Introduction
This guide provides a step-by-step approach to setting up a sole proprietorship (Einzelunternehmen) in Germany, specifically tailored for expats living in the country. It covers all essential aspects, from legal requirements to tax considerations.
1. Check Requirements
Residence Status
Before starting a business, ensure your residence status allows for self-employment. If you are from a non-EU country, you may need a specific visa or residence permit for self-employment.
Language Skills
While it is possible to start a business without knowing German, it significantly eases the process if you can speak the language. Many official documents and administrative processes are in German.
2. Preparation
Register Your Address (Anmeldung)
In Germany, you must register your address each time you move. This registration is necessary to obtain a tax ID (Steueridentifikationsnummer), which is required to register your business.
Steps:
- Schedule an appointment at the Bürgeramt.
- Fill out the registration form.
- Bring your ID/passport and rental agreement.
- Receive the registration confirmation (Meldebescheinigung).
Open a Bank Account
You need a bank account to handle payments and pay taxes. It’s recommended to open a separate business account.
Recommended Banks for Expats:
- N26
- DKB
- Online banks like Kontist or Holvi
3. Business Registration
Freelancer (Freiberufler) or Trade (Gewerbe)?
There are two main categories of self-employment: freelancers (Freiberufler) and tradespeople (Gewerbetreibende).
– Freelancers (Freiberufler): Professions like doctors, lawyers, engineers, artists, journalists.
– Trade (Gewerbe): All other types of self-employment.
Trade Registration (Gewerbeanmeldung)
If you operate a trade (Gewerbe), you need to register and obtain a trade license (Gewerbeschein).
Steps:
- Fill out the trade registration form.
- Bring your ID/passport.
- Pay the registration fee (approx. €20-40).
- Receive the trade registration confirmation.
Register with the Finanzamt
Regardless of whether you are a freelancer (Freiberufler) or a tradesperson (Gewerbetreibender), you must register your business with the Finanzamt.
Steps:
- Complete the tax registration form (Fragebogen zur steuerlichen Erfassung) online or in paper form.
- Provide your tax ID.
- Apply for a VAT number (if necessary).
4. Insurance and Finances
Health Insurance
Self-employed individuals must pay for their health insurance. There are public and private options.
- Public Health Insurance: Contributions are based on your income.
- Private Health Insurance: Often cheaper, depending on your health and age.
Additional Insurance
- Professional Liability Insurance: Protects against damages caused by your professional activities.
- Legal Insurance: Covers work-related legal cases. Additional features possible: invoice, dunning process, creation of legally compliant documents
- Disability Insurance: Secures against long-term inability to work.
5. Taxes and Accounting
Types of Taxes
As a self-employed individual, you need to pay various taxes:
- Income Tax (Einkommensteuer)
- Value Added Tax (VAT or Umsatzsteuer)
- Trade Tax (Gewerbesteuer, only for tradespeople)
Small Business Regulation (Kleinunternehmerregelung)
If your turnover is expected to be below 22.000 € in the first year, you can opt for the small business regulation, which exempts you from charging VAT.
Accounting
It is advisable to hire a tax advisor to assist with bookkeeping and tax declarations.
You find our partners here: https://www.expatcompassgermany.de/our-partners
6. Business Operations
Monitor Your Business Account
Regularly check your business accounts and ensure all transactions are clearly documented.
Marketing and Client Acquisition
Use online platforms, networking events, and social media to market your services or products.
Legal Requirements
Ensure your business complies with all legal requirements, such as having an imprint (Impressum) on your website, data protection policies, and correct invoicing.
7. Support and Resources
Funding Programs
There are various state programs and grants available to help you start your business, such as the start-up grant (Gründungszuschuss) and training vouchers (Bildungsgutschein).
Get in touch with us if you want to check which funding programs are suitable for you. https://www.expatcompassgermany.de/contakt
Networks and Resources
Utilize networks like the IHK (Industrie- und Handelskammer), business angels, and local start-up centers for advice and support.
Summary
Starting a business in Germany requires careful planning and organization, especially for expats. With the right knowledge and resources, you can successfully establish and run your own business. Good luck on your journey to self-employment!