Self-Employment in Germany
Being self-employed in Germany is necessarily tied to residence. Without some sort of residence permit it will be difficult, if not impossible, for an individual to establish a business in which they are self-employed. (See the separate article on Residence Permits).
It is strongly advised to consult with experts in the field of residence permits and experts schooled in labor, business and tax laws before becoming self-employed in Germany.
Residence permits are usually easily granted for highly specialized professionals, e.g.: scientists, professional experts or specified senior mangers etc. But other qualified professionals can also be granted residence permits.
If you want to move to Germany and be self-employed and you meet certain criteria, then you most likely will be automatically issued a residence permit (for both you and your family) if you can show that your business will have a positive effect on the German economy.
This criteria would usually be related to the type of business, your qualifications and whether or not you may be doing something that could be done by a German national or some other qualified resident. The local Foreigners Office would most likely ask for certain documentation and then may well check with the local Chamber of Commerce or other organizations to see whether or not your business is specialized enough and economically viable. If your business is deemed acceptable you could be issued a residence permit. However, there may be limitations as to what you can do and where you can do it. In other words, your permit may restrict you to a certain type of self-employment in a certain geographical area. This decision is up to the local authorities.
There are a few additional steps that must be taken if you are the spouse or family member of an expatriate or otherwise considering working or setting up your own business in Germany. Once again, the residence permit enters into the equation. If you have a residence permit that restricts your work options, you must somehow have those restrictions lifted. It would be advisable get legal assistance to see whether or not the restrictions can be lifted or changed to allow you to start a business.
Something else you must be aware of if you are considering setting up your own business or working in Germany is the recognition of foreign qualifications in various professions. The best contact for information in this area is the German Federal government.
Once all the residence permit questions are sorted out, there are a number of steps that have to be taken to establish and register a business.
First of all, a determination must be made as to the exact classification of your work. Rules and regulations may vary depending on what sort of business you plan to engage in. Like the residence permits, this can be complicated. And, again, it is be advisable to get expert, professional help in finding out just exactly where your profession fits in.
Free-professionals (Freiberufler) are those who have academic training - lawyers, doctors, pharmacists etc. Other professions may be considered to be "trades". Then there are the "crafts" - such as butchers, barbers, florists etc. And then there are the "freelancers" - writers, artists, performers, independent consultants etc.
Your work classification is important because it may very well have an effect on your tax liability, the various certificates and licenses you may need to acquire and whether or not you may be required to be a member of a professional association or other "chamber".
For example, if you intend to engage in what may be classified as a "trade", you should check with the local Trades Office (Gewerbeamt). You will most likely be required to register your business and get a certificate of registration (Gewerbeschein). To get this certificate you will have to demonstrate that you are of reliable character and qualified to run your business. Having a Gewerbeschein obligates you to pay local trade tax (Gewerbesteuer) and requires that you become a member of the local Chamber of Commerce (Industrie- und Handelskammer - IHK) and to pay a yearly membership fee to them.
Free professionals may be exempt from certain registration procedures at the Gewerbeamt as may persons engaged in agriculture or forestry. But there may be other regulations and procedures that are required to be followed.
To engage in "Crafts" you may need the approval of a trade association and establish the fact that you meet German standards relating to specific qualifications for your chosen craft.
"Freelancers" fall into a category all their own and have yet a somewhat different set of regulations, laws and procedures that must be followed.
The importance of getting expert advice about being self-employed in Germany cannot be stressed enough. Laws, rules, regulations and procedures are always undergoing change. To avoid misunderstandings that may result in heartache and trouble with the authorities you should get professional assistance.
The German Federal Ministry of Economics and Technology has good information in English on starting up a business at this link: www.existenzgruender.de/EN/Home/inhalt.html.
Should your business flourish and reach a certain level of turnover or profitability you may want to consider incorporating in Germany.
Different Circumstances for some Foreign Residents of Germany
The overwhelming majority of legal foreign residents in Germany are in the country with one of the standard residence permits issued by the German authorities allowing them (and their eligible family members) to live in Germany while working for a German company or studying at a German school. Residency is also normally granted in most cases to eligible EU citizens and spouses of German nationals.
There are, however, a number of foreigners that are in Germany legally under other circumstances. Uniformed military (and their accompanying family members) from the USA and NATO countries are allowed residency under various Status of Forces Agreements (SoFA) negotiated with the German government. Civilians that work for the various defense departments or ministries as well as diplomats and other foreigners assigned to their country’s embassy or consulates may also have a different status (as do their family members). A different status may also be afforded to foreigners who work in Germany for companies that contract with the various foreign military and diplomatic offices of other countries. Some residents that are self-employed may also fall under this category.
Issues regarding residence permits, health insurance, tax status and filing requirements, spousal employment, eligibility for German social benefits, German driver’s licenses, proper registration procedures and others things may raise questions from this group.
For example, if a spouse of an active duty USA military member takes a job with a German company would he or she be eligible for German benefits? What sort of tax issues would that present? Or suppose a person from the USA, UK or Canada is working for a home country based company that has a contract to perform services in Germany? Would health insurance issues and benefits be involved?
These are just a couple of examples of the sort of situations that those in Germany under “different circumstances” may face.
There are specialized companies that have in-depth knowledge of these complicated issues and can guide people through the bureaucratic maze to make sure that they are in full compliance with German regulations and are able to take advantage of the various benefits that may be available to them.
If you think you may fall under any of the “different circumstances” you may want to get in touch with experts regarding legal, accounting and tax matters who can offer advice and help.