Starting a company in Germany entails several important steps, with the initial one being the registration of your business. Once you have prepared your business plan, outlining crucial aspects such as your idea, potential opportunities, associated risks, and available financing options, you are ready for the first official move. This entails visiting the Gewerbeamt (Trade Licensing Office), to apply for a business license, commonly referred to as the Gewerbeschein in Germany. To guide you through the registration process and ensure a smooth journey, here is a comprehensive breakdown of the essential steps and the necessary documents you will need to bring along. By following these guidelines, you can pave the way for successfully establishing your company in Germany.
Who has to register their business?
Anyone who is commercially active is considered a trader in Germany, and so must register themselves as a business. An exception to this rule is a Freiberufler (freelancer), plus a few other exemptions which will be explained below.
Obligation for businesses
In Germany, engaging in entrepreneurial activities with the intention of making a consistent profit solely falls under the definition of trade. It is crucial for founders to bear in mind that they must register their businesses with the Gewerbeamt prior to commencing any trading operations. This requirement also extends to any additional income generated on the side, as tax regulations do not differentiate between full-time and part-time business activities. The Gewerbeordnung, or Trade Regulation Act, explicitly highlights this aspect. To put it simply, it is essential to complete the business registration process before initiating any trading endeavors. While the Gewerbeamt is generally accommodating, founders should aim to approach them promptly, especially if they have recently commenced business activities. Failing to register on time or neglecting to notify the relevant authorities altogether would be a violation of the Trade Regulation Act, potentially resulting in a fine of €1,000 as stipulated in Section 146 of the Gewerbeordnung.
Occupations exempted from the obligations
Certain professionals and occupations in Germany are exempt from the obligation to register their businesses as trades. Freelancers, scientists, and those self-employed in agriculture and forestry are among those exempted. The specific activities considered freelance are outlined in Section 18 EStG. This category includes various professions such as doctors, dentists, alternative practitioners, physiotherapists, veterinarians, lawyers, notaries, patent attorneys, architects, auditors, tax consultants, consulting economists, business economists, sworn accountants, tax agents, journalists, photojournalists (photographers), interpreters, and translators. However, it is ultimately the responsibility of the Finanzamt, or tax office, to determine whether a particular profession meets the requirements for freelancing. If you are uncertain about the classification of your own activities, it is important to consult with your local Finanzamt. Proper classification is essential as it determines whether you are liable to pay the Gewerbesteuer, or trade tax.
Where should you register your business?
Register your company at the Gewerbeamt in your district. This is usually possible both in person and online. Online registration is on the rise in many cities, sparing startups the trip to the Gewerbeamt. Your options for registering online or by mail depending on the municipality. Get thoroughly informed about which documents you have to submit and how.
What are the necessary documents to register your company?
Registering your business requires filling out the company questionnaire. In the case of partnerships such as a Gesellschaft bürgerlichen Rechts (GbR), partnership company, Offene Handelsgesellschaft (OHG), Kommanditgesellschaft (KG), each managing partner fills out a separate form. Where corporations (Kapitalgesellschaften) are concerned, the managing director is the legal representative who completes the registration. Any other legal representatives are added onto corresponding supplementary sheets.
The Gewerbeamt requires the following documents:
- Identity card or passport
- In the case of power of attorney, a written power of attorney and the identity card or passport of the person granting the power of attorney
- Excerpt from the register of companies entered in the commercial, association or cooperative registers
It depends on the nature of your business, but the Gewerbeamt may also require a police clearance certificate, health certificate, master craftsperson’s certificate, or craftsperson’s card. Visit the responsible Industrie- und Handelskammer (Chamber of Industry and Commerce) or Handwerkskammer (Chamber of Crafts) for more information. Founders without German citizenship will also need a valid residence permit and confirmation of permission to carry out commercial activity.
Preparing for your business registration
Save time on registration with adequate preparation. If you’re prepared, you’ll likely be taking your business license with you straight from the registration office, or having it mailed to you within a few days. Check off these to-dos to ensure you’re prepared:
Choose the right legal form
Open a business account
Create articles of association
6 Simple Steps to Register Your Business in Germany
Step 1: Collect Information and Documents
Before starting the registration process, gather all the necessary information and documents. Learn about the registration process in your area and find out if you can register online. Also, figure out how to submit your documents (digitally, by mail, or in person).
Step 2: Fill in the Business Registration Questionnaire
Obtain the business registration questionnaire from your local registration office. It's a form that asks for essential information about your business. Take your time to complete it accurately. If you have any questions, don't hesitate to contact the registration office for help.
Step 3: Apply for a Tax Number for Your Business
Once you've filled out the questionnaire, the authorities will review it and assign you a tax number for your business. This number is important for all tax-related matters and invoicing. If your business involves cross-border trade, you'll also need a VAT number in addition to the tax number.
Step 4: Register with the Statutory Accident Insurance
It's mandatory to register with the appropriate employers' liability insurance association, known as Berufsgenossenschaft. Make sure to register with the one that applies to your profession. If it's unclear which one is relevant, the Verwaltungs-Berufsgenossenschaft (VBG) will assist you.
Step 5: Register with the Chamber of Industry and Commerce (IHK)
As a tradesperson, you need to become a member of the Chamber of Industry and Commerce (IHK). Once your registration information is forwarded to the IHK, you'll automatically become a member. Craftspersons should register with the Chamber of Crafts (HWK) that covers their specific craft.
Step 6: Register Your Company with the Employment Agency
If you plan to hire employees, you'll need a company number called the Betriebsnummer. You can obtain this number from the Employment Agency (Agentur für Arbeit). It identifies your company in Germany and is used for social insurance notifications.
What does it cost to register your business?
The price depends on the municipality and will fall somewhere between €10 and €65. Once paid, you will receive the authorization to operate your business in the next few days and can get to work.
What You Need to Know About the Gewerbesteuer?
If you have registered a business in Germany, you are considered a trader and are required to pay the Gewerbesteuer, a municipal tax. This tax is one of the main sources of income for local municipalities. Unlike other taxes, the Gewerbesteuer is paid directly to the local district rather than the tax office. The Gewerbeamt or Ordnungsamt, depending on your location, is the responsible authority for handling this tax.
Here's some good news: if your company is relatively young or small, you can benefit from a uniform tax allowance for Gewerbesteuer. Sole proprietorships and partnerships are entitled to a Gewerbesteuer allowance of €24,500 per year. This means that if your annual profit falls below this amount, you are covered by the allowance. If your profit exceeds this threshold, the allowance is deducted from the total profit, and you only pay the amount that exceeds the allowance. However, corporations are not eligible for this allowance, regardless of their profit amount.
Registering or Deregistering a Trade:
Once your business is registered, you must inform the Gewerbeamt of any changes that occur within your company. These changes include relocating your registered office within the municipality, opening additional branches, changes in ownership, alterations to the scope of your activities, and expanding your offerings. In such cases, you need to re-register your business using the appropriate form.
If you change the legal status of your company or move its headquarters to another municipality, you must first deregister your business and then re-register it with the new municipality. If you decide to shut down your business entirely, you need to proceed with the deregistration process.
