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Overall, Germany is a favourable country in which to start a business. German law does not recognise any difference between a native German starting a business and a non-national doing so. Furthermore, unlike in many countries, there are no restrictions on profit remittances.
If you are an expat wanting to start your own business in Germany, the first step is to ensure you have the legal right to live and work in the country. Citizens from the European Economic Area (EU plus Iceland, Liechtenstein and Norway) and Switzerland are freely permitted to live and work in Germany, and they have the same legal rights to own a business in Germany as German citizens. If, however, you are a non-EU citizen, you will need to obtain a residence permit before you can operate a business in Germany.
The German market is very competitive, therefore it is vital to have a good business plan before starting your own business. Moreover, if you do not have a business plan, German authorities will not deem you eligible for certain benefits and many banks will refuse to deal with you.
When writing your business plan, make sure to research which businesses already exist in your field and determine your potential customers, partners and competition. Your business plan should set out your business objectives, target market, commercial strategies, potential obstacles and financing projections. For further advice and information on business plans, see the BMWi site (in German).
Setup and Registration
The next step is to contact a financial advisor, as they will be able to establish whether you will need a notary, and give you details on the registration process at the nearest Amtsgericht (local court.) Once you have completed the registration process, the Chamber of Commerce will contact you.
Another important step is to decide which legal structure is best suited for your business. The legal structure will determine the nature of your legal, financial and tax obligations. The two most common business types in Germany are Self-employed and Limited Liability Company, or GmbH.
The advantage of setting up your business as a self-employed person is that you have full ownership and control over the business, and that all after-tax profits are yours. On the other hand, you are personally liable for all the losses your business makes, and have additional responsibilities, such as keeping business records.
To start a self-employed business in Germany, it is nigh on essential to obtain the kind of residence permit that allows you to run a business. It may be possible to obtain a residence permit automatically if you have a specialisation that is lacking, or it is deemed that your company will bring some benefit to the German economy. Otherwise, you will need to convince the local Foreigners’ Office (Ausländerbehörde) that your company will provide some benefit to Germany. If you are not especially successful with this, the residence permit you receive may restrict your business activities.
You are strongly advised to get professional advice about setting up as a self-employed person in Germany, particularly with reference to residence permits.
GmbH (Limited Liability Company)
The German for ‘limited liability company’ is Gesellschaft mit beschränkter Haftung, which is handily abbreviated to ‘GmbH’. In this, the simplest and most common company structure, shareholders are not personally responsible for company debt.
To start a standard GmbH, you must have a minimum of €25,000 in share capital, though only half of this amount actually needs to be paid in. The amount to be paid is assessed by the registry court. You also need to be entered onto the commercial register; this is done at the local court. The company name must end with the abbreviation ‘GmbH’. The minimum number of founding members is one, and there must also be at least one shareholder.
If you have less than €25,000 of share capital, you can start a ‘Mini-GmbH’. This is a simpler structure, in which cash subscription is required and profits have to be retained until the minimum share capital level has been reached. A company or private partnership may also found a GmbH. If the company has at least 500 employees, a board of directors, with a minimum of three members, is also required.
Other legal structures in Germany include business partnerships (which come in general and limited forms) and unincorporated firms. The joint stock corporation, (Aktiengesellschaft or AG) is also very common. To read more on tax for expats in Germany, see Taxation.
If you want to employ someone – including yourself – to work in your business you will have to register as employer at the local tax office. Online registration is possible. However, in certain cases expat business owners must register by telephone or in person.
As employer, you will have to ensure that your business complies with German labour regulations. You should familiarise yourself with different types of contracts, minimum wage requirements, equal opportunity policies, work permits, insurance payments and recruitment options. Note that if you employ freelance workers (freie Mitarbeiter in German), you will not have so many legal obligations as they will be liable for paying tax and insurance themselves.
Sections in EMPLOYMENT AND BUSINESS IN GERMANY:
» Finding a Job, CVs, Interviews and Etiquette for Expats in Germany
» Work Culture and Labour Market for Expats in Germany
» Expats Owning and Operating a Business in Germany
» Business Groups, Associations and Networking for Expats in Germany
» Business Taxation for Expats in Germany
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If you are considering moving to Germany or are soon to depart, you can find helpful information and advice in the Expat Briefing dedicated German section including; details of immigration and visas, German forums, German event listings and service providers in Germany.
From your safety to shopping, living in Germany can yield great benefits as well as occasional drawbacks. Find your feet and stay abreast of the latest developments affecting expats in Germany with relevant news and up-to-date information.
Working in Germany can be rewarding as well as stressful, if you don't plan ahead and fulfill any legal requirements. Find out about visas and passports, owning and operating a company in Germany, and general German culture of the labour market.
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