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Idea Explorer Set 2 Start a small business

Advice on how to Plan and Register Your Business in Germany

Tanni for Danceof Chaos

Hello DanceofChaos lover,

If you have read my previous two posts on this series “From Dream to Launch”, you know how the idea to open an online retail store for stationery came to my mind. You can always refresh your mind by reading them once again. So far I have talked about how I ended up wanting to start my own small business and why I chose stationery as the products I wanted to retail. Today I am going to discuss how you can go ahead to plan and register your business.

For those of you, who are fluent in German, there is a website called Junge Gruender and it is full of lot of useful information. The government website for new business founder, Gründerplattform is also highly informative.

(a)      Develop a Business Plan

The first step of creating a business is developing your business plan. This is not necessarily needed to register if you are planning to start a small business as a freelancer ( Freiberufler).  This is for your own personal goal setting. When a small business starts, the seeds lie in the entrepreneur’s love for the subject and something they would want to try out of passion. So, it is easy to get lost in the dream and lose the goal of your business. A business plan can help you stay close to the goal. It can include the following:

  • Goal of the business : products/ service you want to sell online
  • Target customer group
    • Who do you want to be your customer.
    • What kind of product and service they prefer?
  • Finance Plan
    • While this might not need to be exact, you will see while applying for tax and many other cases, an estimate of your sales and profit will be required.
  • Sourcing plan/ creating your content and product plan
  • Launch idea
  • Marketing idea
    • If you want to provide a service or products
    • How do you plan to reach your customers
    • Do you plan to sell online via website

(b)      Register your business

This is something you can do in parallel to developing your business plan. It is particularly important to register a business via the proper channel in Germany or the EU and get your business a VAT Id ( Umsatzsteuer Identifikation Nr. / USt-IdNr) Any business which is delivering goods and providing service in the EU need their uniquely identifying VAT Number. For detail govermentment guidelines, please check  the Bundeszentralamt für Steuern. It is bilingual and offers information in English  as well.

(c)      Limitations of this Post

a)         GmBH

I am focussing this blog post on helping people like me. If you are looking for more information on how to start a GmBH (Gesellschaft mit beschränkter Haftung) or what may also be known as LLCs, I would suggest to read it on Gründerplattform. You would need investments/ capital, lawyers , notary for founding such business.

b)         Food and beverages

If you are looking to import and export food items, start a gastronomy business, please look into additional requirements. To open a business on fresh or packaged food items, you must follow the health and safety guidelines for the food storage, product description, insurance and many other small things.

Please read the government guidelines for opening online grocery stores.

To open a food business, like a small restaurant or bakery, you must need permission, food and safety department clearance, a commercial kitchen and in some cases a certification course ( Ausbildung) in the department.

(d)      How to register your business? Follow these few steps:

Get permission from your main job

If you are already working a main job and want to start a side hustle, it is  important that you get written permission from your employer before you register for your business. Most job contracts stipulate that you have to inform your employer in case of a second job or Nebentätigkeit. This is to ensure you are not working for their competitor and  business compliance is met.

Your health insurance only covers certain amount of hours of work, if you work beyond that, your employer is liable in case of any accident. Typically you are not allowed to work for more than fifty hours a week and on Sundays. You need to confirm this information to your employer.

Most company HR has such forms and you need to contact your HR and fill up these forms. Your supervisor may need to sign off on the form and so it is good if you inform your supervisor beforehand and let them know as courtesy.

If you are not employed, you do not need to go through this step.

Register at your local Gewerbeamt/ Commercial Office

The most important step is to go to your local commercial office and register yourself and your business. The city commercial office is usually located in the Ordnungsamt / city regulatory office. A quick google search will tell you where your nearby commercial office is.

Before Corona happened, walk in appointments were somewhat possible. Now you must take an online appointment for registration. It is efficient but it also means you may have to wait for a slot for about three to four weeks. Use this time to set up your business plan, do your research, maybe prepare your product portfolio and other offline things. If you are applying for a side hustle, you can contact your employer in parallel and get your permission. Depending upon your employer, this also might take a couple of weeks.

Documents needed for business registration

You will need your photo identity proof and proof of residence. For expats living in Germany it typically means your passport and your residence permit. If you are EU national, your Id card or Ausweis is enough.

If you are registering for an online shop or service, typically you will be operating from your home as a small business and you would need a proof of residence for that. You can take your city registration certificate with you ( Meldebescheinung). Apart from that you need your registration fee. As of 2021, registering as a freelancer or small business costs you 45€ for registration.

How should I register myself?

If you are self-employed and you plan to run your business on your own, it is best to register as a freelancer. If you are working and your business is your side hustle, registering as a freelancer makes sense too. You will have to tell the officer if this job is your primary means of income or not.

If more than one person is coming together to register a small business, typically you are registered as an Gesellschaft bürgerlichen Rechts ( GbR). A GbR is a merger of two or more natural person or legal entities for a common purpose. This is the easiest and simplest form of forming a company, without any need for capital investment or notarization. A GbR also does not need a special name for the business. Simple PersonX, PersonY GbR is used as company name.

The registering officers are extremely helpful and answer their questions honestly. If you plan to sell x,y,z commodity or x,y,z commodity and y consultation, please tell them clearly. This information must be present on the registration form.

Once you register your business, you are automatically registered in the local chamber of commerce (Industrie- und Handelskammer). Based on the scope of your business, expected sales, you might need to pay a nominal membership fee. For most small businesses  it is free in the beginning. For freelancers, this does not happen automatically and you can also spare this process if you choose so.

Register yourself at ELSTER Portal

Once you have registered yourself as a freelancer or as a GbR, the registering officer would provide you with the necessary information to login in the Income Tax portal or the ELSTER portal.

You must create an account here and get the certificates for login to the portal here, with a valid email id.vThe account verification takes a couple of days. Once your Elster account is valid, you can fill in all the necessary information. If you do not have a business bank account, you can keep that area empty for some time. It takes some time to open a business bank account.

While filling up the forms and applying for the VAT number, you need to give a realistic value of your sales and profit that you can predict. A business plan including a finance plan comes in handy. You do not have to be exact but you have to present a realistic amount of sales and profit.

If this is your first business and you do not have any prior VAT number, you would be asked to provide your Steueridentifikation Nummer ( Tax Number). This number is present on the top of your annual tax returns.

 Once you fill in the information, you can apply for the VAT Id for your business. It usually takes between three to four weeks for your VAT Id to be delivered to your registered address.

 So keep looking out for your post and the VAT Number.

Annex : Register as a freelancer in Germany

This post is a short annex to the main post on , How to plan and register your business.

As a freelancer you can spare the journey to the Gewerbeamt/commercial office and can directly register at the Finanzamt or Income Tax office.

(a)      Who can register as freelancer

Usually if you are practising your scientific, artistic, educational skills independently or are freelance  content creator, writer you are providing a service and not necessarily selling goods and can register yourself as a freelancer.

As a freelancer you can practise your job as a doctor, engineer, architect, lawyer, tax consultant, translator. People who offer their services in photography, designing, dietician, artist, musician, dancer, magician, private educator, marketing strategists, writer, actors, dance teacher, yoga teacher can all register their services as freelancers.

As a freelancer, you can spare yourself the journey to the commercial office and directly register yourself at your local Tax office ( Finanzamt). If you have another job and freelancing is your side hustle, please do not forget to clarify with your employer.

(b)      Register at Tax office/ Finanzamt

You have maximum four weeks’ time, from the start of your freelancing to register yourself as a freelancer with the tax office. Please register yourself for the ELSTER portal and start filling up the form. You must fill up the details exactly the way you do when you have a business of your own.

For more information feel free to browse this amazing site: Fuer Gruender de

They even have all the explanations as a beautiful graphic :  Infographik

If you find this post informative, feel free to like, comment, share and subscribe to the newsletter. I will talk more about opening bank account, selling platforms in the upcoming post.

Before you leave, you can check out these cool stationery in the shop. The notebook in the featured image is something I often use to sketch out my plans. It is full of unique grids that just let your idea flow.

Advice on how to Plan and Register Your Business in Germany

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