Germany is the absolute paradise for businesses in many ways. If you are thinking about starting a business, it is probably one of the best countries you can pick. In Germany, there are about 4 million of small and medium companies.
If someone talks about Mittelstand there, you know that he or she is talking about those businesses. First off, having a German address is one of the main requirements.
It provides you with a registration certificate and a tax ID. If you have these, you can continue by registering your new business.
Start by Researching the Market
Your future business is going to be built on something you have expertise in. Once you have figured that out, you need to research the market. Find a target audience for the product you have to offer. Whether you want to provide a product or service, online or locally, take a look at your competitors.
You can come up with a thorough business plan just by collecting information on what your competitors are doing. Writing down your plan is going to help you find investors and dealing with banks.
Picking the Right Business Entity
There are various business entities to choose from in Germany. For those who want to work alone, becoming self-employed is the straightforward option. For those who not, here are the best options:
Partnership
There are different partnerships that are ideal for small businesses. A partnership is linked with the personal funds of its partners. Thus, legal cases can take away all of their money without limits. In such cases, you can be forced to sell your possessions.
The great thing about partnerships, however, is that you can start with zero capital investment.
Limited Liability Company
This is the go-to business entity for startups in Germany. An LLC requires shareholders to invest at least 25,000 Euros in capital. This is the so-called GmbH or Gesellschaft mit beschränkter Haftung. There is another option for those who don’t have the amount to invest, which is called the mini-GmbH.
It allows you to start with 1 Euros and pay the 25,000 EUR in rates annually. The rate will be 25% of your profits. With a Limited Liability Company, your personal funds are completely protected.
How Your Business Should be Named?
Of course, it has to be a unique name that is not listed in the commercial register in Germany. It also has to include your first and last name, if you are the owner. The first step is to check the commercial register so that you can come up with a name that is available. For registered merchants, the main rule is just to pick a name that is descriptive of their company.
An Essential Document for Small Companies
This document is called articles of association (Gesellschaftsvertag) and it thoroughly describes your company. It contains information about shareholders, business location, founding members, profit beneficiaries and a short description of your business.
In order to register this document and pay the notary, you need to set aside a few hundred Euros.
Gewerbeamt and Finanzamt
The Gewerbeamt is the trade office in German and it is where you can get a trade license. The permits you should get for this will depend on the type of business you are about to run.
The following documents are required for everyone:
- Passport or ID for registration
- Address registration
- Required business permits
- Registration form for your business
- Articles of association
- Registration costs
The Finanzamt, on the other hand, is where you get a VAT number and tax ID. The Finanzamt will be your last step and it might require additional documents that they will inform you about.
