How to found a startup in Germany: What you need to know

7 min read
06 Apr 2021

ermany’s capital city has a reputation for entrepreneurial spirit and a leading startup ecosystem, but while this remains a key part of the country’s attraction, there is much more to the nation than Berlin. Frankfurt’s thriving business community fosters collaboration among corporates and startups and the city is a hub for fintech. Hamburg is a leader in logistics and Nuremberg in digital health. 

With strong government support and dedicated initiatives to drive innovation and entrepreneurship, there’s a lot on offer for aspiring entrepreneurs and established founders across the nation. Ready to start a business in Germany? Informed by Startup Guide Germany, here’s what you need to know.

What paperwork do I need to live in Germany?

Embarking on a new adventure in Germany includes overcoming some heavy bureaucratic processes: visas, taxes, legal issues and insurance to name a few. The good news is that much of the information is available in English. Take a look at the federal government’s Make it in Germany website to get started. 

EU citizens (including people from Lichtenstein, Iceland, Norway and Switzerland) do not require a visa to live, work or set up a business in Germany. Other foreign nationals need a visa for stays longer than ninety days and may only work in Germany if they have a residence permit that authorizes them to do so. Australian, Israeli, Japanese, Canadian, South Korean, New Zealand and US citizens can obtain such a residence permit once they have arrived in Germany. All other foreign nationals must apply for a work visa before coming to Germany. 

To work as an independent worker, you need an Aufenthaltserlaubnis für selbständige Tätigkeit (residence permit for self-employment). Get in contact with the German embassy in your local area to find out exactly what you need to do or visit the Federal Foreign Office website for detailed information.

On arrival in Germany, your first priority should be to register at the local Bürgeramt (town hall) to register your address and receive a Steueridentifikationsnummer (tax number). You’ll need it to open a bank account and get a phone contract. Health insurance is essential and mandatory, so be sure to look into your options and budget accordingly. The type you need depends on whether you are employed or self-employed and you can choose between public and private plans.

Iron Footbridge, Frankfurt - Sinan Erg / Unsplash

How do I start a company in Germany?

Knowing whether your profession is freiberuflich (freelance) or gewerblich (self-employed) is an important first step. The local tax office will decide this for you when you register your business, which must be within four weeks after your activities start. The decision affects the visa application process, taxes and how to structure your business. 

There are two main company structures: Unternehmergesellschaft (UG) (entrepreneurial company with limited liability) and GmbH (limited liability). The difference between the two is the amount of capital required: UG is €1, whereas GmbH requires €25,000 of initial investment. Unless you are categorized as freelance, you are required to register your business in the Handelsregister (commercial register). 

Check the Recognition in Germany website to see if you need to provide evidence of the level of your professional qualification. If you hold a qualification that's equivalent to a Meisterbrief (master craftsman's certificate), you can proceed with setting up a business. If the authorities deem your qualification insufficient, you will need to complete an appropriate advanced training course. While there are many complexities to tax and legal structures, information is available in English and there are many English-speaking tax advisors and accountants to help. 

For a comprehensive overview of setting up a business, visit the BMWi business startup portal. The government is also developing a portal to offer direct access to all information and services from all sixteen Bundesländer (states) as part of the EU’s Points of Single Contact initiative.

Is it expensive to live in Germany?

Your biggest monthly expenses will likely be rent and household bills. Frankfurt, Hamburg and Berlin have high rental costs at €14.99, €13.04 and €12.87 per square meter, respectively. Renting in the Ruhr area and Nuremberg is significantly cheaper. 

Across Germany, eating out is good value and the average price of a beer is around €3.50 for 0.5 L. Public transportation costs are similar across Germany: in Nuremberg it is €80.10 per month, in Berlin it is €82 and in Frankfurt it is €91.80. 

Wherever you are based, expect to pay around €35–€40 for internet and €40 for a cell phone contract with 10GB of data. 1&1 Internet, Deutsche Telekom, Vodafone and O2 are some of the biggest suppliers. Grocery costs are similar everywhere, but cost of living in Frankfurt can be considerably more than elsewhere: a one-month gym membership averages €69 in Frankfurt compared to €29 in Nuremberg. Check out Numbeo to compare prices among cities.

Embarking on a new adventure in Germany includes overcoming some heavy bureaucratic processes. The good news is that much of the information is available in English.

What should I expect when renting an apartment?

Home ownership is not common in German cities and this makes the rental market fierce. Start searching early at Immo Scout24 and immowelt. Subletting is very common, as is sharing apartments. When you first arrive, a sublet may be the easiest option but make sure to get Wohnungsgeberbestätigung (landlord’s consent) as you’ll need this to use your address when you register as a resident. Search WG-Gesucht, tempoFLAT or local Facebook housing groups to discover the options available. 

There's no denying that finding somewhere to live will be one of your biggest challenges in relocating to Germany. If you see something you like, be prepared to move quickly and have a landlord’s reference, credit rating report and proof of three months' salary ready. 

Be prepared to pay up to three months' deposit and sign a two-year contract. Rental agreements may cover Kaltmiete (no bills included), Warmmiete (some bills included, normally heating) or Nebenkosten (bills in addition to rent). Nebenkosten vary but may include heating, maintenance fees, waste removal and other bills. Housing in the Ruhr area and Nuremberg is significantly cheaper than in Frankfurt and Berlin.

Platz der Republik, Berlin - Sven Przepiorka / Unsplash

How are the German people?

German directness can be a bit of a culture shock for some new arrivals, but it shouldn’t be perceived as rude. Communication in business is very direct: small talk is rare and the style is to get to the point. German people also appreciate straight talking in return, which may be something you need to get accustomed to. 

Business meals often take place at lunchtime and should be viewed as an informal negotiation. Avoid personal topics of conversation and enjoy the moment when you seal the deal. Punctuality and politeness are valued, so arrive on time (if not five minutes early to a business meeting) and always greet a new acquaintance using the polite form of address: Sie. The informal du is used when people feel close enough, but don't be surprised if it never happens. If you're unsure, always err on the side of caution and use Sie. 

English is the most common foreign language and is taught in most high schools, but try to learn at least some German as it will make everyday events such as going to the bakery or ordering in a restaurant much easier. 

Germany is full of ways to fill your spare time, whether that's hiking in the Bavarian Alps, partying until sunrise in Berlin or chilling out in the urban forests of Frankfurt. It’s also a culturally diverse country: The United Nations Population Fund lists Germany as host to the third-highest number of international migrants worldwide, and you’ll find a wide range of backgrounds represented in major cities, particularly in Berlin.

How can I make friends and business connections in Germany?

Germans can be hard nuts to crack, but when you get to know them you'll find them amiable and make friendships for life. If you play sports or have a niche hobby, join one of the thousands of Vereine (clubs or associations) to meet like-minded people. 

In all the major cities, you will find coworking spaces hosting events on a regular basis. Impact Hubs across Germany are alive with social entrepreneurs exploring how to make our world more sustainable. Head to TechQuartier in Frankfurt or ZOLLHOF in Nuremberg to connect with the German tech community and check out Science City Bahrenfeld in Hamburg for science-related opportunities. There are also many innovative smaller hubs springing up across the country, such as Hammerhof in Nuremberg and die Urbanisten in Dortmund. 

To keep up to date with events, Meetup, Eventbrite and local Facebook groups are filled with events in each area. Startup nights, local chambers of commerce and many incubators and accelerators also host regular events.

Want to know more about Germany’s startup scene? Startup Guide Germany includes valuable tips, founder stories and expert insights. Order your copy now!

Written by Rachael Gooby. 

Repackaged by Hazel Boydell.