The Path to a Successful Business Formation
Starting your own business requires not only a good idea and courage but also careful planning and organization. One of the first and most important steps is registering a business. Only those who register their business correctly are legally allowed to operate it. Depending on the industry, certain requirements and regulations must be observed. Here, you will learn what exactly a business is, who is allowed to register a business, how the registration process works, and what special aspects need to be considered.
Who Must Register a Business – What About Trade Tax?
Anyone who operates independently with the intention of making a profit must register a business. This is always the case when you work independently and issue invoices for your services or products. In this case, you need a business license before you start your activities.
Additionally, you are liable for trade tax if your revenue – also known as commercial income – exceeds the tax exemption threshold of €24,500 per year. If your annual revenue is below this threshold, no trade tax is due.
What Exceptions Exist for Business Registration?
Not everyone who works independently must register a business. Freelancers such as artists, journalists, lawyers, or doctors are exempt from business registration. Additionally, businesses in primary production such as agriculture, horticulture, or forestry do not require business registration.
Note: There are hybrid forms! Some freelance activities may still be subject to trade registration, for example, if an architect also sells real estate or an ophthalmologist sells contact lenses. In such cases, a separate registration with the trade office is required.
Activities Requiring Special Permits or Approvals
For certain activities, a government permit or approval is required, as stipulated by the Trade Regulation Act. The relevant authority is usually the public order office of the municipality. Activities requiring permits include, for example, traveling trades or insurance consulting. Approval is required for activities such as manufacturing pharmaceuticals or operating a broadcasting station. You also need special permits for running a driving school, a taxi business, or a restaurant.
Business Registration for EU or Non-EU Citizens: What Needs to Be Considered?
To register a business, you must be of legal age and capable of conducting business. For some trades, proof of certain qualifications, such as a master craftsman certificate, is required. Citizens from EU and EEA countries, as well as Switzerland, face no additional restrictions and can become self-employed in Germany. However, non-EU citizens need a valid residence permit without restrictive conditions.
What Happens If You Don’t Register a Business?
A delayed business registration is considered an administrative offense and can result in a fine of several thousand euros. Additionally, the tax office may demand back taxes, depending on your revenue.
What Costs Are Associated with Business Registration?
The cost of registering a business varies by federal state and ranges from €20 to €60. Additional fees may apply for duplicate copies. Other potential costs include police clearance certificates or extracts from the central trade register, each costing €13. The processing of the registration usually takes up to four weeks.
Many municipalities now offer the option to register your business online, which incurs the same fees as registering in person. The documents will be sent to you by mail.
The Most Important Steps for Business Registration
To properly register a business, several formal steps are required. Here is an overview of the most important steps:
Prepare the Necessary Documents
Required documents include identification (such as a passport), articles of association, or required qualifications (e.g., a master craftsman certificate), depending on the industry. Online registrations require the same documents in digital form.
Submit the Business Registration Application
Business registration can be done in person, by mail, or online. Online registration often offers advantages such as no waiting times and cashless payments.
Complete the Tax Form from the Tax Office
After registration, you must submit a tax form to the tax office within a month to obtain a tax number or VAT ID.
Register with the Chamber of Commerce (IHK) or Chamber of Crafts (HWK)
As a business owner, you automatically become a member of the Chamber of Commerce or Chamber of Crafts. They also require tax registration for your business.
Contact the Occupational Accident Insurance
The occupational accident insurance is also the statutory accident insurance. You must report to the relevant insurance within one week of registering your business.
Optional Registrations
Depending on the industry, further steps may be required, such as applying for a company number from the employment agency or registering in the craftsman’s register.
Changing or Canceling a Business Registration
A re-registration is necessary if you relocate your business or change its activity. Re-registration usually incurs low costs. Cancelling a business registration is free of charge and can be done simply by submitting a form.
Conclusion: The Path to Self-Employment
Business registration is the official starting point for your entrepreneurial journey. By following the steps mentioned and submitting all necessary forms, the process is manageable. If a mistake is made, it is usually possible to rectify it by making a late registration.
If you need assistance with starting a business in Germany, we are happy to advise you.
Important Note: The content of this article has been prepared to the best of our knowledge and belief. However, due to the complexity and constant changes in the subject matter, liability and warranty are excluded.
If you need legal advice, feel free to contact us at 0221 – 80187670 or email us at info@mth-partner.de.
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