8 Steps on How to Start a Business in Germany | 2024

Have you ever wondered how to start a business in Germany? If yes, don't worry we have the full explanation for you.

Recently, Germany has emerged as a favored destination for investment and business prospects.

In 2023, Germany boasted a gross domestic product of 4,121 billion euros, positioning it as the world's 3rd largest economy following the United States and China, and the largest economy in Europe.

Those numbers show that Germany has become an attractive destination for investment and business ventures due to its strong economy and favorable business conditions. Germany offers promising opportunities, whether you're a local entrepreneur or a foreign investor.

If you're contemplating opening a business in this country, it's crucial to familiarize yourself with the process.

In this article, we provide 8 comprehensive steps on how to start a business in Germany in 2024. So, without any further ado, let’s dive into the full guides below!

8 Steps on How to Start a Business in Germany 2024

As mentioned earlier, Germany is the largest economy in Europe. Therefore, starting a business in Germany will be a big challenge for new entrepreneurs to enter the business world.

Rest assured! In this article, we will give you tips for starting a business in Germany to encounter the highly competitive German business world. Here are 8 steps on how to start a business in Germany:

1. Register Your Address

When you are starting a business in Germany, it is necessary to register your address whenever you relocate. Legally, this process is known as the Anmeldung.

Upon initial registration, you receive a tax ID (Steueridentifikationsnummer). Both a registered address and a tax ID are required to establish an ELSTER account and register your business with the Finanzamt.

2. Make a Bank Account

After you register your address, the next step when opening a business in Germany is to make a bank account.

Creating a bank account is a mandatory requirement to register your business with the Finanzamt and fulfill tax obligations. However, it doesn't necessarily have to be a German bank account. In such a case, you can actually create any bank account that permits SEPA transfers.

SEPA transfers, commonly used for money transfers between European banks, are free and typically take around 2 business days to complete. They are widely used in Germany as the primary method of sending money.

SEPA transfers can be initiated at the bank, through banking apps, or online banking platforms, and direct debit authorizations can also be arranged. 

Alternatively, if SEPA transfers are not feasible, you can use other options like Wise, PayPal, or wire transfers.

Freelancers or traders can use a personal bank account. However, some banks may impose restrictions on its use for business purposes. If you establish a corporation (GmbH, UG, AG, or KGaA), then a dedicated business account (Geschäftskonto) is obligatory.

Other than that, there are two important things you need to remember:

• Two bank accounts: You should have two separate bank accounts, one for personal use and one for your business. This separation simplifies bookkeeping tasks, ensuring clarity of financial transactions. 
• Account freeze: This is one of the important things in how to start a business in Germany. Failure to fulfill tax obligations may result in Finanzamt freezing your bank accounts, including personal and business accounts. This freeze also applies to accounts held in other EU countries, prohibiting withdrawals and bank transfers until the matter is resolved.
   

3. Register Your Tax with Tax Authorities

The next step in how to start a business in Germany is to register your business tax with tax authorities. Tax advisors in Germany can be expensive, but their services often result in significant savings. 

They handle tasks such as registering your business with Finanzamt and Gewerbeamt, as well as managing tax declarations. In addition, they also simplify the accounting process and help prevent costly mistakes.

What you need to remember is that all official documents, including the extensive tax registration forms, are available in German. Correspondence from Finanzamt is exclusively in German and many accounting tools are also available only in German.

Therefore, German language proficiency or assistance from a German speaker is essential in navigating these processes.
 

4. Decide Your Type of Business

Before you register your business, you need to know your business type first. There are two types of business in Germany, a freelancer (Freiberufler) or a tradesperson (Gewerbe). Those business types have significant distinctions.

Tradespeople are obligated to:

• Obtain a trade license (Gewerbeschein).
• Pay the trade tax (Gewerbesteuer).
• Register in the Handelsregister (in some cases).
• Adopt double-entry bookkeeping practices (in some cases).

It's important to note that not all freelancers are considered Freiberufler, as this designation is reserved for specific professions such as engineers, doctors, architects, and teachers.

On the other hand, individuals like food delivery drivers and tour guides are classified as Gewerbe. Many commercial websites are also typically registered as Gewerbe entities.
 

5. Register Your Business

After you know your business type, the next step in how to start a business in Germany is to register your business. To register a business in Germany, you must adjust to the classification of your business.

Freelancers are required to register with the Tax Office (Finanzamt), while the self-employed must contact the local trade office (Gewerbeamt). For other types of companies, registration at the commercial registration office is required.

This requires completing the Fragebogen zur steuerlichen Erfassung online, a process that usually takes 5 to 7 weeks, with an additional week required to create an ELSTER account.

As an alternative, you can enlist the help of a tax advisor to handle your business registration.
 

6. Get Your Trade Licenses or Permits

When you have registered your business with the trade office (Gewerbeamt), you will also get a trade license from them. This license, also known as Gewerbeschein or Gewerbeanmeldung, permits you to engage in commercial activities in the country.

To initiate registration at the trade office, you must fill out a registration form. Once the form is filled, signed, and dated, you must send it by post to your local Gewerbeamt.

Certain trades may require additional licenses beyond the standard trade license. For example, businesses in the gastronomy sector, driving schools, taxi companies, skilled craft companies, insurance brokers, and so on.

7. Get Your Insurance

When starting a business in Germany, it's crucial to make sure you have the appropriate insurance coverage, whether you're self-employed, freelance, or business owner.

If you are already covered by health insurance, inform your provider about your transition to being self-employed.

Previously, health insurance premiums were deducted from your salary as an employee, but as a freelancer, you will have to make monthly payments via bank transfer. 

Health insurance for freelancers tends to be more expensive as the employer does not contribute. On the other hand, public health insurance premiums are income-dependent, using income estimates as future income is uncertain. Overpayments result in refunds, while underpayments result in future bills.

One of the best tips for starting a business in Germany is that you should consider private health insurance as a more affordable option for a self-employed individual.
 

8. Promote Your Business

Starting a business in Germany offers many opportunities for growth and success. However, promoting your business effectively is key to standing out in a competitive market.

You can utilize various marketing strategies such as digital marketing, networking events, and collaboration with local businesses can significantly increase the visibility of your business.

In addition, having a professional website that showcases your products or services and provides valuable information to potential customers is essential in today's digital age.

By optimizing your website for search engines and ensuring it is user-friendly, you can attract organic traffic and interact with your target audience effectively.

If you have a website, you must comply with German and European regulations. Compliance errors can result in costly legal notices (Abmahnung) and financial losses.

Additionally, you can also use social media platforms, create engaging content, and invest in targeted advertising campaigns that can complement your online presence and help build your brand in the German market.

With a comprehensive promotional approach, you can effectively position your business for success and achieve your entrepreneurial goals in Germany.
 

Conclusion

That was the complete explanation of 8 steps on how to start a business in Germany in 2024. We believe this guide provides valuable insights to help you navigate the online business landscape within the country.

Once you understand the comprehensive steps of how to start a business in Germany, it is imperative to develop an effective business strategy to navigate the competitive market in Germany successfully.

The right marketing strategy plays a crucial role in increasing business visibility and attracting a wider audience.

For new businesses, integrating SEO proves to be a cost-effective marketing approach.

By applying SEO techniques such as keyword research and creating SEO-friendly content, businesses can optimize their online presence and drive traffic and sales.

Don't hesitate to contact our Marketing Team to discuss your business needs. Get the various benefits of SEO Services by cmlabs now!