Starting a Business in Germany as a Foreigner | US Guide

Thinking about starting a business in Germany? The country’s robust economy and central location within Europe make it an attractive destination. However, navigating the legal and administrative landscape can be daunting for those unfamiliar with the German system.

There are specific requirements to consider, such as obtaining the right visa, choosing the appropriate structure for your business, and understanding tax implications.

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How to Start a Business in Germany as a Foreigner: First Steps

Germany, a powerhouse in the European economy, offers a wealth of opportunities for foreign entrepreneurs. However, navigating the legal and bureaucratic landscape can be a daunting task.

The World Bank's Ease of Doing Business index ranks Germany 125th out of 190 countries for the difficulty of starting a business—underscoring the need for careful consideration and expert guidance.¹

Before getting into the process and covering the initial steps let’s figure out whether you can even start a business in Germany as a foreigner.

Can I Start a Business in Germany as a Foreigner?

Yes, you can start a business in Germany. The country accepts foreign entrepreneurs, but the process can vary depending on your nationality and business model.

For foreigners, including individuals from other countries and self-employed international freelancers, obtaining a residence permit is the first step, which involves demonstrating your business's viability and potential contribution to the German economy. Once your residence permit is approved, you’re ready to tackle the other steps of business registration.

What Steps will be involved in starting a business in Germany for foreigners?

Getting your business in Germany can be done in a few steps. Let’s look at the 5-step process for starting your business:

1. Secure your residence permit: Non-EU citizens will need to apply for a self-employment residence permit.²
2. Decide on your business structure: Each German legal structure has distinct legal, tax, and operational implications. Two of the most common business types for foreigners are sole proprietorship and limited liability company (LLC).
3. Register your business: Depending on your chosen structure, you'll register your business with either the local trade office or the commercial register.
4. Fulfill tax and legal obligations: Germany does have a complex tax system. You may want to consult with a tax advisor to ensure compliance.
5. Build your business plan: A comprehensive business plan is your roadmap to success. It outlines your vision, target market, financial projections, and marketing strategies.

Your business and tax registration process will depend on your category. For example, freelancers will primarily register with the tax office, while self-employed entrepreneurs will register with the local trade office and obtain a trade license (Gewerbeschein).³

How Much Does it Cost to Start a Business in Germany?

The cost of registering a company in Germany varies depending on the chosen legal structure. It can range from €20 to €50 for a sole proprietorship to €2,000 to €3,000 for a limited liability company (LLC). These costs include registration fees, notary fees, and potential legal and consulting fees.

Here are some key costs to consider based on your business:

• Sole Proprietorship (Einzelunternehmen): The most cost-effective option, with a registration fee of around €20 and minimal additional expenses.
• Partnership (Personengesellschaft): Similar to sole proprietorship, with registration fees ranging from €20 to €50.
• Limited Liability Company (GmbH): More complex with a registration fee of around €400—and requires a minimum share capital of €25,000.
• Entrepreneurial Company (UG): A simpler version of GmbH with a lower minimum share capital (€1).
• Stock Corporation (AG): The most expensive structure with registration fees ranging from €500 to €700 and a minimum share capital of €50,000.

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Legal Requirements for Starting a Business in Germany as a Foreigner

Understanding Germany’s legal framework is essential for a smooth and successful venture. Some of the key documents and legal requirements include:

• HRB Certificate: A certificate that serves as proof of incorporation and good standing, detailing your company name, registration number, address, activities, and more.⁴
• Memorandum and Articles of Association: Documents that outline the company's purpose, structure, and rules governing its operation.⁵
• Company Search Report: A comprehensive report with company details, registration history, legal status, activities, share capital, and shareholder information.

Beyond these requirements, your business will have additional legal requirements depending on the business structure you choose.

Choose a Legal Structure in Germany as a Foreigner

Germany offers various legal structures for businesses, each with its advantages and requirements. As a foreign entrepreneur, understanding these structures is crucial for making an informed decision that aligns with your business goals and financial capabilities.

Germany offers various legal structures for businesses, each with its advantages and requirements. The most common types include:⁶

Sole Proprietorship (Einzelunternehmen)

• Best for: Freelancers, independent contractors and small businesses
• Pros: Simplest and most cost-effective structure
• Cons: Unlimited personal liability

Partnership (Personengesellschaft)

• Best for: Businesses with multiple owners
• Pros: Offers different liability structures
• Cons: More structure and costly to manage

Limited liability Company (GmbH)

• Best for: Small and medium-sized enterprises (SMEs)
• Pros: Provides formal structure and limited liability
• Cons: Comes with capital requirements

Entrepreneurial Company (UG)

• Best for: Startups
• Pros: Simplified version of GmbH with lower capital requirements
• Cons: Still has specific regulations

Stock Corporation (AG)

• Best for: Larger businesses
• Pros: Good for raising capital
• Cons: Complex structure

Note the actual registration process varies based on the chosen structure.

Obtain Licenses and Permits for Your Business

Beyond the basic registrations, various business licenses and permits may be required depending on your specific industry. These could include:

• Health and safety certificates: Especially relevant for businesses in food service, manufacturing, or healthcare.
• Environmental permits: Necessary for businesses with potential environmental impact.
• Trade-specific licenses: These vary greatly depending on your industry.

For example, a restaurant may need a food handling license, while a construction company may require building permits.

Can I do Business in Germany Without a Residence Permit?

No, if you're a non-EU citizen, you'll need a residence permit for self-employment. It's required for freelancers and entrepreneurs looking to do business in Germany.

The requirements for obtaining this permit include:²

• Valid passport and photo
• Resume or curriculum vitae and health insurance
• Proof of rental lease or home ownership
• Detailed business plan demonstrating a positive economic impact
• Application for registration in the commercial register or trade registration
• Proof your business has sufficient funding
• Market analysis showing demand for your product or service

Initial permits are usually granted for a set period, with the possibility of extension or obtaining a settlement permit if the business is successful.

How to Get a Business Visa in Germany

As a foreigner looking to start a business in Germany, you might need a visa. The business visa in Germany is known as the Schengen visa. This visa is your initial entry ticket, allowing a 90-day stay for business planning and setup.

However, you might not need a business visa to set your business up. Residents of over 60 different countries, including the US, are permitted to enter Germany visa-free and remain there for 90 days.⁷

If you do need to get a Schengen visa, you’ll need various documents to apply, including:

• Visa application form
• Two photographs
• Valid passport
• Travel visa insurance
• Flight itinerary
• Proof of stay accommodations

Visa fees vary depending on your location and visa type, but the Schengen costs €90 and takes 10-15 days to get.

Tips for Opening a Business Account in Germany as a Foreigner

Opening a business bank account in Germany is a must for foreigners. It facilitates transactions, simplifies tax management and adds credibility to your venture. However, the process can be complex for non-residents due to additional documentation and scrutiny.

Each structure has specific requirements for opening a bank account. For example, a GmbH requires notarized company formation documents, while a sole proprietorship might need proof of freelance registration.

Here are some essential tips for opening a business account as a foreigner:

• Get your documentation: Gather your passport, residence permit, business registration documents, and proof of address. Some banks may also request a business plan.
• Understand the fees: Business bank accounts in Germany often come with monthly fees and transaction charges. Some banks might require a minimum deposit to open an account.
• Prepare to answer questions: Most banks require you to schedule an appointment to open a business account. Then get ready to answer questions about your business, source of funds, and anticipated business activities.

Some banks specialize in serving international clients and offer English-speaking support. Research various banks and compare their fees, services, and online banking features.

Discover Wise Business: The Easy Business Account for Foreign Business Owners

Starting a business in Germany comes with unique challenges, especially when it comes to finances. As a foreign business owner, you'll need a solution for managing multiple currencies with minimal stress.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 160+ countries.

Wise Business offers a versatile and cost-effective solution to simplify your financial operations in Germany.

• Multi-currency support: Hold and manage multiple currencies in your Wise Business account, making international transactions a breeze.
• Easy invoicing: Create and send invoices in different currencies, making it easier to get paid by clients abroad.
• Fast, low-cost international transfers: Send and receive money internationally with no hidden fees. This is essential for businesses operating in multiple countries.
• Transparent fee structure: Wise has no hidden fees or surprises. You'll always know exactly what you're paying for.

With Wise Business, you can focus on growing your business in Germany from the get go, without the burden of unexpected hidden fees.

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Getting a German business account can take time and require in-person appointments, but with Wise Business you can register online, and get Euro account details with ease.

Obtaining the HRB Certificate for Your Business

The HRB Certificate, also known as a certificate of good standing, confirms your company's legal existence and good standing within the German business registry. It details a company's name, registration number, registered office, business address, branches, activities, directors, and issued share capital.

You can get an HRB Certificate from the German Handelsregistereintragung. It takes roughly 2-3 days to get and costs £300. You can also get an HRB from the court with an Apostille, which takes 15-20 days and costs £500.⁴

Starting a business in Germany as a foreigner requires careful planning and adherence to legal and administrative procedures.

Helpful Links for Starting a Business in Germany as a Foreigner

Here are some useful resources for further reading before embarking on your new business in Germany:

• Make it in Germany: The official German government portal for information about visas, residence permits, and starting a business.
• Federal Ministry for Economic Affairs and Climate Action: Offers information about the legal framework for doing business in Germany, including regulations and procedures.
• Existenzgruender: Offers information and advice for entrepreneurs, including legal and financial matters.
• Chambers of Industry and Commerce (IHK): These are local organizations that provide information and support for businesses, including starting a business, finding suitable premises, and obtaining permits and licenses.
• Germany Trade & Invest (GTAI): Provides information and support for foreign companies looking to do business in Germany, including market research and advice on legal and regulatory matters.

🔍 Looking to hire employees in Germany? Read the guide to employee benefits in Germany next.

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Sources:

1. World Bank Group - Ease of Doing Business rankings
2. Service Berlin - Residence permit for the purpose of self-employment
3. Unternehmensregister - Company Register
4. SystemDay - Germany Certificate of Good Standing – HRB Certificate
5. Heidelberg Druckmaschinen - Memorandum and Articles of Association
6. Tetra Consultants - Introduction to the 9 Different Germany Legal Entity Types
7. German Missions in the United States - Schengen visa

All sources checked August 2024.