How to start a business in Germany

This guide explains how to start a business in Germany, step by step.

This guide is only for people who live in Germany. It explains how to register a sole proprietorship, not a UG or a GmbH.

How hard is it?

It’s not so bad. When you start your business, there is a lot of paperwork to fill, but there is information online to help you. The difficulty is gradual. You solve problems one by one, not all at once.

Accounting and bookkeeping is the hardest part. You usually do it every month. If you make a mistake, it can be expensive.

If you are moving to Germany to become a freelancer, it’s harder. You must find an apartment, register your address and apply for a residence permit, all at the same time. During that time, you can’t work (because you don’t have a residence permit), so you must have a lot of savings.

If you don’t speak German, everything is much harder. All the documents are in German. The long tax registration form is in German. The Finanzamt only writes in German. Most accounting tools are only in German. You will need help from someone who speaks German.

There are tools that make it easier:

English-speaking tax advisors in Berlin

The cost of running a business

This is what it costs to be self-employed.

This is for sole proprietors and partnerships. Corporations and limited liability companies are taxed differently.

Trade tax

Cost: In Berlin, 1.05% of all profit above 24,500€ per year. Similar in other cities.

If your business is registered as a Gewerbe, you must pay the trade tax (Gewerbesteuer). This is a tax on all profit above 24,500€. You can credit most of it from your income tax. In Berlin, you pay 1.05% more taxes on your profit with the trade tax. In other German cities, you pay 0% to 3% of your profit.

What is the trade tax?

In Berlin and a few other cities, if you pay the trade tax, you are forced to join the IHK and pay the membership fee. This can cost up to a few hundred euros per year.

Health insurance

Cost: 90€ to 925€ per month

If you live in Germany, you must have health insurance. If you are self-employed, your employer does not pay half of your health insurance, so it feels twice as expensive. The cost depends on the type of insurance you have.

When you are self-employed, you have more health insurance options. You can choose public, private or expat health insurance. Talk to a health insurance broker to pick the best option for your situation. Don’t just pick the cheapest one.

How to choose German health insurance

If you are a freelance artist, publicist or art teacher, join the Künstlersozialkasse. It’s a social fund that pays half of your health insurance, and half of your public pension insurance. It’s a really good deal.

How to join the Künstlersozialkasse

Value Added Tax (VAT)

Cost: 0

VAT (Umsatzsteuer) costs you nothing. You charge VAT on your invoices, and give that money to the Finanzamt. It’s not included in your income. If you charge VAT, you also get a VAT refund for your business expenses.

Small businesses (Kleinunternehmer) can choose not to charge VAT. If they don’t charge VAT, they can’t get VAT refunds on their business expenses.

How VAT works in Germany

Income tax

Cost: 0% to 45% of your income.

As a German resident, you must pay income tax (Einkommensteuer) on all your income, including the income from your business.

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Disposable income Health insurance Public pension Unemployment insurance Income tax Solidarity surcharge Church tax
Health insurance

Your private health insurance costs per month.

Public pension

Public pension insurance pays for your pension when you retire.

Your employer pays

You pay

Unemployment insurance

Unemployment insurance pays for unemployment benefits if you lose your job.

Your employer pays

You pay

Income tax

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Taxable income

Income tax rate

Solidarity surcharge

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Church tax

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Your income is too low to pay income tax, so you don't pay church tax.

You pay {{ formatPercent(100 - disposableIncomeRatio) }}

This is what you pay for all taxes and social contributions.

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This is your net income. It's how much money you keep after taxes and other deductions. It's your money. You can spend it.

Tax advisor and bookkeeping

Cost: 0€ to 2,000€ per year

A tax advisor can help you register your business and file your taxes. They are expensive, but they are worth it. My tax advisor prevented many mistakes, and solved many problems with the Finanzamt.

English-speaking tax advisors

If you want to pay less, use tax software instead. Sorted and Lexoffice can help with invoicing and VAT reporting. I use Lexoffice for all of my bookkeeping.

List of German tax software

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

Tax advisors and tax software are tax-deductible expenses.

Other business expenses

Cost: varies

If you run a business, you can get insurance against disability, lawsuits, mistakes, and other problems. This is optional. You could also need tools, equipment and office space.

Types of insurance in Germany

You can deduct all of your business expenses. This allows you to pay less income tax.

Cost of living

If you move to Germany to start your business, understand the cost of living. Your business must make enough money to pay for your cost of living.

Cost of living in Germany

Step 1: Register your address

In Germany, you must register your address every time you move. It’s called the Anmeldung.

When you register your address for the first time, you get a tax ID (Steueridentifikationsnummer). You need a registered address and a tax ID to create an ELSTER account and register your business at the Finanzamt.

How to find an apartment in Berlin

How to register your address in Berlin

How to get a tax ID

Step 2: Open a bank account

You need a bank account to register your business at the Finanzamt, and to pay your taxes. You don’t need a German bank account; you can use any bank that allows SEPA transfers.1

If you are a Freiberufler or a Gewerbe, you don’t need a business bank account.2 You can use your personal bank account. Check your bank’s terms and conditions; some banks don’t let you use your personal account for your business.3

If you form a corporation (GmbH, UG, AG or KGaA), you need a separate business account (Geschäftskonto).3 It’s required.

If you don’t have a bank account, look at my comparison of German banks. 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

Two bank accounts is better

You should have two bank accounts: one for you, and one for your business. If you keep business transactions in a separate account, bookkeeping is easier.

The Finanzamt can freeze your account

If you don’t pay your taxes, the Finanzamt can freeze your bank accounts. 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, the Finanzamt can freeze your accounts 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.

If you get a Pfändungsschutzkonto (P-Konto), you can access some of your money, even if your bank account is frozen.6 It gives you enough money to buy food and pay your bills.7 You can switch to a P-Konto for free,8 but it can affect your Schufa score.9

Step 3: Find a tax advisor

A tax advisor can register your business at the Finanzamt and at the Gewerbeamt, and prepare your tax declarations. They make accounting easier, and they prevent expensive mistakes.

You need a tax advisor to renew a freelance visa. They must prepare and stamp some of the required documents.

It’s hard to find a tax advisor. It can take a few weeks.

English-speaking tax advisors in Berlin

Step 4: Freiberufler or Gewerbe?

Later, you will need to register your business with the tax office (Finanzamt). The tax office decides if you are a freelancer (Freiberufler) or a tradesperson (Gewerbe).

The difference is very important. Tradespeople must…

Not every freelancer is a Freiberufler! This title is only for specific professions. Engineers, doctors, architects and teachers can be Freiberufler. Food delivery drivers and tour guides are not Freiberufler; they are a Gewerbe.14 Most commercial websites are registered as a Gewerbe.

Freiberufler or Gewerbe, what’s the difference?

Step 5: 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.

What is the trade tax?

How to get a trade licence in Berlin

Step 6: 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.

How to register a business in Germany

Step 7: Get a residence permit

You might need a residence permit to be self-employed in Germany. It depends on your nationality. It takes around 3 months to get a residence permit, sometimes longer.

Who needs a residence permit? ➞

How to apply for the German freelance visa

Step 8: Tell your health insurer

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

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

Health insurance for freelancers is more expensive, because your employer does not pay half of it.

If you have public health insurance, the cost of your insurance depends on your income. 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.

If you are self-employed, private health insurance could be a lot cheaper. Since I switched to private, 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

Step 9: 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

Step 10: 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

Need help?

Where to ask business questions

Sources and footnotes
  1. Screenshot 

  2. billomat.com 

  3. allrecht.de 

  4. together.bunq.com 

  5. juraforum.de 

  6. support.n26.com, auslandsueberweisung-guenstig.de 

  7. verbraucherzentrale.de 

  8. verbraucherzentrale.de 

  9. schutzkonto.de 

  10. medium.com 

  11. existenzgruender.de, deutschland-startet.de 

  12. deutschland-startet.de 

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

  14. Wikipedia, IHK Hamburg