Business Features in Germany

Doing business in the heart of Europe is a dream for many people from various countries around the world. Germany is considered an ideal European country for businesspeople, especially those developing startups. The level of support for private entrepreneurship found here is hard to match anywhere else.

1. Why Start a Business in Germany

2. Сultural aspects

3. Benefits of Doing Business in Germany

4. Getting Started

5. Key Steps to Start a Business

6. Choosing a Business Niche

7. Selecting a Legal Structure

8. Freelancers and Self-Employment

9. Freiberufler Explained

10. Sole Proprietorship

11. Getting a Business Visa

12. Registering a Company

13. Steps for Company Registration

14. Business Growth Strategies

15. Residence Permit for Entrepreneurs

16. Business Taxes in Germany

17. Support for Small Businesses

18. Investing in Existing Businesses

19. Conclusion

Why Start a Business in Germany

The government of Germany provides comprehensive support for businesses and creates favorable conditions for them:

• Support programs for aspiring entrepreneurs and foreigners looking to start a business in Germany
• Insurance for bank depositors against risks
  
• Stable business laws that have remained largely unchanged for decades
  
• Virtually no corruption or bribery in the business environment
  

Germany is globally recognized for its stable and prosperous economy. It has one of the strongest economies in the world, with a strategically advantageous position in Europe, and is also one of the wealthiest European countries.

Germany offers the opportunity to conduct business not only for its citizens but also for foreigners. This is a significant advantage, as starting a business can serve as a basis for obtaining a residence permit, and eventually, permanent residency and European Union citizenship.

An EU residence permit is a pleasant "bonus" to entrepreneurial activity in Germany

Being a businessperson in Germany is advantageous because it is:

• Accessible
• Legal, transparent, and safe
  
• Reliable with government support
  
• Promising
  

This is why many entrepreneurs, especially startup owners, strive to start a business in Germany. It’s a guaranteed chance to ensure your project’s development and secure a high standard of living in Europe.

What Cultural Aspects to Consider When Doing Business in Germany

Respectful relations with colleagues and business partners are the foundation of business relationships in Germany. Germany is a country with a European mindset and some local peculiarities. To successfully develop your business, it’s essential to consider the general norms and rules of interaction in the business environment.

Respectful Attitude. Business partners and colleagues treat each other politely and with respect in everything—from business correspondence to negotiations. It's customary to maintain professionalism without getting personal. It’s important not to disrupt others' comfort, for example, by not raising your voice during negotiations or distracting others from their work.

Handshake — an essential form of communication, exchanged regardless of position or status.

Integrity and Honesty. German business is built on mutual trust; there’s no fear that invoices won’t be paid without prepayment. Documents are handled very carefully, with all processes and regulations followed strictly, without attempts to bypass any stages or procedures.

Fairness. Working conditions and wage levels in Germany are among the highest in Europe. Work relationships are based on mutual respect and equality.

Seriousness, Meticulousness, Thriftiness. Germans are responsible people who take their obligations seriously, strive to stick to plans, avoid creating obstacles for others, respect private property, and rarely borrow money.

Hard Work. German citizens are known for their diligent approach to their duties.

Commitment to Tradition. Germans do not favor changes to the established order and dislike when someone tries to disrupt it.

Advantages of Entrepreneurship in Germany

Registering a company in Germany provides the entrepreneur with the status of a legal entity and the associated benefits:

• The possibility of creating joint ventures in Germany, as well as investing in joint foreign enterprises with partners
• The ability to register your own trademark in Germany and transfer the rights to use it to a joint company or other foreign firms
  
• Access to loans for equipment and other needs
  
• VAT refund on goods and services supplied for export
  
• Insurance at attractive rates and terms similar to those offered to German companies
  

A company registered in Germany will enjoy a high level of trust in the European business environment. This is because German business is considered a benchmark of reliability, and German products are synonymous with quality. As a result, it is easier for German firms to establish business relationships with partners from other countries.

Moreover, at the official invitation of an entrepreneur from Germany, their foreign business partners can apply for short-term and long-term visas for up to three years.

How to Start Your Own Business in Germany

Preparation

It is advisable to lay the groundwork for your business even before relocating:

• Identify a niche — study the sectors and choose a promising option, taking into account your capabilities
• Thoroughly research the chosen field — understand how the business operates, what regulations and standards exist, and how to launch it
  
• Plan the location — decide in which city and region you will launch your business
  
• Determine the legal structure — decide how the business will be legally structured, depending on the type of activity and the amount of share capital
  
• Prepare a business plan with market research and financial forecasts — this will be needed not only for the launch but also for obtaining a visa and registering the company
  
• Develop a marketing strategy, set goals, and make plans
  

Practical Steps

When planning to start your own business in Germany, it’s essential to understand the sequence of practical actions. An entrepreneur will need to go through the following stages:

• Form the share capital — Participants contribute the necessary funds for the chosen business structure, which are deposited into an account at a German bank.
• Choose a German legal address — You can seek assistance from legal professionals for this.
  
• Prepare the documentation — This includes the contract, list of founders, articles of association, distribution of shares. Individual entrepreneurs will also need a diploma to prove their qualifications, a medical certificate, and a certificate of no criminal record. A more detailed list can be obtained from the Chamber of Commerce and Industry.
  
• Open a bank account in Germany.
  
• Register the company with the German Trade Office, obtain licenses, permits, a tax number, VAT registration, and complete all the stages required by German law to legalize the company.
  
• Seek support if needed — For example, apply for government programs that assist young companies or seek advice and support from an accelerator for startups, including technical and financial assistance.
  
• Apply for a business visa — Submit the necessary documents to the German consulate.
  
• Start the company — Rent and equip an office, hire staff, etc.

It’s also worth exploring funding opportunities, such as investments, grants for startups and innovative companies, and business loans:

• Innovation funds support businesses through government-backed programs.
• Accelerators and incubators** provide mentoring support for startups and sometimes financing, in some cases in exchange for equity in the business.
  

All the listed stages will be discussed in more detail further on.

Bureaucratic procedures can cause difficulties, especially if the entrepreneur is registering a company for the first time. If challenges arise during the registration process, it’s best to seek assistance from lawyers specializing in business operations. They can save you stress, time, and money.

To start a business in Germany, thorough preparation and the completion of numerous documents are required.

Choosing a Niche

This is the very first thing to decide before launching a business. It’s great if you have a ready-made model and concept. But if not, you can choose from one of the promising and popular niches:

• Fast food
• Restaurants, cafes
  
• Hair salons, barber shops
  
• Hotel business
  
• Sports and wellness services
  
• Beauty industry
  
• Commercial real estate for rental business
  
• Various handmade products
  
• Eco-friendly products
  

Among larger sectors, popular fields include pharmaceuticals, medicine, and IT.

For freelancers and self-employed individuals, the following occupations are in demand:

• Food delivery
• Nanny or caregiver services, as well as housekeeping
  
• Pet care services
  
• Car repair
  
• Construction, renovation
  

To successfully run a business in Germany and beyond, you need to:

• Analyze the market and competitors
• Utilize modern information technology
  
• Use online trading
  
• Stand out among competitors
  

Choosing the Legal Structure for Your Business

After obtaining a visa, it's time to finalize the choice of legal structure — the optimal form for conducting business activities specific to your business.

In Germany, there are different legal forms of business entities. Regardless of which one you choose, there are important steps that must be completed:

• Prepare the articles of association and budget information
• Develop a detailed business plan
  

If you plan to start a business from scratch, you can consider the following popular forms:

GmbH — similar to a limited liability company. This option offers entrepreneurs favorable conditions:

• To open a company, only one shareholder is required, although there can be several.
• A relatively small share capital — starting from 25,000 EUR, half of which must be deposited in a German bank account.
  

Another common option, if finances are limited, is Mini-GmbH (UG). The main difference from a GmbH is that there is no requirement to confirm the share capital of 25,000 EUR. You can start the business immediately but with the condition that you set aside 1/4 of your profits until this amount is accumulated.

If the entrepreneur already has an established business in their home country and wants to scale up by opening a branch in Germany, the "branch" option might be suitable. In this case, you can choose whether to subordinate the branch to the parent company, which will handle all major decisions, or operate independently. This option also allows for joining a large company while maintaining more independent management of your branch.

Other German business forms:

• GmbH & Co
• Sole Proprietorship (Einzelunternehmen) — a commercial business form distinct from freelancing
  
• OHG — a partnership that requires at least two founders
  
• KG — a limited partnership
  
• AG — a public limited company with a minimum capital of 50,000 EUR, requiring at least one participant
  
• GbR — a civil law partnership without initial capital requirements
  

Freelancers and Self-Employed Individuals

The difference between freelancers and self-employed individuals in Germany is that freelancers provide services without involving external resources, such as a tutor. The self-employed, however, use the services of other people or companies in their activities, such as for goods delivery. It's important to clearly define these terms, as they will impact your tax obligations.

Freiberufler

This is the system that regulates the work of freelancers and self-employed individuals. The list of professions is outlined in the Income Tax Act. For example, freelancers can include certified doctors, lawyers, economists, engineers, journalists, teachers, artists, and more.

Freelancers are not required to register with the Chamber of Commerce and Industry or pay the Gewerbesteuer (business tax). Additionally, they can maintain simplified bookkeeping. To transition to freelancing, a professional must document their qualifications. In some cases, membership in relevant associations is required.

Sole Proprietorship

Sole proprietors in Germany are required to pay income tax, VAT, and Gewerbesteuer. Regardless of income level, full financial reporting is mandatory, including income, expenses, and balance sheets. This can be done independently using software or by hiring specialists.

Records, including accounts, certificates, and other important documents, must be retained for ten years from the date of receipt. If the business needs to be closed, the process is very quick: the owner contacts the German Trade Office (Gewerbeamt) and fills out a form. The entire process takes just a few minutes.

Obtaining a Business Visa

Residents of all countries outside the European Union must obtain a special business visa to start a business in Germany.

Typically, foreign entrepreneurs first apply for other types of visas that are easier to obtain for entry into the country. For example, you can enter with a type D visa, which allows you to stay in Germany for up to 90 days within six months. After that, it can be converted into a business visa. However, this is not easy and requires strong grounds, such as:

• Demonstrating sufficient financial resources to start a company
• Providing information about the products and services you plan to offer, showing that they will benefit the local population
  
• Proving that the company will be beneficial to society as a whole, for example, by creating new jobs
  

If an entrepreneur decides to apply for a business visa while still in their home country, they must submit the following documents to the German consulate:

• Two copies of the application form
• Three recent photographs (3.5x4.5 cm)
  
• Originals and copies of national and international passports, showing the applicant's details
  
• A resume
  
• Language proficiency certificates, if available
  
• If the applicant is 45 years old or older, they must provide information about their financial security for retirement, such as details of a pension plan, property ownership, etc.
  
• Health insurance
  

All documents must be translated into German before submission.

In addition to the standard documents, you need to provide business-related information:

• For legal entities: a list of founders, the minutes and articles of association, an extract from the commercial register, and a business plan. All documents must be translated into German.
• For freelancers: a description of the planned activity, financial information, and documents proving qualifications—originals and copies.
  

After submitting the documents, you will need to wait for notification of the decision and the readiness of the visa.

Once the visa is issued, the company must be registered with the German authorities, and all necessary permits and licenses must be obtained.

Company Registration in Germany

After selecting the legal form for your business, the next step is to register it. This can be done online or at the local Gewerbeamt office.

Entrepreneurial activity in Germany is regulated by two main interconnected laws:

1. HGB (Handelsgesetzbuch)** — The Commercial Code, which regulates commercial activities.
2. Steuerrecht — Tax Law, which covers all aspects related to taxation.
   

Understanding all the legal nuances can be facilitated with the help of the regional Chamber of Commerce and Industry (IHK).

Step-by-Step Guide to Registering a Company

• Notarize Documents: The business owner must personally notarize the documents at a notary office in the region where they plan to operate. If the business form is GmbH or AG, the presence of the owner and one of the participants is sufficient. Power of attorney can be arranged for the other founders.
• Open a Bank Account: Provide identification and the company’s articles of association. Owners of GmbH, UG, AG, and KG must deposit the capital into the account. Bankers will check the client’s credit history.
  
• Register with the Chamber of Commerce and Industry (IHK) or the Chamber of Crafts (HWK).
  
• Enter Information into the Commercial Register:** After verification, the entrepreneur receives an individual number consisting of letters and numbers.
  
• Register with the Tax Office:** Fill out a form to obtain a tax number.
  
• Register with the Industry Trade Insurance Association.
  
• Obtain an Employer Identification Number from the Federal Employment Agency** if the company employs workers.
  

The business owner can complete all company registration procedures personally, or, if they cannot manage on their own, they can:

• Find a partner in Germany for joint business ownership who can handle all the formalities.
• Consult a specialized firm that provides advisory and practical assistance in business registration.
  

If all documents are correctly prepared, the registration process itself typically takes around four business days. The business owner will need to be present in Germany for a couple of days to visit the notary and bank.

Further Business Development

After the company is up and running, attention should be paid to the following areas:

• Personnel: If the company employs workers, German labor law strictly regulates hiring. It is necessary to sign an employment contract with each employee and withhold contributions for social insurance. The wage must not be below the national minimum. Vacation schedules must be strictly observed. A dismissed employee can challenge the decision in court.
• Marketing and Promotion Strategy
  
• Data and Intellectual Property Protection
  
• Obtaining all necessary licenses and permits**, such as for medical services, the restaurant business, trade, etc.
  

Can You Obtain a Residence Permit While Running a Business in Germany?

Yes, entrepreneurs in Germany can apply for a residence permit. You will need to contact the local immigration office at the address where the business is registered. In the future, the entrepreneur can apply for permanent residency and citizenship, provided all necessary conditions are met.

• The residence permit is called Aufenthaltserlaubnis. Initially, the entrepreneur receives a residence permit for three years.
• After this period, and if the business is successful, the entrepreneur can apply for an indefinite residence permit.
  
• Four years later, they can apply for citizenship (Bürgerschaft).
  

It's important to note that the entrepreneur’s family members will also be eligible for residence permits and citizenship. They will then be able to enjoy social benefits like all German citizens:

• Free education in schools, gymnasiums, and universities
• Access to healthcare with insurance
  
• Eligibility for benefits and allowances
  
• Access to preferential loans
  
• The ability to open bank accounts in Germany
  
• The right to buy securities
  
• Eligibility for a pension, provided contributions are made to a state or private insurance company for at least five years.
  

Taxes

Taxes on entrepreneurial activities in Germany are not low, but there are ways to influence their amount. The most important factor is choosing the right legal structure for your business.

One of the most common forms for new companies is the GmbH. Additionally, those who want to avoid high taxation often register as freelancers or self-employed individuals.

What Taxes Apply to Businesses in Germany?

• Income Tax
• VAT (Value Added Tax)
  
• Trade Tax
  
• Capital Gains Tax
  
• Corporate Tax
  
• Property Tax
  
• Payroll Tax
  

Support for Small and Medium-Sized Enterprises in Germany

Germany offers attractive conditions for small businesses. The government supports them through federal programs. The country is well-suited for those starting a business from scratch without large investments, such as startup owners.

Examples of Programs:

• ERP Capital for Startups — an opportunity to obtain a loan of up to 50,000 EUR at favorable rates.
• ERP-Mezzanine — companies that have been operating in the German market for up to two years and are developing an innovative product can receive a loan of up to 5,000,000 EUR.
  
• ERP-Digitalization and Innovation Credit — for the IT and digital technology sectors.
  

If a businessperson encounters difficulties at the start, they can seek help from accelerator companies, which provide not only informational and practical support but sometimes financial support as well.

Major German Accelerators:

• Axel Springer Plug & Play
• Merck Accelerator
  
• Tech Founders
  
• German Accelerator
  

Investing in an Established Business

Foreigners can launch their own company or become part of another business through investments. Germany has a favorable climate for investors, thanks to its economic stability. It is important to note that investment funds must be legalized.

The Most Profitable Areas for Investment:

• Stocks and securities
• Investment funds
  
• Residential and commercial real estate
  

Conclusion

Germany is a favorable European country for business development. The German government supports not only large businesses but also small and medium-sized enterprises, startups, and innovations. Therefore, even a novice entrepreneur with a promising direction will find it comfortable here.

There are many different niches for business in the country. You can open a company with employees or provide services and produce goods independently as a freelancer or self-employed individual.

Of course, handling all the paperwork is not easy — it’s a significant list that requires a thorough approach. However, all efforts will be rewarded with a successful, growing business in an economically stable and prosperous country.