Tips for starting a business in Germany

Tips for starting a business in Germany

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If you are setting up a business in Germany, here's a guide on market opportunities and how to navigate German regulations for foreigners starting a business in Germany.

Plenty of English speakers have taken their chances starting a business in Germany, ranging from relatively small companies such as English-language schools, Irish pubs and English-language bookshops, to bigger investments in the high-tech sector. Certain nationals can also apply for a German work permit for the purpose of setting up a business.

German opportunities for the ambitious

With German law making no distinction between Germans and foreigners in the establishment of companies and no restrictions on the repatriation of profits, nothing stands in the way of ambitious expatriate entrepreneurs with a little capital. However, nationals from outside the EU/EEA/Switzerland may need a visa or work permit in order to legally reside and work in Germany. Read more about German visas and permits, and getting a German work permit.

The basics of German company law have many similarities to those in English-speaking countries. It distinguishes between limited liability companies (equivalent to a British limited company), joint stock companies (equivalent of a British Public Limited Company), and various forms of partnerships. It is normally advisable to have a lawyer help you decide which is the most suitable for your needs and go through the necessary official rigmarole.

Jumping the hurdles

Before starting the race through bureaucratic hurdles, it is recommendable that you evaluate your business’s chances and risks and to prepare a business-plan. This business-plan is mandatory when talking to banks or applying for benefits at German authorities.

The kind of business and financial strength in most cases determines the form of company for your business.

Whatever form of company you choose, you will need to tackle a  number of bureaucratic hurdles. The first important steps are to contact a financial or tax advisor. They will know if it is necessary to hire a notary and how to register the business at the local court (amtsgericht). Shortly after this, the chamber of commerce should contact you, having received your details from the commercial register.

The next step is to organise two sets of tax registration, one for commercial tax at the so-called Gewerbesteueramt and one at the local tax office (finanzamt). After this it is possible to obtain a certificate of registration (gewerbeanmeldeschein) and to commence business.

Expat entrepreneurs in Germany

And how do expatriate founders of companies deal with this system? Paul Gurner runs St. George's Bookshop (Wörther Strasse 27 in Prenzlauer Berg), one of the best places in Berlin for second-hand English-language books. He says that bureaucracy was one of the biggest obstacles they faced when they set up the company around seven years ago.

Getting hold of permits to open a business was a problem, as was taking on staff. "Employing non-Germans can be tricky. You have to show that you aren't taking a job away from a German," he says. "You have to inform the job centre about the vacancy and they send people round – even if you have someone lined up."

Be prepared

Gurner, who has started several companies in England, thinks that it is more straightforward to set up one there than in Germany. That did not put him off, though, despite the language barrier when he first started.
And what advice would he give for starting a business in Germany? "Do lots of preparation beforehand. It took us six months," he says, "and use a tax consultant."

Expatriate business start-ups in Germany are of course vulnerable to cash flow problems, with some clients slow to pay up and banks not always keen to extend overdrafts for developing firms. Gurner says it is vital to be patient and not expect to make a lot of money at the start, but as he observes, "that's true everywhere."

Setting up a business in Germany
Straightforward

A guide to German company forms: GmbH The most common form of company is the limited liability company, mostly known by the acronym GmbH, which corresponds to a British Limited Company (Ltd.). Share capital must be at least EUR 25,000.

Since 2008, entrepreneurs have been able to start a so called Mini-GmbH (unternehmergesellschaft haftungsbeschränkt). This form of company was developed especially for start-ups, as the bureaucratic efforts are simplified and the minimum share capital is reduced to EUR 1.00.

Nightmare complications

Another expatriate entrepreneur is Alan Twigg from Sheffield, who came to Germany as a lorry driver 15 years ago.

He is now involved in three businesses here, including a translation agency and an online audiobook firm (www.playtime-books.com) from his base in Neuenburg in northern Germany.

He does not find Germany very open towards freelance work and business start-ups. "I think British people are more entrepreneurial," he says, and is glad that he deals only with freelancers and so avoids the "nightmare" complications of German labour law.

Nevertheless Twigg still thinks that Germany is a great place to start a business. "The opportunities in Germany are massive. It is an untapped giant."

Spreading optimism

Optimism seems to be spreading at last. That is the impression that Martin Brune, tax advisor in Duisburg, has. During the last financial crisis more and more expats decided to start their own business – and are now on a successful way to increase this business. There are still many possibilities to niche a market if one has a good idea and the skills and courage to start a business in Germany.

Links

 

James Kennaway / Martin Brune / Expatica

Updated from an original article by James Kennaway in June 2011 by Tax advisor Martin Brune. Martin Brune is listed on Expatica's A-Z listing under Tax category.
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15 Comments To This Article

  • Elizabeth posted:

    on 13th July 2016, 00:26:16 - Reply

    If anyone has any information on starting an online business and dealing with shipping, please contact me!!

    [Moderator's note: You can also post questions on our Ask the Expert free service.]

  • chel posted:

    on 4th June 2016, 08:24:11 - Reply

    Hello Everyone ,
    I'm a foreigner here in Germany , allowed to work/business and would like to start my small business in Franchising , anyone here can give me an advice?? Financial and Tax advice PLEASE .
    you can contact me thru e-mail : chelga2001@yahoo.com

    Thank you!

    [Moderator's note: You can also post questions on our Ask the Expert free service.]

  • Rajinder posted:

    on 29th April 2016, 13:57:59 - Reply

    Sir/Medam,

    Kindly advice me how i can start the bussines in germany . we are plan to open office and our prodcut store in germany many city. kindly advice on this topic which documents required for this field.

    [Moderator's note: You can also post questions on our Ask the Expert free service.]

  • Rahul posted:

    on 22nd February 2016, 11:27:51 - Reply

    I am indian and cook very good indian and some french dishes. I would like to start my Restaurant in Germany. I need more information.

    [Moderator's note: You can also post questions on our Ask the Expert free service.]

  • KarlWeiss posted:

    on 1st February 2016, 14:18:53 - Reply

    A few years back I used the consultancy services of the company EGZ LEIPZIG gmbh in Germany. They were very friendly and professional too. They have employees who speak perfect english and understood all my needs.

  • Siddiqui posted:

    on 2nd December 2015, 09:03:43 - Reply

    Who can help me start a company in Germany?
    Please mail me. imgsolutions.fazil@gmail.com
    I come from INDIA.

    [Moderator's note: You can also post questions on our Ask the Expert free service.]

  • bersetzung posted:

    on 29th November 2015, 17:05:57 - Reply

    Thanks for sharing the information. looking forward to read more.
  • Haider posted:

    on 17th April 2015, 20:46:21 - Reply

    Can someone tell how much it costs to make a professional club in Germany? .
    As I along with my group of friends are planning on making a club in Germany? .
    How much a land cost.
    Which place is cheapest to live?
    Any detail all your help would be be great.

    [Moderator's note: You can also post questions on our forums or Ask the Expert service]

  • Ryan posted:

    on 8th April 2015, 15:44:18 - Reply

    Who can help me start a company in Germany?
    Please mail me. ryan_db@yeah.net
    I come from Hongkong.
  • Hinaladen posted:

    on 11th June 2014, 20:48:40 - Reply

    This is the best information I found online re starting a business in Germany. Thank you so much for sharing these useful information - I learned a lot from it!
  • javed posted:

    on 28th April 2014, 08:40:04 - Reply

    Plz advice This time is best to buy a property in germany 2nd .. I want to start a little business in germany .which business is better and which city of germany

    [Moderator's note: You can also post questions on our forums or Ask the Expert service] 

  • Alaa K. posted:

    on 30th November 2013, 12:05:58 - Reply

    What is about the Visa? if I can open a company in germany, I can get the visa.
    Thanks

    [Moderator's note: You can also post questions on our Ask the Expert service]

  • Mark posted:

    on 5th April 2013, 04:39:52 - Reply

    For help with the set-up of a German business I can recommend FMT Tax Advisors in Frankfurt. FMT have prepared all tax and legal documents for me when I started with my German advisory business and do all my German bookkeeping and tax compliance.

  • Soraya posted:

    on 6th March 2013, 18:11:36 - Reply

    Jesus.... God bless you. Thank you ...
  • Greg Baxter posted:

    on 6th May 2012, 19:34:01 - Reply

    Thanks for the advice. I plan to start a small business here in Germany within the next six months and can use the tips to my advantage. Keep up the good, informative articles!