Starting a company in Germany: how do you do it, and how much does it cost?

Many people dream of running their own business and being their own boss. Often, however, that excitement and motivation fades when faced with the paperwork needed to get a company registered. Especially in Germany, the bureaucracy can seem daunting. 

But it needn't be so intimidating. Let's break it down. 

What does the founding process look like? How much does it cost? And what are the administrative hoops you need to jump through to get up and running?

In this article, we offer you a comprehensive overview of the path to creating your own company. From the initial planning steps to official registration – we guide you through the entire founding process and show you what really matters.

In principle, anyone who is at least 18 years old can start a company in Germany as long as they are fully legally competent, meaning they are not under full guardianship or subject to legal restrictions imposed by a court.

Non-German nationals can also establish a company in Germany, provided they meet residency requirements.

There are also some legal and technical requirements you must meet to start your own business:

• Choice of legal form: You must choose a suitable legal form for your company (GmbH, UG, AG etc.).
• Minimum capital: Some business forms, such as the GmbH, have specific capital requirements.
• Business registration: The business must be properly registered with the relevant trade office.

If you meet the requirements mentioned above, you can get founding right away. Preparing and planning each step carefully will help you avoid many of the most common pitfalls.

Below, we show you the key steps to launching your own business and laying a solid foundation for your future success.

1. Find and refine your business idea
2. Create a business plan
3. Choose a location and consider infrastructure
4. Create a partnership agreement
5. Choose a legal form
6. Open a business account
7. Register your business
8. Enter your company in the commercial register
9. Take out insurance
10. Apply for a tax number
11. Build a network and sell your product or service

Everything starts with an idea. But how do you ensure that your idea can become a viable business?

Take some time to consider which problem your product or service solves and why customers would be willing to pay for it. Ask yourself the following questions:

• What are my strengths?
• What problems can I solve with them?
• Which target customer do I want to reach?
• How will this idea set me apart from competitors?

If you're happy with your answers to those questions, you're ready for the next step: the business plan.

A solid business plan is not only important for potential investors. It also provides you with a clear direction and helps you define your business strategy, financial planning, and market positioning. It is the foundation for your entrepreneurial success.

A good business plan should include the following components:

• Financial plan
• Financing plan
• A market analysis
• A competitive analysis

Choosing the right location is crucial to your business success, as it significantly influences access to your target audience and revenue sources. A careful analysis of the business location helps assess the geographical proximity to competitors and customers.

Check whether coworking spaces or your own business premises better fit your cost structure and core capabilities. The ideal business location should not only meet logistical requirements but also provide the appropriate legal framework.

A strategic choice of location can enhance your competitiveness and contribute to the long-term success of your business.

The choice of legal form has significant implications for personal liability, tax burden, and the day-to-day management of your company.

From self-employment to GmbH and AG – thoroughly research and choose the form that best suits your business model and goals.

Further information on the appropriate legal form can be found later in the article.

Once you have chosen the appropriate legal form for your company, the next step is to draft the partnership agreement.

If you're looking to become a freelancer (Freiberufler) or a sole trader (Gewerbetreibende), a one-person GmbH, or a one-person AG, you do not need to create a partnership agreement. Similarly, for establishing your company as an OHG, GbR, or KG, drafting a partnership agreement is not mandatory, but highly recommended.

For all other legal forms, a partnership agreement or articles of association is necessary to establish a company. The following must be included:

• Name and registered office of the company
• Purpose and business objective
• Partners and capital shares
• Profit distribution
• Management and representation powers
• Regulation on the transfer of shares
• Special rights

For some legal forms, a notarial certification of the partnership agreement or articles of association is also required for company formation.

For some legal forms, opening a business account is mandatory to establish your company. However, a business account is recommended for all entrepreneurs to separate it from the personal account and also to keep a close eye on your business finances.

When founding a company with legal forms where you need to deposit share capital, you need a business account for founders. In these cases, you cannot register your company in the commercial register beforehand.

Qonto allows you to open a business account for your GmbH or UG in formation, even during the founding phase, for any legal form. Within 15 minutes, you will have completed the digital account opening process with Qonto, and after 48 hours, the business account is usually available to you. You can now transfer the share capital to your new business account for the establishment of your company. For example, the UG share capital is about €1, and that of a GmbH is €25,000.

The formal act of establishing a company is the business registration phase. For this, you need to go to the appropriate trade office (Gewerbeamt) in your city or municipality. Depending on the nature of your business, additional permits or licenses may be required. Research this in advance to avoid unpleasant surprises.

If you are going to operate as a freelancer (Freiberufler), you don't need to register with the Gewerbeamt.

Officially establishing most businesses requires entering them in the commercial register. Exempt from this step are freelancers (Freiberufler), sole traders (Gewerbetreibende), sole proprietors (Einzelunternehmer), small businesses (Kleingewerbe), civil law partnerships (GbR), or silent partnerships. For the formation of all other legal forms, the commercial register entry is a necessary step.

To enter the commercial register, you must fill out an application and submit the founding documents. These include:

• the articles of association
• proof of paid-in share capital using a bank statement

A notary will assist you in preparing your documents, will certify them, and then initiate the entry into the commercial register at the district court. Depending on the legal form, your company will then be entered into commercial register section A or section B. The costs for this range between €70 and €360.

To protect your business, you should take out essential insurance policies. A public liability insurance protects against compensation claims, while accident insurance is important for the protection of your employees.

Working with a professional association and an insurance representative makes it easier to choose the right policies.

For retirement planning, the statutory pension insurance is an option that can be supplemented by private provisions. You should also consider a disability insurance to secure your income.

Consider the nursing care insurance as part of the social insurance obligation. When choosing between statutory and private health insurance, advice from the insurance office is advisable. These insurances are also important when taking out a loan.

After registering your business, the trade office (Gewerbeamt) informs authorities and institutions such as the responsible Chamber of Industry and Commerce (IHK), Chamber of Crafts (HWK), and the tax office about your venture.

All entrepreneurs and every company, including freelancers, need a business tax number (Steuernummer). You do not need to actively apply for the tax number at the responsible tax office if you have registered the business. The trade office automatically forwards your registration, and you will then receive a questionnaire for tax registration.

To successfully establish a business, build a strong network of customers, partners, and suppliers and engage in targeted marketing.

Utilize social networks like LinkedIn to boost your acquisition efforts and communicate your value proposition. Develop compelling marketing and sales strategies that support your revenue model.

A professional company logo and an appealing company website are extremely helpful for brand building. Consider franchise options to benefit from existing networks.

By effectively using social media and maintaining your business relationships, you create a solid foundation for the long-term success of your company.

The choice of business form has far-reaching implications, whether in terms of liability, tax burden, or administrative effort. There is no one-size-fits-all best business form, as it strongly depends on your individual business model, your goals, and your personal preferences.

Below, we offer you an overview of common legal forms and their respective advantages and disadvantages.

Choosing the right legal form requires careful consideration and planning. You may want to seek professional advice, for example from a lawyer or a tax advisor, when making this decision.

Starting a company in Germany is always associated with financial costs that need to be carefully considered and calculated in advance. The actual costs of setting up a company depend, on one hand, on the type of company chosen, and on the other hand, on the individual personal requirements of the owner.

Below, we outline the basic costs for the most popular legal forms.

Want to understand self-employment in Germany? Read this dedicated article for all you need to know.

Establish your GmbH or UG in just a few days – with our fully digital incorporation process and personal support in English for legal and tax questions. This way, you can get the right business account for your incorporation and deposit your share capital directly online.

Financing is one of the central challenges of creating a company. Without the necessary start-up capital, it is difficult to get your business up and running.

But how do you get the money you need? There are various financing options for your business idea, and depending on your business model and needs, some forms of financing may suit you better than others.

• Equity: Funds you contribute yourself, such as savings or assets.

• Debt capital: Loans from banks or other financial institutions.

• Business Angels: Private investors who not only provide capital but often also bring know-how and networks.

• Venture Capital: Investors who invest larger sums in start-ups, usually in exchange for company shares.

• Crowdfunding: Financing by a large number of people, usually via online platforms.

• Subsidies: Government or regional grants, loans, or guarantees.

• Start-up competitions: Prize money and support through winning business competitions.

The choice of the right financing depends on various factors. Thorough research and consultation can help you find the best option for your project.

Secure the financing that ideally suits your company's needs – centrally and clearly directly in the Qonto app.

Company founders in Germany can access numerous government funding opportunities to ease the transition into self-employment. These programs offer financial support, advice, and more to secure the foundation of a business.

• Start-up Grant: The start-up grant from the Federal Employment Agency supports unemployed individuals in their step towards self-employment, providing financial security for up to 15 months.

• Entry Money: Recipients of citizen's income can apply for entry money at the job center, which is paid in addition to the citizen's income to promote the start-up.

• Development Loans (KfW): The Kreditanstalt für Wiederaufbau (KfW) offers low-interest development loans to ease the financial entry.

• Guarantees: Guarantee banks take on the default risk in the absence of securities to improve access to loans.

In Germany, company founders generally have access to numerous funding programs that offer financial support and advice.

• The EXIST Start-up Grant supports technology-oriented start-ups from universities with monthly grants and additional funds for material costs and coaching.

• The Start-up Grant from the Employment Agency is aimed at unemployed individuals who want to become self-employed, offering monthly grants based on previous unemployment benefits.

• The ERP Start-up Loan StartGeld from KfW allows loans up to €125,000 for investments, even without equity.

• The INVEST Grant supports business angels with a 20% grant on their investment in start-ups.

• The High-Tech Start-up Fund provides growth capital for innovative start-ups.

• The Micro-Mezzanine Fund Germany provides equity capital up to €50,000, while the Go-digital program offers grants for digitalization projects.

Starting a company is not only a step towards entrepreneurial freedom but also comes with tax obligations. As an entrepreneur, you are responsible not only for your business but also for the correct payment of taxes.

Depending on the type of your business, the chosen legal form, and the business volume, different taxes may apply. It is therefore essential to address the issue early on to avoid unpleasant surprises and take advantage of possible tax benefits.

Taxes that may apply to businesses:

• Income tax: For sole proprietors and partnerships on the business profit.

• Corporate tax: For corporations like GmbH or AG.

• Trade tax: For commercial activities, depending on the business location and trade income.

• Sales tax (value-added tax): On the sale of goods and services.

• Property tax: For business-used properties.

• Payroll tax: For employees, deducted directly from wages.

• Real estate transfer tax: When purchasing land or real estate.

Manage accounting and taxes directly in Qonto – thanks to our convenient integration with DATEV.

When starting a business, you face risks such as high initial investments and startup costs, which can strain your liquidity. Revenues and profits are often uncertain at the beginning, which becomes a challenge, especially when cost drivers like health insurance contributions or unexpected expenses arise.

There is also the risk of insolvency if the company's capital is insufficient to bridge financial gaps. While self-employment or freelancing offers opportunities, it also requires protection against seizure. Careful planning and cost control are crucial to minimize these risks and ensure the success of your business startup.