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Want to Start a Business in Germany as a Foreigner? Check Out this Guide

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Germany is a country in Europe known to be a world global power. In the 21stcentury, the country has done well in terms of economics where it is the fourth largest economy by nominal GDP. It is the 5thlargest economy in the world by Purchasing Power Parity.

The country’s leading economy can be largely attributed to the measures taken by the government when it comes to economic policies. The country has also done extremely well in research and innovation and that is the reason why it is the 3rdlargest country in terms of both export and import.

A free market policy that upholds the highest standards of living by offering healthcare, social welfare and free education at University level.

Germany is the founding member of European Union and is also a member of many other international organizations like G-8, G-20, OECD, NATO, and many other economically beneficial groups that helps it in making trade across nations easier and profitable.

The country also has very skilled labors, has the lowest unemployment rate among EU nations and is also the largest economy in EU. Innovation leads the country’s economy as it is home to many MNCs that are major source of economic gain and employment.

Germany houses 28 of the top 500 multinational companies. Some of these MNCs are world renowned especially in automobile and electronic sector. Volkswagen, Audi, Mercedes Benz are some of the big car companies that are born in Germany.

Apart from these MNCs, Germany has also focused on MSMEs that are small enterprises which may not have huge turnovers but are capable in providing employment and sufficient turnover. The country also has policies that support startups which can also be tech startup or innovation driven.

Germany in Ease of Doing Business:

Germany ranks at the 24thspot in ease of doing business. The government of Germany has focused a lot in making ease of doing business much easier. Here are the ranks of Germany in doing business at various Parameters.

  • Starting a business: 114thrank
  • Dealing with construction permits: 24th
  • Getting Electricity: 5th
  • Registering Property: 78th
  • Paying taxes: 43rdrank
  • Protecting minority investors: 72ndposition
  • Resolving insolvency: 4thspot
  • Getting Credit: 44th
  • Enforcing Contracts: 26thspot
  • Trading across borders: 40thrank

Germany ranks 5thin world competitive index while it ranks at 4thspot in corruption index which is the lowest making it a corruption free country. Germany also does extremely well on various other parameters making it one of the best performing economies. Now if you are convinced about how doing business in Germany will help you in boosting your business and income then here is the whole procedure of doing business in Germany as a foreigner.

Starting with the Basics:

The first step before starting any business is deep research regarding the business. This is known as feasibility analysis test which is conducted in order to get a very brief, comprehensive and precise information on starting your business. If you are starting a business in Germany as a foreigner then what will be the conditions for you while doing so. There are various questions whose answer will be given in the report. You must hire a prominent team that will conduct the feasibility analysis.

A group of professional people should be hired as this report will be the base of your business and its success or failure. There are few objectives that are very essential in the report. They are:

  • How the location will impact your business?
  • Is the particular business at that particular place will be useful?
  • How secure will be the business?
  • What type of business will succeed in such place?
  • Are all required essentials for the business available?
  • Capital investment required?
  • Minimum time required to start business
  • Procedure of starting the business will all needed details
  • Calculation of return on investment and the time needed for it
  • Other miscellaneous yet important points if required

Thus a feasibility analysis report will have all the answers regarding your business needs.

Business Plan and its Importance:

A Business Plan is the manual of your business that contains all the details regarding your business. It carries some important aspects of your business such as:

  • The objective of your business
  • Capital Investment
  • Type of business
  • Area of operation
  • How it will benefit the country where you are starting your business
  • Some other technical details of your business, etc.

You need to get your business plan written by expert who knows all the aspects of writing a plan. The importance of a business plan is essential for your business as it will be the manual that you will present to your clients, people with whom you are interacting during your business startup, authorities while completing the process of business, and at many importance times. It will also be essential while you are applying for your visa in Germany. Agencies ask for a comprehensive business plan in order to grant you work visa. It will also be necessary while getting your loans sanctioned.

Getting your Visa:

Nationals who belong to Schengen countries and EU are not required to obtain any visa as the Schengen visa that allows a national of Schengen country to stay and work in Germany is enough to enter Germany. Countries that are not the member of any of the two groups will have to apply for a business visa that gives the applicant 6 months of stay in Germany.

You can also stay for 3 years if you apply for residential stay and it can exceed or renewed if your business is doing well. Here is the whole process to apply for Visa in Germany.

You need to fill the application form for apply to visit Germany under the Business Visa program. After this you need to visit the embassy of Germany or consulate in whichever country you permanently reside. It doesn’t takes much long to fill the form and apply.

Ensure that you have submitted all the required documents in sequence as asked and that your application form is complete and signed. The form will also be filled online and after that your biometric details will also be taken. This requires the fingerprints of all your ten fingers. For minors under 18, their parents are required to sign the form on their behalf.

Around 60 euros are generally paid as fees but it may subject to change which you can know while filling the form. It will take 10-15 days’ time to process your Visa given the officers are satisfied with your information.

Requirements for your Visa:

You will be required to submit:

  • Your two photographs
  • Bank account details
  • Details of company incorporation
  • Valid passport of your country from where you belong
  • Your passport should be valid for at least 3 months from the last day of your stay
  • Details of your character, personal record, family records
  • Details of your stay, reservation of ticket
  • Travel insurance plan
  • Financial detail of yours and your business
  • Complete details of your business that includes business plan

For other details you can visit the official website of Ministry of External Affairs, Germany.

Incorporation of your Company or Business:

You need to be clear about your business and how will you start it. There are several types of business that operate in Germany. You need to choose what fits best for your business. There are many types like:

  • Proprietorship
  • Limited Liability Company
  • Partnership
  • Limited Partnership
  • Joint Stock Company
  • Private Limited Company
  • Association, Trusts, etc.

Choose what is best for your business. In order to do such things like choosing of business entity, legal issues like opening your business, acquiring land, business space, hiring employees, setting up your business, etc. you need to hire a legal advisor or promoter who is well versed with the system of Germany.

Though you can also do such work but it would be wastage of time and energy as an appropriate person will do this job with ease and precision. Such advisor will also tackle issues related to establishing a business, getting clearance, permission and license, obtaining certificates, business number, tax registration number etc.

Taxation in Germany:

There are several taxes in Germany but for businesses one has to pay corporate tax that has a slab of 15%. Apart from this there is a solidarity charge of 0.825% that needs to be paid as well. For businesses selling goods and services, they need to pay Value Added Tax at every point that has rate of 7% to 19% on various goods designated under particular slab. There is also income tax and church tax that is subject to conditions.

Germany also has some policies, special business initiatives, exemptions from taxation, policies encouraging startups and innovators in order to create pro-business atmosphere.

Types of Permit you need while Starting your Business:

There are some permissions and licenses that you need while starting your business. Here are some list of permits that is required for starting a general business. Some more and special permits may be required if your business is of special kind like manufacturing hazardous items, chemicals, etc.

  • Fire Department Permit
  • Permit from Environment authority in several cases
  • Health Department Permit
  • Sign and Advertisement Permit
  • Sales tax license
  • Country Permit

Apart from this, there are many more aspects you need to fulfil while doing business in Germany. Incorporation of company will also require you to choose your company name, logo, brand, which will further require you to register it as intellectual property. For all such issues you need to hire an efficient lawyer.

Agencies you will Contact while starting your Business:

Many times it becomes hard to figure out where you will have to go in the process of starting your business. Though you will be helped by officials and your advisor but here are some agencies where you need to contact while incorporating your business.

  • Chambers of Commerce and Industry
  • Company Registrar
  • Federal Ministry of Economic affairs, Labor, Energy and Social Affairs
  • Labor Agency
  • Other Ministries for Permission

Challenges in Germany for your Business:

Despite being a leading economy you may also face some challenges while doing business in Germany. Here are few such challenges.

Ruthless Market: Already being a developed nation and having a very competitive market, the business atmosphere in Germany is ruthless. There are many entrepreneurs and businesses working in the country that will be a challenge to your business. There is hardship for failure as you will not get any chance to recover. Be prepared therefore.

High Standard of Living:The country has very high standard of living making it difficult for foreigners to live and start a business. If your business isn’t doing well then being in Germany and managing the expense is quite challenging.

High Capital Investment Required: Being an expensive country one requires high capital investment in order to incorporate a business. It becomes challenging because if one fails a bit then there is lot to lose.

Other Challenges in Starting a Business: Starting a business isn’t easy in Germany as it ranks at 114thspot in that category. There are also many challenges in getting credits as it ranks at 44thspot. In paying taxes it ranks at poor 43rdposition while in registering property it ranks at 78thposition which is quite poor thus making it a challenge.

Advantages of Doing Business in Germany:

  • Being a developed economy it has lots of opportunities for startups
  • The country values entrepreneurs and startups thus supports them at various levels
  • It is pro-business and the government and officials are very friendly with you in your business prospective
  • The country is least corrupt ranking at 5thspot making it easier for doing business
  • The country is an open economy giving opportunity to all to try their hand in business and succeed.
  • It has highly developed infrastructure and a dedicated business zone making it luxurious for foreign business to establish and run business
  • There is lots of incentives that the government provides to startups, innovation businesses and those businesses that create ample jobs
  • Policy of the government makes doing business easier and efficient
  • There is social and financial security for your business and being a moderate economy it offers stability for business.

With such advantages it is evident for you start looking for business opportunities in Germany.

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