Ever dreamed of setting up a cafe in your favourite Kiez? Always wanted to plug that huge gap in the German market? Setting up a business in Germany can be a daunting prospect, but help is at hand in our comprehensive guide.
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Before you even think about starting your new venture, it is worth making sure that you have got the basics out the way.
Whether you are from Germany, another EU-country, or anywhere else in the world, you will not be able to set up a business until you are registered at an address.
Other basic requirements include being over the age of 18 and, unsurprisingly, being legally allowed to practise the profession of your choice.
If you have all those bases covered, then you can take your first steps in setting up your business.
Work out what kind of business you are
Depending on what kind of business you want to set up, there are different authorities to refer to and different requirements to fulfil. When it comes to German bureaucracy, it is sometimes hard to see the wood for the trees, but here are a few questions to ask yourself.
Firstly, there are two ways of being self-employed in Germany, so are you going to be a business person or a freelancer? If you plan to go into something like retail, trade or catering, then you are almost certainly a business person.
If your chosen occupation is one of the so-called “Freie Berufe” or “liberal professions”, such as those in medicine or journalism then you will need to register as a freelancer. If this sounds more like you, check out our guide on setting up as a freelancer instead.
A businessperson in Berlin. Photo: DPA
Secondly, do you require any special permissions? There are some occupations which are “subject to authorization”, which means they require a licence or certain qualifications.
To find out whether this applies to your business, you can get in touch with the German Chamber of Trade and Industry (IHK) or, if you are a tradesperson involved in manual or skilled labour, the Chamber of Skilled Crafts (HWK).
The Economy Ministry website also provides information on which professions are subject to authorization.
Register with the authorities
Once you’ve worked out what you want to do, it’s time to prepare yourself to go deep into the belly of the beast of German bureaucracy.
Depending on your field, you may need to come into contact with several different administrative offices, but the most important one is the Gewerbeamt (Trade Office). This is where you will register your business.
The key thing is to turn up with the right paperwork. The website Selbststaendig.de has a handy checklist on this, which includes ID, any relevant licences or qualifications and, for the non-Germans, your residence permit. Skilled tradespeople may also need a trade card.
Do your research
If this first step goes smoothly, the Trade Office should transfer your details to other departments such as the Tax Office or relevant trade association.
However, it is best to assume that nothing will be done for you, says Julian Boyce, an Australian restaurateur who has set up several businesses in Berlin.
“First and foremost: know the rules. Ignorance won’t help you in the face of German bureaucracy,” says Boyce. “Do your research on all the regulations and the various licences you need from the various administrative offices.”
Depending on your business, you may need to work with other offices such as the Ordnungsamt (Public Order Office), Bauamt (Planning Office) or Bezirksamt (District Office).
Knowing as much as you can about the various requirements you need to fulfil and which offices are responsible for them can help you avoid any nasty shocks.
“We once had to delay an opening and spend a huge amount extra on soundproofing because we weren’t aware it was required,” says Boyce. The Bauamt, in other words, are not going to give you a checklist.
“Ask people in the know, and find out everything you require before you open,” advises Boyce. “Ask a German, preferably someone with experience.”
Once you know what you’re looking for, the prospect of going to several different administrative offices for several different applications will be less daunting. All you’ll need to know is where to go, and for that, the Economy Ministry has a handy online tool which helps you find the offices you need in your local area.
Keep on top of book-keeping
Just like freelancers, business people need to register with the Finanzamt (Finance Office). There are three key numbers you will need to acquire: an Identification Number, a Tax Number and a VAT number.
Your identification number will be assigned to you automatically by the Federal Office for Taxes (BZSt).
The Finance Office will provide you with your tax number once you have successfully registered with them. This involves filling in a form which is rather dauntingly entitled “Fragebogen zur Steuerlichen Erfassung”.
As Selbststaendig.de points out, filling in this form wrongly could lead to serious trouble down the line. If you fill it in wrongly, you could end up being burdened with advance payments which are far too high, or end up underpaying and being surprised by huge tax bills.
It is, therefore, highly advisable to get a Steuerberater, tax advisor or accountant, from the very beginning. With their help, you will not only avoid any major mistakes on the initial form, but you should be able to avoid any nasty surprises when things are up and running.
“Get someone who can speak to you in your own language, and with whom you can discuss sensitive matters,” says Boyce. This, after all, is somebody who will know every little detail of your business, and therefore your life. In the major cities, there are plenty of tax advisors who offer English-speaking services.
Last, but by no means least, comes health insurance. Regardless of where you come from, this is a legal requirement in Germany, and you will need to provide proof of it when you register as a business person.
Statutory health insurance can prove to be quite expensive for business people, as your monthly payments are calculated according to your income. Many people therefore choose to switch to private health insurance.