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Business start ups in Germany
- Entire chapter
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Do you have a business idea that you want to turn
into reality? Then don’t hesitate – your
chances for success as an entrepreneur in Germany
are good. Not only have many other foreigner entrepreneurs
paved the way for you, but Germany can also offer
your business a market of customers with strong
purchasing power, excellent infrastructure, dependable
economic conditions, and in comparison to other
countries, falling labor costs.
The following
chapter will give you some guidelines for starting
your own business in Germany and provide you
with contacts to possible business partners who
can help you set up shop while avoiding unnecessary
hang-ups.
Getting started
Let’s first assume
you have answered the basic market questions
surrounding your product or service: What is
my target group? How big is the potential market
for my business? Who are my possible business
partners? Where will my business be located?
How does my timeline look? How can I raise the
capital that I will need to get started? In addition
to these, you will still have many open questions
concerning the relevant legal aspects and market
conditions that affect your business idea.
Step
1: The preliminary interview
Your first stop
for starting a business in Germany should be
the “Industrie- und Handelskammer” (Chamber
of Industry and Commerce) See: www.IHK.de.
In comparison to other business organizations and
other industry-based groups, the IHK supports
members at 81 locations in Germany and represents
3.6 million businesses that are all legal members
of the IHK. This fact makes the IHK independent
of any single interest group and creates a strong
force for dealing with political powers and bureaucratic
permit offices.
The IHK’s partner organizations,
which are known as “Außenhandelskammern“ (Foreign
trade offices) can also be found in locations
outside of Germany. See: www.AHK.de.
These 120 offices are a good starting point for
receiving initial information concerning a start-up
in Germany.
It is worth your while to seek out
your nearest IHK-office as the business-venture
experts there can provide you with information
on the local market, funding possibilities, and
relevant contacts for start-up advice and detailed
legal matters. We recommend that you set-up a personal
consultation with one of their specialist early
in your venture process. Then, prepare a model
of your business idea for the meeting and work
out the answers to any questions that could come
up. An initial meeting with the IHK is also important
because you are sure to come into contact with
them at a later time. A German law requires the
IHK’s approval of any business applications
that are forwarded from district courts and foreign
offices (at which you must file for residency
approval).
Furthermore, you should contact the “Amt
für Wirtschaftförderung” (Office
of Business Advancement) which is most likely
located in the courthouse of the city in which
you hope to locate your business. Here, you can
get more detailed information on requirements
for your chosen business site, local funding
possibilities and local economic conditions.
For those who are in a hurry to get their business
established, but who still want to keep the founding
costs within budget, consider the local offers
of any existing entrepreneur centers. At such
centers, you can rent office space while also
increasing your networking potential with other
firms located within the center.
Step 2: Founding
the Business
It is especially important for foreign
entrepreneurs to seek the advice of a business-venture
consultant when it comes to the formalities of
setting up a business in Germany. If you decide
to seek advice beyond what is offered by the
IHK/AHK, you can also contact private consultants
that specialize in business start-ups. One source
for finding such a consultant is the “Bundesvereinigung
deutscher Unternehmensberater” (Confederation
of German Management Consultants). See: www.bdu.de.
You can also search the website www.unternehmensberaterscout.com.
The
following questions are especially important
for foreign entrepreneurs and business capitalists.
They can be better assessed with the help of
a consultant:
- Which conditions
must be met in order to start a business in Germany?
- What
start-up costs must the founder absorb?
- In
which legal form is it best to form my business?
- How do I limit my liability?
- What
do I need to consider when registering my business
and how long does the registration process take?
- What
legal aspects do I need to know about?
- Who
can help me develop a plan for the firm’s
foundation and how much does a consultant for
such a purpose cost?
Step 3: Running the Business – Specifics
for Foreigners
To a large extent, all individuals
have the right to open a business in Germany,
as is documented in the "Gewerbeordnung“(§ 1Abs.
1 GewO) (Trade, Commerce, and Industry Regulation
Act). This law is valid for all who wish to manage
commercial operations independent of their status
as a real or legal entity or as a German or foreign
national. Limitations do exist, however, for
foreign nationals who do not hold an EU passport.
These individuals are subject to the “Ausländerrecht” (immigration
law) with jurisdiction being at the local foreign
office at which the individual is registered
in Germany.
Foreigners still residing in their
home country without a valid “Aufenthaltserlaubnis” (Foreign
Visa) for Germany, must apply for such a visa
BEFORE arriving in Germany. Employees at your
home country’s AHK can help you with this.
Your application will be forwarded from there
to the foreign office in your future place of
residence in Germany where it will then be reviewed
before being accepted or rejected. In the case
of acceptance, a foreigner will receive a foreign
visa for a period of three years after which
it may be renewed. However, the following prerequisites
must be met by your business:
- public interest
or a special local need for the product or service
exists.
- the business operation makes a positive
contribution to the economy.
- the project is
financed through personal capital or an approved
form of credit.
The approval of your business could very well
falter based on criteria 1 or 3. Here, the German
regulation offices allow themselves much leeway
in their decisions. In order to lower your risk
of rejection, be sure to discuss these criteria
with your consultant as they apply to your business
concept. As far as the second criteria goes,
if at least 1 Million Euro are invested in the
project or 10 jobs are created by your business,
it has been fulfilled. Don’t worry, though,
criteria 2 can also be fulfilled on a smaller
budget.
Foreign residents who wish to start a
business and already hold a valid visa should
directly contact the foreign office at which
they are registered. The local IHK or Handwerkskammer
(Chamber of Trade) will usually be notified by
the foreign office and asked for advice on the
business aspects of your venture idea. The criteria
that can be levied in such cases are clearly
outlined in the “Informationsleitfaden
IHK” (The Information Guidelines of the
IHK)
At
this point, the foreign office will decide whether
your application should be approved based on
their “best judgment”. In these instances,
they decide independently of the IHK. The IHK
only plays a supporting role to the foreign office’s
decision, and often, the final decision is not
shared with the respective IHK. The decision
regarding the business venture is then sent in
writing to the applicant directly from the foreign
office.
Tip: the detailed and relevant specifications
of the German IHKs can be accessed with the search
phrases “Existenzgründung für
Ausländer“ (Livelihood Establishment
for Foreigners) or “Aufnahmen einer selbständigen
Erwerbstätigkeit in Deutschland“ (Founding
a self-employed business in Germany).
Which laws
and regulations should I be familiar with when
starting my business and hiring others? Without
going into detail, this is a brief list of the
most important laws with which business owners
in Germany should be familiar. These are especially
important for those owners who wish to hire external
employees:
- General Equal Treatment
Act (Allgemeines Gleichbehan-dlungsgesetz – AGG)
The goal of this act, which was first implemented
in August 2006, is to prevent and eliminate discrimination
on the basis of race, ethnic origin, gender,
religion or world view, handicap, age, or sexual
identity. For more information, see: http://bundesrecht.juris.de/agg/
- Working
Time Directive (Arbeitszeitgesetz – ArbZG)
This law regulates the maximum amount of time
an employee is permitted to work per day and
determines when work breaks must be taken and
how long they should last. It also guarantees
both work-free Sundays and holidays and contains
protective regulations for night and shift work.
For more information, see: http://bundesrecht.juris.de/bundesrecht/arbzg/
- The
German Civil Code (Bürgerliches Gesetzbuch – BGB)
This comprehensive list of basic laws also includes
regulations for employment including those that
apply to work contracts. These include the following:
- Termination of Employment (Beendigung
des Arbeits-verhältnisses)
(§§ 620 bis 628)
- Legal Termination
Period Notice (Gesetzlichen Kündigungsfristen)
(§ 622) o Written clausal requirements for
termination or dissolution contracts and temporary
written employeement contracts (Kündigungen
oder Auflösungsverträge sowie befristete
Arbeitsverträge bedürfen der Schriftform)
(§ 623 BGB)
- Right to an official work
certificate (Anspruch auf ein Arbeitszeugnis)
(§ 630) o Workers‘ rights in the case
of a company takeover (Ansprüche von Arbeitnehmern
beim Betriebsübergang) (§ 613)
- Parents’ Time
and Parents’ Funds (Elternzeit
und Erziehungsgeld - Bundeserziehungsgeldgesetz –BerzGG)
German law gives parents the right to a leave of
absence from their place of work during a
period known as “parents’ time”,
which applies to the first three years following
a child’s
birth. During this time, either the mother
or the father of a child can spend up to
three years at home with the child. In the
first year, a working parent is guaranteed “Erziehungsgeld” (Parents’ Funds),
which compensate one parent for two-thirds
of his or her salary up to a certain amount
(currently set at € 25,200). For more
information, see: http://bundesrecht.juris.de/bundesrecht/berzgg/
- Trade,
Commerce, and Industry Regulation Act (Gewerbeordnung – GeWO)
Among other things, this act lists the general
regulations for employment in Germany. These
apply to all employees and include freedom
of contract, an employer’s right to
issue directives to employees regarding
working time, working place, etc., benefits
included in the salary, a key of abbreviations
for understanding salary invoices, as well
as the right to a work certificate, and details
on the non-competition clause. For more information,
see: http://bundesrecht.juris.de/bundesrecht/gewo/
- Job
Protection Act (Kündigungsschutzgesetz – KSchG)
This law limits the ability of an employer
to terminate an employee by granting workers
the right to a termination review by the
German Labor Court within three weeks after
a termination is issued. This right is, however,
limited to the termination of employment
contracts that exist for more than six-months
and to places of business with at least 11
employees. For more information, see: http://bundesrecht.juris.de/bundesrecht/kschg/
- Expectant
and Nursing Mothers Protection Act (Mutter-schutzgesetz – MuSchG)
This law protects pregnant women before and
after the birth of a child by prohibiting
employers to assign physically strenuous
tasks at work and guaranteeing a paid leave-of-absence
during the period which begins six-weeks
before the birth of the child and ends eight-weeks
afterwards (twelve weeks in the case of multiple
births). The act also grants women the right
to lactation breaks once they have returned
to work. During the aforementioned period
of time, salary and job protection laws apply.
For more information, see: http://bundesrecht.juris.de/bundesrecht/muschg/
These laws should give you an impression
of the most important regulations for everyday
business practices and dealings between employers
and employees. Do not be overwhelmed, but
remember the old German saying: “Es
wird alles nicht so heiß gegessen wie
es gekocht wird” (Food
is not eaten at the same temperature that
it is prepared.) In other words, things are
never as bad as they seem. On this note,
be sure to discuss any questions that you
have with your business consultant.
You will find 35 other interesting
articles in our book.
Enjoy reading!
Keywords: business
start up in germany,
sucessful with german clients, german business
network, german business partners, german business
practices , german business etiquette and manners
, german business culture characteristics , german
business culture , german business correspondence
etiquette , business etiquette in Germany , business
communication germany etiquette
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