Setting up a business

Setting up a business is a bold step, and one that requires meticulous planning. Once you have your business idea, you will need to determine all of the legal, technical and sector-specific requirements associated with it. This will include taking into account your residence status and social security protection entitlements. You will also need to clearly define the scope of the self-employment you will be undertaking. Will it be a full-time or part-time job? What legal form would you prefer for your business? Will you need to employ staff? Will you need commercial premises to set up your business? Will you need to bring in outside creditors or funding institutions to realise your plans financially?
These are just some of the questions you should consider before starting your new business. The check list provided below is designed to give you an overview of the requirements and conditions you will need to meet, and what factors you should be aware of.
Please note that the list is not exhaustive and, depending on your business objectives, choice of legal form, etc., other factors may come into play. We recommend making an appointment with one of the Chamber of Commerce and Industry (IHK) Chemnitz’s Starter Centers or a similar service to obtain further, more personalised, information.

Residence/settlement permit

Under § 21 of the German Residence Act (AufenthG), you will need at least a residence permit in order to be self-employed in Germany. This can be converted into a settlement permit after three years, provided your plans have been successfully realised and you can support yourself independently. In the event that you already have a settlement permit, you can start your own business and become self-employed at any time.
Your immigration authority will be able to inform you of the relevant requirements.

Commercial law and specialist requirements

Some kinds of business require you to have a particular permit, to enrol on a register, hold a certain vocational qualification, e.g. for handicraft businesses, or a certificate of competence. For this reason, make sure that you check with the IHK or the relevant Regulatory Agency and Trade Office (Ordnungs- und Gewerbeamt) in advance to determine whether you will need additional documentation to start your business.

Health and pension insurance

All self-employed persons in Germany are legally required to have a health insurance policy. This can be either with a private or statutory insurance company. Certain groups of people are covered by statutory pension insurance. For those who are not, there is the option to either enter into the scheme voluntarily or take out a policy privately.
For further information on the conditions, contact any health insurance company or the German Statutory Pension Insurance Scheme (Deutsche Rentenversicherung Bund).

Grants and development loans

If you are in receipt of benefits from the Federal Employment Agency (Agentur für Arbeit) and/or the Jobcenter, you may be able to apply for funding to start your business. This funding is provided mainly to help you cover your personal living expenses. You can apply directly through the Federal Employment Agency or the Jobcenter. You will need to provide your financing plans and CV as well as a clear, informative business plan that has been deemed feasible and sustainable by a competent authority.
If you require outside investment to realise your business plans, you can also apply to development banks. In Saxony specifically, the Sächsische Aufbaubank awards loans of up to €20,000 to start-up founders and new companies. The KfW Mittelstandsbank also offers a range of programmes for start-up projects. Your bank will be able to provide further information.

Business plan

Your business plan or business concept should help you to structure your start-up project, identify any weak-points and gain an overview of your financial resources. You will need to provide one if you decide to apply for outside investment or a grant. The basic components of a business plan are:
  • A description of your objective
  • Information about the founder (CV)
  • Business purpose
  • Target group and customer benefits
  • Market and competition
  • Location
  • Pricing policy
  • Marketing and sales
  • Company organisation
  • Financial planning
Further details about the structure and content of a business plan can be found here.

Reporting obligations

If you decide to go into self-employment, you must report this to the relevant Regulatory Agency and Trade Office for the place in which your business is located, unless you will be working as a freelancer (see § 18 of the Income Tax Act [EStG]). Depending on the legal form you choose, you may need to list your business on the commercial register (Handelsregister). You will also need a tax number for the company, which you can apply for through the relevant tax authority using the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung). If you intend to employ staff, you will need to apply for a company number from the Federal Employment Agency, and you will also be subject to compulsory membership in the relevant Employer’s Liability Insurance Association (Berufsgenossenschaft).