of space or more is normal when conversing.
Flexibility and cultural adaptation should be the guiding principles for doing business in every country. Any unethical behavior might seriously harm future business relationships and negotiations.