How to start a business in Germany

By Nicolas Bouliane Verified by 1 expert

This guide explains how to start a business or become a freelancer in Germany.

It explains how to form a single proprietorship (Einzelunternehmen), not a corporation or a limited liability company (UG or GmbH).

What to expect

How hard is it?

It’s not so bad. When you start, there is a lot to learn, and there is a lot of paperwork to do. After one or two years, it gets easier.

If you don’t speak German, it’s harder. Most services, forms, letters and websites are only in German. You will need help to write emails, make phone calls and go to appointments.

If you are not a citizen of the EU, EEA or Switzerland, you need a residence permit to live in Germany. This adds costs, delays and paperwork.

Cost of running a business

Plan the cost of running your business. It helps you decide how much savings you need, and how much to charge your clients.

Accounting

Every year, you must make a tax declaration. This tells the Finanzamt how much money you made, and how much income tax you must pay.

You will probably need to charge VAT on your invoices. If you charge VAT, you must make monthly, quarterly or yearly VAT declarations, depending on your income.

There are many ways to do income tax and VAT declarations:

A tax advisor makes everything easier, but they are expensive and hard to find. Accounting software is cheaper, but you must do everything yourself. Use a tax advisor until you understand the system better.

You also need a tax advisor to renew your freelance visa. They must prepare some of the required documents for you.

How to find a tax advisor

German accounting software

Before you start

Are you really self-employed?

Some employers hire employees, but treat them like freelancers. This is called fake self-employment or pseudo self-employment (Scheinselbstständigkeit). It’s illegal.1

Generally, you are not self-employed if…

  • You only have one client for a long time.
  • You are integrated in your client’s business. You have a company email, company business cards, a uniform, etc.
  • You always work at the same location. You can’t choose where you work.
  • You have a fixed schedule and a fixed salary.
  • You do not use your own equipment.

Pseudo self-employment is a bad deal for you. You have no job security. You get no paid sick leave, no public pension and no unemployment benefits. You will not get a freelance visa for fake self-employment.

What is fake self-employment?

Are you a Freiberufler or a Gewerbe?

There are two kinds of self-employed people: freelancers (Freiberufler) and tradespeople (Gewerbetreibende). The difference is important.

Tradespeople must…

When you apply for a freelance visa or permanent residence, the required documents are different for Freiberufler and Gewerbetreibende

Not all freelancers are Freiberufler, only people in specific professions. For example, designers, engineers, doctors, architects, teachers, artists and journalists.

Freiberufler or Gewerbe, what’s the difference?

Understand how VAT works

Value added tax (VAT or Umsatzsteuer) is a 19% tax on goods and services. Usually, you must charge VAT on your invoices, and pay VAT on your expenses.

If you receive more VAT than you give, you must give the extra money to the Finanzamt. If you give more VAT than you receive, the Finanzamt gives you the difference back. You don’t win or lose any money with VAT.

How VAT works in Germany

Small businesses (Kleinunternehmer) can choose not to charge VAT. It makes accounting easier, but it’s not always a good idea.

How being a Kleinunternehmer works

Register your address

In Germany, you must register your address. This is called the Anmeldung, and it’s very important.

When you register your address for the first time, you get a tax ID. You need a registered address and a tax ID to register your business with the Finanzamt, and to access many government services. You might also need a registered address to apply for a freelance visa.

Some temporary apartments don’t let you register your address. This will make your life much harder. It’s really hard to start a business without a registered address. Always choose an apartment where you can register.

How to register your address

Open a bank account

You need a bank account to pay taxes, pay for health insurance, and to get paid by your customers. You can use any European bank.1 A German bank with a German IBAN might look more serious.

Use a separate bank account for your business. Bookkeeping is easier when your personal and business transactions are separate. Some banks don’t let you use your personal account for business.3

Business banks like Holvi, Qonto, Kontist and Finom help with your accounting. I use Kontist since January 2022, but I don’t recommend it.

Best German banks for expats

The Finanzamt can freeze your bank accounts if you don’t pay your taxes. They will freeze all of your accounts, not just your business account. They can also freeze your accounts in other EU countries.4 When the Finanzamt freezes your bank account, you can’t withdraw money or make bank transfers.5

Sometimes, they freeze your account by mistake. It happened to me, and to other people I know. Even if it’s not your fault, it can take a few days to fix. During that time, you can’t withdraw money.

Get a P-Konto (Pfändungsschutzkonto). It lets you access some of your money when your account is frozen, so you can buy food and pay your bills. You can get a P-Konto for free, but it can affect your Schufa score.

Get health insurance

In Germany, you must have health insurance. It’s a big part of your cost of living.

As a freelancer, never choose health insurance yourself. It’s a terrible idea. Freelancers often get stuck with bad or expensive health insurance. Freelance visa applications are often rejected because of invalid health insurance.

Talk with a health insurance broker. They will help you choose the best insurance. Their help is free.

I work with Feather Insurance since 2018. They helped me switch to private insurance and save over 400€ per month. I had a difficult case, and Rob worked for months to get me accepted. They have a lot of experience with immigrants.

Join the Künstlersozialkasse if you can. They pay half of your health insurance. It’s a really good deal. You can do this later.

How to choose health insurance

Get a residence permit

If you are not a citizen of the EU, EEA or Switzerland, you need a residence permit to live in Germany. The freelance visa is a residence permit for self-employed people.

It takes a few months to get a freelance visa. You must have clients in Germany, and a few thousand euros in savings.

Other residence permits sometimes allow self-employment. This lets you start your business while you wait for your freelance visa.

If your current residence permit does not allow self-employment, you must wait for your freelance visa. During that time, you can’t work. You need enough savings to wait a few months without an income. It might be cheaper to get a freelance visa in your home country, before you move to Germany.

How to apply for a freelance visa

Set your prices

As a freelancer, you get no paid vacations, holidays or sick days. If you don’t work, you don’t get paid. You only work around 210 days per year, excluding weekends, holidays and vacation days.2 You also do a lot of unpaid work like accounting, marketing, paperwork and maintenance.

You must also pay for your taxes, health insurance and your retirement. It costs up to half of your income. You must also pay for your tools and office space.

This is why you must charge more than employees. Take the hourly rate you would make as an employee, and double it.9 This is not a reliable rule, but it’s a good start.

Income survey for solo freelancers

Freelancers usually charge higher prices for short contracts. Longer contracts are more stable, and have less overhead. You spend less time finding clients, interviewing and writing contracts. In some industries, you charge clients per day, not per hour.8 If you get this wrong, it can look unprofessional.

If you charge VAT, you must usually include it in your prices. B2C clients expect VAT to be included in the price. B2B clients expect VAT to be excluded.15

Ask freelancers in your field how they work. Some industries organise meetups and presentations for freelancers. It’s a good place to learn how the industry works.

Where to ask business questions

Find a tax advisor

Tax advisors are worth it. They handle your taxes and most of your paperwork. They can prevent expensive mistakes, and solve problems with the Finanzamt. You must have a tax advisor to renew your freelance visa.

A tax advisor costs 700€ to 2,000€ per year if you charge VAT, or 300€ to 800€ per year if you don’t. The prices vary a lot. The only way to know is to call and ask.

Tax software is cheaper than a tax advisor. Sorted and Lexware Office help with invoicing and VAT reporting. You can do your tax declaration in ELSTER. I use Lexware Office for all of my bookkeeping, but I still have a tax advisor.

Find a tax advisor

Find accounting software

Some banks like Qonto, Holvi and Kontist can also make your accounting easier. I use Kontist as my business bank.

Steps to start your business

1. Get a trade licence

If you register as a Gewerbe, you must get a trade licence (Gewerbeschein) before you register your business with the Finanzamt.

In Berlin, you can apply for a Gewerbeschein online. You need a valid residence permit before you do this. In the rest of Germany, you can use the paper form. Your tax advisor can also do it for you.

You can start working before you get your Gewerbeschein.6

What is the trade tax?

How to get a trade licence in Berlin

2. Register with the Finanzamt

The next step is to declare your business to the Finanzamt. You must fill the Fragebogen zur steuerlichen Erfassung online. It takes 5 to 7 weeks,10 including 1 week to create an ELSTER account.

Your tax advisor can register your business for you. If you don’t speak German, use Sorted’s free tool to register your business. I tried it; it’s really good.

You should register with the Finanzamt as soon as possible, but you don’t need to wait for the Finanzamt to start working.2

How to register a business in Germany

3. Get financial help

The state can help you start a business. There are many options:

You can apply for a training voucher, initial funding and an investment grant at the Agentur für Arbeit or the Jobcenter. You might not get a training voucher if you don’t qualify for unemployment benefits.13

What to do next

Tell your health insurer

If you already have health insurance, tell your insurance company that you will be self-employed.

If you have public health insurance, the cost of your insurance depends on your income. Health insurance for freelancers is twice as expensive, because your employer does not pay half of it.

Since you don’t know your future income, they use your estimated income. If you pay too much for insurance, you will get a refund later. If you don’t pay enough, you will get an invoice later.

When you are an employee, health insurance payments are taken from your salary. When you are self-employed, you pay every month by bank transfer.

Private health insurance could be a lot cheaper for you. For example, I save over 400€ per month, and I have better coverage. Talk to a health insurance broker about it. It’s not a simple decision.

How to choose health insurance

Update your website

If you have a website, it must follow German and European laws. If you make a mistake, you can get an Abmahnung and waste a lot of money.

How to run a website in Germany

Do your taxes

Every year, you must make a tax declaration. Remember that most business expenses are tax-deductible: tax advisor, tax software, insurance, transportation, computers, internet, mobile phone, banking fees, part of your rent and a lot more. This reduces your taxable income, so you pay less taxes.

Legal insurance (Rechtsschutzversicherung) covers your legal costs if you need a lawyer. It’s useful when you have a problem with a client or another business.

You must get professional legal insurance. Private legal insurance rarely covers business activities.

What does legal insurance cover?

Feather and Getsafe sell legal insurance, and they speak English. Tarifcheck helps you compare insurances, but it’s only in German.

Get disability insurance

If you are an employee, you get sickness pay while you are sick. Your employer pays your full salary for the first 6 weeks. After 6 weeks, your health insurance pays you 70% of your salary (up to 128.62€ per day) for 78 weeks.

By default, freelancers don’t get sickness pay. If you don’t work, you don’t get paid.

If you pay a little more for health insurance, you get sickness pay for 78 weeks.

You can also get disability insurance (Berufsunfähigkeitsversicherung). It gives you a regular income if you are too sick to work. Disability insurance is optional, but it’s useful if you have dependents or a mortgage. Around 26% of Germans have disability insurance.7 It costs around 40€ per month.14

If you don’t speak German, Feather and Getsafe sell disability insurance, and they speak English. Tarifcheck helps you compare options, but it’s only in German.

Types of insurance in Germany

Join the Künst­ler­so­zi­al­kas­se

If you are a freelance artist, publicist or art teacher, apply for the Künstlersozialkasse. They will pay half of your health insurance, and half of your public pension insurance. It’s a really good deal.

How to join the Künstlersozialkasse

Join VG Wort

If you publish texts or run a website, you should also join VG Wort. You can earn a few thousand euros per year from your published texts.

How VG Wort works (in German)

Save for retirement

Employees automatically save for a retirement, but freelancers don’t. You must plan for retirement and set money aside. Many freelancers neglect that.

There is no easy way to do this, especially for immigrants. You might need a flexible pension, in case you want to cash out sooner, become an employee, or leave Germany.

A financial advisor can help you choose a pension. Usually, they are paid by commission. In my experience, many of them are not honest. Seamus at Horizon65 is the only financial advisor I trust.

Need help?

There are tools that make it easier:

English-speaking tax advisors in Berlin

Where to ask business questions

Sources and footnotes

  1. Screenshot ⤴

  2. Sebastian Hoffmann from Touring Artists (January 2025), personal experience (2017) ⤴

  3. allrecht.de ⤴

  4. together.bunq.com (2018) ⤴

  5. juraforum.de ⤴

  6. Personal experience (2017) ⤴

  7. gdv.de (2019) ⤴

  8. Personal experience as a software developer (2020) ⤴

  9. /r/berlin (2016), /r/berlin (2018) ⤴

  10. medium.com ⤴

  11. existenzgruender.de, deutschland-startet.de ⤴

  12. deutschland-startet.de ⤴

  13. hartz4widerspruch.de, Carina Senf at Rotwang Law (July 2023) ⤴

  14. Quote from Feather (January 2025) ⤴

  15. anny.co (2024), reddit.com/r/berlin (2018) ⤴

  16. Suat Göydeniz, tax advisor (2022) ⤴