Starting a business in Germany as an expat: What you need to know
Got a budding entrepreneur inside you? Thim Werner from Business Development Germany, an organisation that helps support foreign companies in Germany, explains what you need to know.
For entrepreneurial expats, doing business in Germany is appealing for a number of reasons. Among other things, the country has:
- High purchasing power and a stable economy
- A climate of innovation
- A reputation for being welcoming to expats
- Excellent transport infrastructure
- A highly qualified workforce
In Germany, entrepreneurs can count on a stable political and economic environment. You are also triple protected against idea hacking: valuable assets like inventions, logos and concepts are all well-protected in Germany under intellectual property, copyright, patent and trademark laws.
How to get your business started?
If you’re already sold about getting your business up and running in Germany, what are the next steps?
The first thing to do is validate the business itself and check that there is actually a market for it in Germany. There are plenty of online forums and business advisory services that can help you with these questions.
Different types of company
Next, you need to choose a legal form for your company. Aside from structures suited to sole traders and small partnership businesses, these are some of the most popular legal forms in Germany:
Public trading company
Incorporation as a public trading company (Offene Handelsgesellschaft - OHG) is a particularly attractive option for wholesalers. To do this, your business needs to establish a formal partnership agreement in the commercial register. However, you don’t need to bring in minimum capital to secure this business form, and shareholders won’t be liable for any debt or bankruptcy with their private assets.
A limited partnership (Kommanditgesellschaft - KG) requires capital, as well as a formal partnership agreement and registration as a public trading company in the German commercial register. The partners’ contract determines the profit share of each partner, and the owner must submit a profit and loss report to the local tax office each year. In the event of bankruptcy or debt, the owner is liable, but the limited partners’ liability extends only as far as their investment.
Limited liability company
The limited liability company (Gesellschaft mit beschränkter Haftung - GmbH) is probably the best-known German business form. Unlike other options on this list, a GmbH registration in Germany is regarded as an entity that is financially separate from the people who run the business. All profits are funnelled straight back into the business, as soon as the required taxes have been paid. 25.000 euros of capital is required to set up a GmbH, half of which must be paid before registration.
Once you have decided which type of company is right for you, you need to follow these steps:
Ensure your business has a unique name
You need to come up with a totally unique name for your fledgling business. To make sure you don’t accidentally choose a business name that already exists in Germany, you can check the commercial register (Handelsregister) to ensure your proposed company name is available.
Submit a coherent business plan
German law requires you to declare an official purpose (Unternehmensgegenstand) for your business when registering. This includes your business’s purpose and the activities you engage in. It is legally binding, so you should carefully consider your company’s objectives and activities before submitting an official statement. You should also include your business purpose in the articles of association.
How to register a business in Germany
The business registration process in Germany is notoriously complicated. It comprises these essential steps:
Make an appointment with a notary
The first step is to gather your shareholders and visit a notary to get your business registered. Depending on your business type, you might need to register with both the commercial register (Handelsregister) and with the German trade office (Gewerbeamt).
Be sure to bring proper identification and all of the necessary documents, such as your articles of association, a list of your shareholders, and your official purpose document. Your notary can advise you if you are not sure what documents you need.
If the notary can pay the fees to register your company on your behalf, this could save you time. Otherwise, you need to wait to receive an invoice in the post. You will not receive your business licence until you pay it.
Open a German bank account
Your company needs a German bank account for business, salary and tax transactions. This allows you to start paying taxes officially. As soon as you have successfully opened a bank account, you can pay your share capital (Stammkapital) in cash or via bank transfer.
Register your business with the tax office
Once you have all the required documents and licences and completed the necessary preliminary steps, you can register your business with the tax authorities in Germany. The tax office may have been automatically notified of your business registration, and sent the necessary forms to you to complete. Otherwise, you can pick up a copy from your local tax office.
The registration document, known as the Fragenbogen zur steuerlichen Erfassung, is quite long and complex, especially if you are not a native German speaker. Therefore, to save time and ensure accuracy, many companies enlist the help of a tax advisor at this stage - if they haven’t already!
Get your tax numbers
Once you’ve finished registering your business, your company will receive a tax identification number from the Finanzamt. This is the number you will need for all of your local tax transactions.
And that’s it - you’re registered and can begin business operations. After that battle with German bureaucracy, actually running your business might seem like the easy part - best of luck!
If you are interested in learning more about how to do business in Germany, and how you can get support as an expat entrepreneur - from market research and help getting your business registered, to shaping your communications for the German market and optimising sales - visit the BDG website.