Taking your first steps as an entrepreneur in Germany: How to get off on the right foot

Entering entrepreneurship: What to expect after forming your business

So you’ve officially set up your business with the German authorities? The fun doesn’t stop there. Although you’ve already had to jump through (many) hoops, there is still more bureaucracy and business management looming on your to-do list.

That is, after you officially start your business, the management or development phase kicks in. This is when you put all your organisational ducks in a row, such as registering with authorities and taking out insurance. Then there are fun things such as accounting matters that also need attention.

Below we’ll show you the next steps after the official formation/incorporation part so you can get off on the right foot.

Dealing with bureaucracy: Registrations, applications, insurance

Apply for a Steuernummer or USt-ID

You need a Steuernummer (tax number) or USt-IDNr (VAT identification number) to issue proper invoices and pay VAT correctly.

Both numbers are used to identify a legal entity (be that a person or incorporated company etc.) that is liable to pay tax.

You get a tax number from – you guessed it – the Finanzamt (tax office).

You can apply for it after registering your business; otherwise, you’ll automatically receive it after completing the tax office questionnaire.

Betriebsnummer: Apply for an employer business number

Do you want to hire employees? Then you need a Betriebsnummer (employer business number).

Every company that employs at least one person who has to pay social insurance or has a “mini job” needs a company number.

This eight-digit number enables the social insurance institutions to identify a company so that the social insurance contributions can be correctly calculated.

Membership in the IHK or HWK

Usually, the responsible chamber will contact you directly, but you should still check the membership formalities. If you want to start a Handwerksbetrieb (craft business) that is subject to registration, you have to enter it into the Handwerksrolle (register of crafts).

To do this, you must contact your local HWK (chamber of skilled crafts) and apply for registration. The fees vary from region to region and range from €50 to €200. In addition, there is a membership fee for the HWK.

Companies that do not fall under the jurisdiction of the HWK must register with the IHK. Membership with the IHK is compulsory for all Gewerbetreibenden (business/tradespeople who operate commercially). The amount of the contribution depends on the IHK responsible for you and the profit your business records annually.

Take out all the different types of insurance you need

As an entrepreneur, you not only have to insure yourself, but you should also mitigate business risks by taking out appropriate insurance (Versicherung in German).

Insurance coverage that is obligatory for entrepreneurs includes, Rentenversicherung (pension insurance) and Krankenversicherung (health insurance) as well as the gesetzliche Unfallversicherung (statutory accident insurance).

You must also register with the relevant Berufsgenossenschaft (employer liability insurance association) for statutory accident insurance.

Although not compulsory, think about taking out liability insurance and legal expenses insurance. Make sure you protect yourself and your business with the right coverage.

Impressum: Write an legal imprint

Your company website needs an Impressum, just like your invoice, the letterhead of your business letters, emails, and social media profiles. Since the GDPR’s introduction, many companies have been specifically warned about violations of the so-called “operator identification.” This how-to article explains exactly what a compliant Impressum looks like.

Place your business on Google Maps

One of many ways to make your business more visible on Google is to place it on Google Maps. This way, you will appear alongside other traders and service providers in regional search queries.

EORI-Nummer beantragen

The EORI number replaces the Zollnummer (customs number) in Germany. You only need to apply for an EORI if your company carries out customs-related business activities and comes into contact with the relevant EU rules. Here’s how to apply for an EORI number.

1. How to start a business in Germany: 

   1. Develop a business idea
   2. Advice and preparation
   3. Choose a legal form
   4. Name check by IHK
   5. Notarisation at the notary’s office
   6. Open a business bank account
   7. Commercial register entry
   8. Trade registration
   9. Registration with the tax office
   10. First steps as an entrepreneur<<<

Organise your accounting

Buchführung (bookkeeping), Lohnabrechnungen (payroll), and Jahresabschluss (annual accounts). Get familiar with these accounting terms because it’s an inescapable part of entrepreneurship in Germany.

Good preparation and careful maintenance of your business’s finances will make your accounting immensely easier. But, if you want to avoid the bookkeeping part of the job so that you can concentrate fully on your core business, you can also outsource bookkeeping to an external service provider.

Do the bookkeeping in-house or outsource it?

You don’t have to make this decision right at the beginning. You can do the bookkeeping for your company at first and then outsource it to an external agency later if you no longer want to do it in-house.

More than one entrepreneur has believed they could learn by doing when it comes to bookkeeping. If you’re planning to give it a go, bear in mind. However, failure to comply with correct bookkeeping principles will be penalised.

Without experts in the company, self-study can become a time-eater until the necessary know-how for proper bookkeeping is available. Whether it makes sense to outsource bookkeeping to an external service provider must be decided individually.

Eröffnungsbilanz: Create an opening balance sheet

The Eröffnungsbilanz (opening balance sheet) must be prepared at the beginning of each business year. It serves as an overview of the company’s current assets and must be submitted to the commercial register after it has been prepared.

Umsatzsteuer-Voranmeldung: The advance VAT return

In the first business year, founders must submit their advance VAT return every month.

However, it is possible that under special circumstances or after some time, you may only have to submit the advance VAT return quarterly, half-yearly, or even once a year. Ultimately, the tax office decides this.

Create an invoice template

Without sending invoices, no money will come in for your services. That much is certain. With your new tax number, you have already cleared the first hurdle for a valid invoice. Now all you have to do is design and send your first invoice. Here you will find all the mandatory information, invoice samples and a checklist for your first invoice.

Lohnbuchhaltung: Set up payroll accounting

As soon as you hire employees, you need to create monthly payrolls. A payslip must contain comprehensible information about the composition of the salary, tax deductions, and individual social security contributions. You must also observe advance notification deadlines. An introduction to payroll accounting in Germany can be found here.

Paying a salary to yourself

As a rule, shareholders of a limited liability company cannot pay themselves a salary. Only the Gesellschafter-Geschäftsführer (shareholder-managing director) gets a salary – under certain conditions. But even that is not the rule in the first business year. In principle, as a founder, you benefit from profit distributions generated by your business. Conversely, this also means that you may have to reckon with financially uncertain times when your business is not making a profit.

Private loans

A private loan (Darlehen in German) is a popular alternative to a bank loan, as a loan from the bank is often harder to get and comes with high interest rates. You can pay a private loan to your business yourself. Loans from relatives or acquaintances are also ways to increase your start-up capital. Unless you are the lender yourself, you should in any case draw up a contract for private loans.

Getting started with business administration

Once the organisational aspects have been dealt with and bookkeeping has been worked out, you should move on to managing the business. For the business to function, you need customers and possibly some employees as well. Apart from that, you should always keep an eye on your business plan and financial planning.

Revise your business plan

As an entrepreneur, you are not obliged to write a business plan, but it is almost indispensable for convincing investors or credit institutions of your business model. The business plan is also a good tool for your planning to keep track of the goals you have set yourself, the resources you need and the financing model you have chosen. Therefore, you should always revise your business plan at regular intervals, even after you have set up your business. This way you can plan your business strategy for the short, medium and long term and calculate the necessary resources correctly.

Run a tight ship when it comes to your finances

To get your business off to a successful start, you need customers who want to use your product or service. For this, you should know your target group exactly to be able to promote the product or service accordingly. You may also have to consider cold calling to make initial contacts.

Another way to win customers is to network. Make contacts with other entrepreneurs, for example, by participating in special trade fairs for your industry. Optimally, you may even find connections to other businesses so that you can complement each other’s products and recommend them to your customers.

Make friends & influence people

To get your business off to a successful start, you need customers who want to use your product or service. For this, you should know your target group exactly to be able to promote the product or service accordingly. You may also have to consider cold calling to make initial contacts.

Another way to win customers is to network. Make contacts with other entrepreneurs, for example, by participating in special trade fairs for your industry. Optimally, you may even find connections to other businesses so that you can complement each other’s products and recommend them to your customers.

Create personnel management a system

Many entrepreneurs cannot usually afford to employ staff immediately after setting up their business from a sound economic point of view. However, if the business is doing well, sometimes you need support fast and may need to hire a few employees. In this case, you should know what an employment contract should contain for it to be legally valid.

Register a trademark

After buying a domain for the company website, many founders miss the step of protecting trademark rights at an early stage. You can protect your services or products from imitation by investing a few hundred euros.

You can also protect your company name!

If you plan to file a trade mark application at the German Patent and Trade Mark Office (DPMA), you should always first thoroughly check whether the desired trade mark is still available or has already been protected by others in the same or a similar form.

The Master list of all Company Formation articles can be found here