For anyone who wants to become an entrepreneur, Germany can be a great location for starting a new business. This is attested to by the large number of small and medium-sized enterprises (SMEs) that form the backbone of the German economy. There are, however, a few administrative issues that need to be taken care of before you can officially become your own boss.
Point of Single Contact (Einheitlicher Ansprechpartner)
The first port of call for any expat wishing to start a business in Germany should be your local Point of Single Contact (Einheitlicher Ansprechpartner - EA). Since 2009, every federal state (Bundesland) in Germany has had an EA to assist freelancers, start-ups and new businesses.
As well as offering general advice and guidance, the English-speaking staff at the EA can personally advise you on how to start a business in Germany, including helping you with forms and documents, and forwarding them on to the relevant administrative bodies. The EA will be able to assist you with many of the processes described below.
Residence permit for self-employment in Germany
Before you can start a business in Germany, you must first ensure that you are allowed to stay there long-term. Under EU law, citizens of the EU, EEA or Switzerland are able to live and work freely in Germany, including undertaking self-employed activity.
Nationals of other countries will need to apply for a residence permit for the purpose of self-employment before they can start a business in Germany. In order to qualify for this type of temporary residence permit, you will need to demonstrate that your business serves a German economic interest and that you have the funds to realise your idea. You will be expected to submit a business plan outlining these points.
German definition of freelancers (Freiberufler) & tradespersons (Gewerbetreibenden)
German law makes a distinction between a freelancer (Freiberufler) and a tradesperson (Gewerbetreibende). Understanding this legal distinction is important for anyone considering starting their own business, as freelancers are not required to register their business with the trade office or pay trade tax.
In Germany, a freelancer is someone with specific qualifications who independently sells their services. The definition is limited to certain types of professions. You can see a list of freelance professions here. Anyone else is considered a tradesperson. Generally, freelancers operate under their own name, rather than a business name.
If you are unsure whether you qualify as a freelancer or a tradesperson, check with your local tax office (Finanzamt), who will be able to advise you.
The following sections outline the process of registering yourself as self-employed in a trade occupation (Gewerbe). For details on how to register yourself as a freelancer, visit our Going freelance page.
Applying for a licence (Erlaubnis)
Some trades and professions in Germany are protected, and therefore you are required to take some extra steps before you can register your business and commence trading.
Trades requiring a licence in Germany
Some professions, such as insurance advisors, construction supervisors and property developers, can only be practised in Germany on a self-employed basis with a licence (Erlaubnis). See here for a list of trades requiring a licence.
You can apply for this licence at your local trade office (Gewerbeamt) by submitting a form. This can usually be done online, but it would be wise to attend in person if you have any queries. You will be required to submit some or all of the following:
- CRB check (polizeiliches Führungszeugnis)
- Proof of vocational qualifications (officially recognised, if foreign (see below))
- Extract from the commercial register
- Certificate of non-objection (Unbedenklichkeitsbescheinigung) from the tax office and town hall
- SCHUFA credit report
If you are unsure whether you need a licence to practise your profession, you can consult with your local trade office or branch of the Chamber of Industry and Commerce (Industrie- und Handelskammer - IHK).
Skilled trades in Germany
Skilled trades (Handwerke) are also protected in Germany and anybody wishing to practice a trade or craft profession must be entered into the Register of Qualified Craftsmen (Handwerksrolle) before being allowed to commence commercial operations. Being entered into the register also means that you are liable to pay regular subscription fees.
Note that the definition of skilled trade in Germany is quite broad and covers the following industries:
- Electrical-, metal- and woodwork
- Building & finishing
- Health & personal care
- Glass, paper and ceramic work
- Clothing, textiles and leather
To be entered into the register, you must submit an “Application for Registration in the Register of Qualified Craftsmen” (Antrag auf Eintragung in die Handwerksrolle) at the competent Chamber of Trade (Handwerkskammer - HWK) in your area.
There are 43 skilled trades (Handwerke) that can only be practised with specific qualifications. Only those with the correct vocational qualification, or a recognised foreign equivalent (see recognition of foreign qualifications, below) can be entered into the register and permitted to practise these occupations. To practise other skilled trades you do not need specific qualifications, but you still need to be entered into the register.
If you are unsure if your profession is classified as a skilled trade, consult with your local HWK, who will be able to advise you.
Recognition of non-German qualifications
Some professions, such as insurance advisers, security guards and taxi drivers, are regulated in Germany. This means that these professions may only be practised by non-Germans who have equivalent foreign qualifications.
If you wish to run a business in one of these professions, you must apply to the responsible authority to have your foreign qualification officially recognised. Your local competent authority can advise you about this process.
Selecting a legal form for your German business
Once you have taken these initial steps to ensure the viability of your business venture in Germany, you need to choose a legal form for your business. Which structure you choose depends on a number of factors, including:
- How many people are starting the business
- Who will lead the business
- How much equity you have
- Whether your personal liability should be limited
Choosing the right structure is essential, as it will affect your business taxes and your personal debt liability in future.
Entering the commercial register (Handelsregister)
Once you have decided which legal form is best suited to your new business, you can enter your business in the German commercial register (Handelsregister). Almost all businesses must do this in order to receive a commercial register number (Handelsregisternummer), which you will need to register your business at the local trade office and receive a business licence (Gewerbeschein - see below).
Small businesses and the commercial register
The only exceptions to this are freelancers and small businesses (Kleinunternehmen). Small businesses are defined as businesses with a revenue of less than 22.000 euros in their first year of operation and a revenue of less than 50.000 euros in the following years.
If you are a small business owner or a freelancer you can voluntarily enter your business in the commercial register, but note that this comes with additional rights and obligations. For small businesses, it is not usually worth the extra cost. A lawyer can advise you if you are unsure.
How to register in the Handelsregister
Larger businesses, especially OHGs, KGs, GmbHs, UGs and AGs must enter the German commercial register. The application is electronically filed in a publicly-certified form by a notary. The cost of registration varies according to the company’s legal form, anywhere from 200 euros for a sole proprietorship to 500 euros for an AG.
Registering at the German trade office (Gewerbeamt)
Once you have your Handelsregisternummer and any licences or permits you might require, you can pay a visit to your local trade office (Gewerbeamt) to register your business. The competent trade office is the one in the area where you will open your business. You can find your local office on the Federal Ministry for Economic Affairs and Energy’s website. Select “Gewerbeämter” (trade offices) and enter your postcode (PLZ) or location (Ort).
To register your business, you will need:
- Valid ID, such as a passport or identity card (not a driving licence)
- Registration certificate (Meldebescheinigung)
- Visa or residence permit enabling you to carry out self-employed activity
- Handeslregisternummer (if applicable)
- Proof of your qualifications and any permits or licences, as required
- Registration fee (usually no more than 70 euros)
Once you have registered your business, information about your registration will automatically be forwarded on to the tax office (Finanzamt), the local Employers’ Liability Insurance Association (Berufsgenossenschaft) and, depending on the type of business you register, possibly the District Court (Amtsgericht) as well.
Registering with the German tax office
Shortly after you have registered your business with the trade office, you will receive communication from your local tax office, usually asking you to fill out a form called “Fragenbogen zur steuerlichen Erfassung” (Questionnaire for Taxation). Alternatively, to speed up the process, you can download a form to fill out, or submit it via ELSTER. The form is only available in German; if you are unsure about anything, it would be wise to consult with a tax advisor rather than risk a delay by entering information incorrectly. You will need to submit the following details:
- Tax ID
- Description of your business activity
- Details of your German bank accounts (both personal and business, if you have one)
- Estimated profit and expenses
- Estimated revenue
- Registrations with Chamber of Industry and Commerce or Chamber of Crafts
- Registration in Commercial Register
- Whether you wish to charge VAT (see below)
Once you have completed this form and sent it back, you will receive your tax number (a unique identifier for you as a business, different from your Tax ID) and your VAT number. You will need both of these numbers before you can start sending invoices and charging VAT.
Business tax in Germany
On the basis of the estimations you provide in your form, the tax office will send you a schedule for tax payments. Businesses and tradespeople in Germany are liable to pay several different kinds of business taxes, depending on their annual turnover and their legal form. You can learn more about business taxes in Germany here.
German business administration
In Germany, businesses are legally obliged to keep financial and administrative records for 10 years. If the authorities suspect you have been paying tax incorrectly, you may be asked for records reaching back beyond 10 years. This includes:
- Bank statements
- Contracts (e.g. employment contracts or with providers of internet or phone line)
While single-person businesses and partnerships are relatively free to choose how to manage their accounts, corporations in Germany are obligated by law to use double-entry bookkeeping.
Formatting invoices in Germany
You must make sure that any invoice you issue contains the following information:
- Your company’s full name and address
- The recipient’s full name and address
- Invoice date
- Your tax number and VAT number
- Invoice number (assigned by you to help you identify in future)
- Description of goods or service provided
- Time of delivery
- Net amount
- VAT / USt (if applicable)
- Payment deadline
Bank accounts for businesses
You will also need to open a business bank account, to keep your business assets separate from your personal ones (this does not apply to freelancers). Having a separate business account also makes business administration much smoother and will save you a lot of time. There are several different banks in Germany that offer business accounts for entrepreneurs, such as bunq.
Personal insurance and pensions for self-employed workers in Germany
Becoming self-employed in Germany means that social security contributions are not automatically deducted from your salary. You will, therefore, need to take some steps to make sure you are covered by all the mandatory types of insurance.
Self-employed workers & Pensions
Generally, as a self-employed worker, you can continue making voluntary contributions to the German statutory pension scheme. Certain groups of self-employed persons are legally obliged to contribute. This applies to workers in the following professions:
- Architecture & engineering
- Lawyers, accountants and notaries
- Teachers (who regularly earn more than 450 euros per month)
- Artists, writers, authors and journalists
If you do not fit into one of these categories, you can still make voluntary contributions to the state pension plan by informing your pension fund of your decision to become voluntarily insured. Voluntary insurance is fairly flexible, allowing you to specify the exact level of your contributions. You must contribute a minimum of 18.6% of your income up to a maximum threshold of 6.700 euros.
Usually, you will have to cover the entire 18.6% contribution yourself. An exception is those working in artistic professions, who can apply to have 50% of their contributions covered by the Künstlersozialkasse (KSK). Within the first three calendar years after you became self-employed, you may be eligible to have your contributions reduced by 50%. Speak to your local branch of the Deutsche Rentenversicherung to see if you qualify for this reduction.
Alternatively, you can choose to take out a private pension plan, known as a Rürup pension, which allows you to decide exactly how much you wish to contribute. These contributions are also deductible for tax purposes.
Self-employed workers' health insurance
Self-employed workers do not have to contribute to statutory health insurance (gesetzliche Krankenversicherung). However, having health insurance is compulsory in Germany, so you need to make sure you are covered by a scheme. You can voluntarily contribute to a statutory health insurance scheme, which will automatically entitle you to sickness benefit and long-term care, as well as providing cover for your dependent family members. Bear in mind, however, that you will have to pay the entire contribution (14,6% of your income up to a maximum income threshold) yourself.
For many self-employed workers, therefore, taking out private health insurance can work out cheaper. If you opt for this, make sure you are covered in the event of sickness and / or old age.
Unemployment insurance for self-employed workers
To guard against unemployment in future, and be entitled to unemployment benefit, as a self-employed worker you also have the option to make voluntary contributions to unemployment insurance.
Occupational accident insurance
You can choose to take out voluntary accident insurance for yourself (and your spouse, if they work with you). If you have any employees, you will be obliged to make contributions to the scheme on their behalf.
Professional insurance for self-employed workers
In addition to personal insurance, self-employed workers often choose to take out professional insurance to guard against risks that might damage their business. An insurance advisor can help you decide which types of insurance might be necessary for your business. This might include:
To protect you against any damage claims.
Legal expenses insurance
To cover legal expenses should you ever need to go to court.
Loss of profits insurance
To cover lost income incurred as a result of having to temporarily close your business.
To protect your buildings, equipment, goods and machinery.
Machinery breakdown insurance
To finance any necessary repairs.
To cover any damage caused by power cuts or viruses, including those resulting in a loss of data.
Goods transport insurance
To protect your goods while in transit.
To cover unpaid invoices.