To work as a freelancer or set up your own small business in Germany, there are several registrations and permits you need before starting your business in Germany.
To work as a freelancer or sole trader or set up your own small business in Germany, you may need a residence permit and you will need to have your business recognised by the tax office or register with your local trade office before you can start working in Germany.
The rules for setting up a business as a self-employed person in Germany are the same for German citizens and foreigners. The information given here provides a general overview only, and you should always get professional advice from a German accountant or financial expert when setting up your own business in Germany.
Foreigners setting up a business in Germany
If you’re a citizen from an EU member state you can set up a company in Germany or work in self-employment merely by informing your local registration office (Einwohnermeldeamt) at the municipality town hall. If you’re a citizen from a non-EU country and hold a settlement permit, you can also start up a business at any time.
However, if you hold (or wish to obtain) a residence permit to work as a freelancer or set up a business as a sole trader in Germany, you will need to prove to the authorities that your business fulfills a special need or economic need, that it will benefit the German economy and that you have sufficient financial security. For more information, read Expatica’s guides to German visas and permits and getting a German work permit.
Types of businesses in Germany
You can either work as a self-employed trades person (Gewerbetreibender) in a commercial activity (such as a maker or seller of goods or running a café), or as a member of a ‘liberal profession’ (such as a doctor, accountant, business consultant, artist, teacher or information and language-related professional, such as a writer or translator). It is the activity that you will be carrying out rather than your personal qualifications that decides which category your self-employment falls into and it is the tax office who make the final decision.
Legal structures for business start-ups
When you register as a sole trader with the trade office or if you’re a freelancer applying to your local tax office for a tax number (Steuernummer), your business will automatically take on the legal structure of sole-proprietorship (Einzelunternehmen). This means that you have full control of your business, there is no need for minimum capital and you have full liability with your personal assets. If you’re going to be running a small business rather than professional services/freelancing, you have to register your company in the commercial register as a ‘business established as a commercial operation’.
Alternatively, with a One-Person GmbH (Gesellschaft mit beschränkter Haftung) you become your own employee, which is beneficial for tax. The company is liable with its assets but is limited to EUR 25,000, except in the case of liability to bank loans or criminal infringements where personal assets are liable. Your company will be subject to commercial law provisions. You have to get a notary public to enter a one-person GmbH into the commercial register. You can usually only set up the GmbH if you are running a business, not if you are working as a freelancer but there are exceptions, so contact your local Chamber of Commerce for information.
A limited liability company UG (Unternehmergesellschaft haftungs beschränkt) is suitable for small businesses, not freelancers, who want to limit liability and don’t need much equity. The minimum share capital is EUR 1.00.
Rules for working as a freelancer
To work as a freelancer (Freiberufler) in Germany you must have more than one client and not be deemed to be integrated into a client’s organisation. If you earn more than 83 percent of your income in any one year from one client you will be considered to be working in ‘false self-employment’ or scheinselbständig and you will have to pay contributions into the public pension scheme – possibly retrospectively for up to four years. If you are in any doubt about your self-employed status, contact the Association of German Pension Insurance Carriers (Deutsche Rentenversicherung Bund) or call 0800 1000 480 70 (within Germany) for clarification.
Permits, licences and tests
Before you start your business, you will need to find out whether you need a permit or licence to carry out your particular work or if you have to be tested on your skills or take a course. For more information see this list of special permits from the German government’s official portal for business start-ups, or read more about working in Germany and German work permits.
Loans to start a business
The Federal Government and the individual Länder throughout Germany and the EU have support programmes to help people set up a business in Germany, especially in eastern Germany. These may be low-interest loans with long repayment periods and non-repayable grants. KfW Bankengruppe manages the main Federal support loans. The Employment Agency (Agentur für Arbeit) also offers grants to those on unemployment benefit.
How to set up the business
If you are offering a ‘professional service’ – such as a journalist, doctor or tax advisor – or you’re a freelancer, you can start your business by only applying for a tax number (Steuernummer) from the local tax office. Find your local tax office here. The application form will be in German so you may want to ask a German speaker to help you complete it – your registration won’t be processed if the form is incomplete or filled in incorrectly.
Everyone else will need to register their business with the trade office (Gewerbeamt) in the municipality in which the business will be operating. You will need:
- a valid passport or national ID document;
- a residence or settlement permit (if you are from outside the EU);
- depending on the sector in which you want to work (eg. catering), a permit/authorisation;
- A craft card (Handwerkskarte) or trade card (Gewerbekarte) if you will be working in the trade or craft sectors;
- between EUR 10 and EUR 40 for the registration fee, depending on the municipality.
The trade office will inform other relevant authorities on your behalf. These may include the tax office, accident insurance fund, the local court (the electronic commercial register), the local chamber of industry and commerce or chamber of crafts, and the trade supervisory office (health and safety). You may also need to contact other authorities. For example, if you will be working out of a premises previously used for another purpose you may need to apply for a change of use from the Construction office. You must also inform the statutory heath fund.
If you want to work in the crafts sector then you will need to be registered on the Roll of Craftspeople (Handwerksrolle) or in the register of similar activities (Verzeichnis der handwerksähnlichen Gewerbe) at the Chamber of Crafts (Handwerkskammer).
Taxation and social security for businesses
You can earn EUR 8,130 a year without paying tax, after which you pay on a sliding scale. As soon as you earn over EUR 17,500 in a year, you will be liable for Umsatzsteuer/Mehrwertsteuer (VAT/ turnover tax).
The self-employed are not covered by the state-funded social security system so you will need to organise private insurance plans for healthcare, life insurance and pension.
For more information on taxation and social security, see the Expatica article Taxation and charges for the self-employed in Germany.
Invoices and paperwork
Your invoices for any amounts over EUR 150 should include the following information:
- full name and address of your company;
- full name and address of the customer/service recipient;
- location and invoice date;
- tax number (Steuernummer);
- invoice number;
- amount/type of goods or services provided;
- time of delivery/provision;
- any payment already received;
- net amount owed;
- the tax amount and, as you do not pay turnover tax, include the line ‘Turnover tax is not levied, as small entrepreneur in accordance with § 19 UStG Paragraph 1’;
- any discount;
- date by which payment should be received.
For amounts under EUR 150, it is sufficient for an invoice to include:
- the full name and address of your company;
- location and invoice date;
- amount/type of goods or services provided;
- amount owed and tax amount as one sum, ie. the gross amount to pay;
- tax rate, or note of tax exemption.
You need to send invoices to another company or organisation within six months of delivering the goods or services and should keep all invoices for 10 years.
Getting advice for your business start-up
Take advantage of the free advice on business start-ups available from the business promotion unit in your municipal or city authority, your local Chamber of Industry and Commerce (Deutscher Industrie-und Handelskammertag or DIHK) or Chamber of Trade (Zentralverband des Deutschen Handwerks or ZDH). They may be able to provide information on any national, regional or local initiatives, training in business skills and some may offer specific services for foreigners who want to start a business in Germany. Women can also contact the National Agency for Women Start-ups Activities and Services (bundesweite gruenderinnenagentur or bga).
If you need advice on legal issues in setting up your business, then contact a lawyer via the German Association of Lawyers (Deutsche Anwaltauskunft) or a public notary through their professional body the Federal Association of Notary Publics (Deutscher Notarverein).
Tax consultants can advise on legal structures, tax issues and business management. To find a tax consultant, contact the German Federal Chamber of Tax Consultants (Bundessteuerberaterkammer or BSTBK) and the German Association of Tax Advisors (Deutscher Steuerberaterverband or DStV).
Contact relevant professional associations for advice. You can also get business help and advice for a small donation from experienced senior technical and executives from the commercial world via the organisation Bundesarbeitsgemeinschaft der Wirtschafts-Senioren.
KfW Bankengruppe provides financial advice for start-ups and Federal Government loans though its network of 70 offices throughout Germany. Information line: 0800 539 9001 (from inside Germany).
For more information
- Existenzgruender.de – German government’s official portal for business start-ups in Germany in English.
- Chamber of Industry and Commerce (IHK).
- Chamber of Trade (HWK) – free advice on start ups.
- German Association of Lawyers (Deutsche Anwaltauskunft).
- Federal Association of Notary Publics (Deutscher Notarverein).
- Taxation and charges for the self-employed in Germany.