Starting a Business in Germany: What You need to do? Germany is Europe’s largest economy and the fourth largest globally, thanks to its research and innovation capabilities and its capacity to attract foreign direct investment. Over 45,000 foreign businesses conduct business in the country, employing over three million people, with the export sector accounting for more than one-fourth of all jobs.
Germany provides exceptional economic conditions for multinational enterprises and an excellent investment climate. Its economy is now significantly more competitive than previously due to structural reforms and modifications to the corporation tax rate. First-rate infrastructure, a modern financial system and a sizable consumer market attract investment. However, businesses should be aware of the numerous challenges inherent in doing business in Germany and the benefits of bringing in local expertise to help them navigate legal, tax and cultural barriers.
Table of Contents
Advantages to do Business in Germany
There are numerous advantages to doing business in Germany. As the largest market in Europe, the country attracts investors from all over the world. Germany is a technological innovator in many fields, with a highly skilled workforce and a well-developed infrastructure.
Small and medium-sized businesses, in particular, profit from a well-organized business environment and a stable legal climate.
In Germany, entrepreneurs can count on a stable political and economic environment. You are also triple protected against idea hacking: valuable assets like inventions, logos and concepts are all well-protected in Germany under intellectual property, copyright, patent and trademark laws.
How to start business in Germany?
When you start your business, there is a lot of paperwork to fill, but there is information online to help you.
The first thing to do is validate the business itself and check that there is actually a market for it in Germany. There are plenty of online forums and business advisory services that can help you with these questions.
If you don’t speak German, everything is much harder. All the documents are in German.
Different types of Company
Next, you need to choose a legal form for your company. There are several types of company in Germany, and the establishment procedures are straightforward and simple, with well-defined steps.
1): Public trading company
Incorporation as a public trading company (Offene Handelsgesellschaft – OHG) is a particularly attractive option for wholesalers. To do this, your business needs to establish a formal partnership agreement in the commercial register. However, you don’t need to bring in minimum capital to secure this business form, and shareholders won’t be liable for any debt or bankruptcy with their private assets.
2): Limited partnership
A limited partnership (Kommanditgesellschaft – KG) requires capital, as well as a formal partnership agreement and registration as a public trading company in the German commercial register. The partners’ contract determines the profit share of each partner, and the owner must submit a profit and loss report to the local tax office each year. In the event of bankruptcy or debt, the owner is liable, but the limited partners’ liability extends only as far as their investment.
3): Limited liability company
The limited liability company (Gesellschaft mit beschränkter Haftung – GmbH) is probably the best-known German business form. Unlike other options on this list, a GmbH registration in Germany is regarded as an entity that is financially separate from the people who run the business. All profits are funnelled straight back into the business, as soon as the required taxes have been paid. 25.000 euros of capital is required to set up a GmbH, half of which must be paid before registration.
4): Empresa Individual
It is the simplest form of commercial or business activity in Germany where no minimum capital is required. With this type of business, the owner has full responsibility for the business. That is, your personal assets are not separated from those of company, which are at risk in the event of any financial difficulties that the company can find. Freelancers find themselves in this type of business.
After Selection of Company
Once you have decided which type of company is right for you, you need to follow these steps:
Business with a unique name
You need to come up with a totally unique name for your fledgling business. To make sure you don’t accidentally choose a business name that already exists in Germany, you can check the commercial register (Handelsregister) to ensure your proposed company name is available.
Submit a business plan
German law requires you to declare an official purpose (Unternehmensgegenstand) for your business when registering. This includes your business’s purpose and the activities you engage in. It is legally binding, so you should carefully consider your company’s objectives and activities before submitting an official statement. You should also include your business purpose in the articles of association.
How to register a business in Germany?
The business registration process in Germany is notoriously complicated. It comprises these essential steps:
An appointment with a Notary
The first step is to gather your shareholders and visit a notary to get your business registered. Depending on your business type, you might need to register with both the commercial register (Handelsregister) and with the German trade office (Gewerbeamt).
Be sure to bring proper identification and all of the necessary documents, such as your articles of association, a list of your shareholders, and your official purpose document. Your notary can advise you if you are not sure what documents you need.
If the notary can pay the fees to register your company on your behalf, this could save you time. Otherwise, you need to wait to receive an invoice in the post. You will not receive your business licence until you pay it.
Open a German bank account
Your company needs a German bank account for business, salary and tax transactions. This allows you to start paying taxes officially. As soon as you have successfully opened a bank account, you can pay your share capital (Stammkapital) in cash or via bank transfer.
Register your business with the tax office
Once you have all the required documents and licences and completed the necessary preliminary steps, you can register your business with the tax authorities in Germany. The tax office may have been automatically notified of your business registration, and sent the necessary forms to you to complete. Otherwise, you can pick up a copy from your local tax office.
The registration document, known as the Fragenbogen zur steuerlichen Erfassung, is quite long and complex, especially if you are not a native German speaker. Therefore, to save time and ensure accuracy, many companies enlist the help of a tax advisor at this stage – if they haven’t already!
Get your tax numbers
Once you’ve finished registering your business, your company will receive a tax identification number from the Finanzamt. This is the number you will need for all of your local tax transactions.
And that’s it – you’re registered and can begin business operations.
Write your questions about ” Starting a Business in Germany: What You need to do? ” in comment box section!
So, Don’t forget to subscribe our blog by entering your email. Because, It really motivates us.