Setting up a Business
In addition to a business idea, fundamental questions about the business plan and the legal form must be clarified. The success of your business depends on many factors. Good preparation is most certainly one of them.
This page provides information about “setting up a business.” If you have already decided to set up a business or found a company, please visit our “Registering a Business” page.
A brief overview of the most important permits and licences can be downloaded here:
Support and Advice for Setting up a Business
Both on the federal and state level, there are various institutions that offer services for “setting up a business”. In addition to the BMWi business start-up portal, the STARTERCENTERS NRW are an important contact point for those setting up a business in North Rhine-Westphalia. The STARTERCENTERS NRW will give you support on your path to becoming self-employed and offer free and individually tailored advice.
You can find out which STARTERCENTER is responsible for your case here under “Finde dein Startercenter.”
Forms covering various aspects of setting up a business are provided on the Formularserver NRW. Here you enter your data into a so-called meta-form, i.e. software that will guide you through the formalities of setting up a business. The documents you need for the various different authorities will be issued automatically. You will only have to print them, sign them and post them to the respective authorities (if necessary, with additional documents enclosed). Important addresses and fact sheets about the various trades are also provided and may also be printed out.
Foreign companies that would like, for example, to open a branch office in Germany may also contact Germany Trade & Invest. This agency markets Germany abroad as a business and technology location, provides information to German businesses about foreign markets, and supports foreign companies in getting established in Germany.
Please consider the following before registering your business:
- Business idea
- Business plan
- Financing and funding programmes
- Business activity or freelance/independent professional activity
- Legal form
- Fictitious self-employment
Whether you want to set up in business cutting hair, working part-time as a consultant or selling goods you have made over the internet – every business starts with an idea.
It could also be that you know you want to be self-employed but are still looking for a business idea. Whatever the case, this initial step is of great importance.
Preparing a business plan is helpful in setting up a business. The plan should answer the question as to how you intend to achieve your aims. A well-prepared business plan will help you to organise your goals and thoughts, thereby increasing your chances of success. You wouldn’t want to build a house without a blueprint, would you?
A good idea and a well thought-through business plan alone aren’t always enough. Start-up capital is often required before any activities can commence. It is therefore important to settle the question of business financing.
The website of the STARTERCENTER NRW provides extensive information on financing and subsidies. Information about funding programmes is also offered by the Förderlotse NRW, a joint provision of the North Rhine-Westphalian state government and the NRW.BANK. This provides a simple and clear overview of the extensive funding options available in North Rhine-Westphalia.
The funding database of the German federal government also offers an extensive and current overview of the funding programmes of the German federal government and the federal states.
In addition to this, the German Federal Ministry for Economic Affairs and Energy provides an e-training about business start-ups and growth financing on its website. This learning programme helps prevent common financing mistakes and prepares you for financing your ideas.
Freelancer/independent professional or businessperson?
The majority of activities are considered to be business activities and must therefore be registered with the local trade licensing or regulatory office. A business means any long-term economic activity performed under one’s own account and responsibility that seeks to make a profit – except for freelance/independent professional or agricultural activities.
According to Section 18(1) of the German Income Tax Act [Einkommensteuergesetz, EStG], freelance/independent professions include independently performed scientific, artistic, literary, teaching or educational activities, such as those of:
- alternative health practitioners
- interpreters and translators
Freelancers/independent professionals do not have to register their businesses with the regulatory office, but must contact “their” tax office directly to register their freelance/independent professional activities.
Assessing which professions are classed as freelance/independent professions is not always easy. If in doubt, please consult your tax office.
Freelancers/independent professionals normally enjoy a number of benefits in comparison to businesspersons:
- They don’t need extensive commercial accounting procedures, but only the (comparatively) simple net income method.
- They are not compulsory members of a Chamber of Commerce and Industry (or any other corporative professional or trade association) and therefore avoid having to pay fees.
- They don’t have to pay business taxes, even if they generate more than EUR 24,500 in profit each year.
However, chamber membership is required for some freelance/independent professions, e.g. for pharmacists, lawyers and architects.
There are also special cases for freelancers/independent professionals when it comes to healthcare. Artists and publishers, for example, must register for health insurance with the Künstlersozialkasse. More information is provided here and in the download area:
If you want to found a company, you must first of all decide on its legal form. The choice of legal form will affect membership, liability and tax matters. Freelancers/independent professionals often start out as sole traders. But there are a number of other legal forms available. It is therefore advisable to ask your tax consultant which legal form is best suited to your case.
An overview of the various legal forms is provided here.
The location of your business should also be chosen wisely. For example, you may wonder whether you should first of all run your business from home or whether you should rent office space. The right location may be decisive for the success of your business.
Extensive information on “locations” is provided here.
Accounting involves the documentation of all business transactions on the basis of receipts. Using these receipts, business founders can quickly and simply get an overview of their income and expenditure and can at the same time fulfill their obligations to provide information to various authorities and to the tax office.
Extensive information about “accounting” is provided here.
Fictitious self-employment means a dependent employment relationship concluded between an self-employed entrepreneur and a client. Such fictitious self-employment is used to avoid social security obligations – which is a criminal offence. The theme of fictitious self-employment may be of particular relevance to freelancers and sole proprietors with only one or few clients. Whether a case is considered to be fictitious self-employment will be assessed by the German Statutory Pension Insurance Scheme through a so-called status determination procedure.
Extensive information about “fictitious self-employment” is provided here.
VAT, business tax, corporation tax – if you want to set up a business, there is no way around the issue of “taxes”!
Giving thought to this topic and consulting an expert (tax consultant) is therefore recommended before registering a business.
Smaller businesses in particular may in many cases benefit from the small entrepreneur regulation. If you make use of it, this regulation provides exemption from VAT and input taxes, for example. More information about the small entrepreneur regulation and its requirements is provided here.
An overview of the various taxes and who has to pay them is provided here and in the downloads section:
The theme of “Insurance” also requires proper consideration when setting up a business. Making the right provisions will allow you to minimise operational risks (e.g. machine damage or fire) and/or personal risks (e.g. illness or accidents).
A multitude of insurance policies are available. Which of these you actually need will of course also depend on the particular service you provide. For example, a transportation company should consider taking out transportation insurance to insure their transported goods against loss or damage.
Self-employed persons should also pay special attention to their own personal insurance to ensure that they have adequate protection in the case of accident or illness.
Extensive information about “insurance” is provided here and under downloads: