Many African entrepreneurs can count on a stable political and economic environment in Germany. Here’s how you can start a business as an African in Germany and what you need to know to help you get started;
How to start your business
First thing you need is to validate your business, making sure there is a market for it in Germany. There are plenty of online forums and business advisory services that can help you with these questions.
Read also: Why are there few African businesses in Germany?
Company type
Next step is choosing a legal form for your company. These are the most popular forms in Germany, apart from structures suited to sole traders and small partnership businesses. These are the 4 types of business entities in Germany:
Limited liability corporation (GmbH)
The limited liability corporation (GmbH) is the most used business entity in Germany. Minimum share capital required is €25,000, that can be made up of contributions in kind. When incorporating the GmbH, at least €12,500 must be contributed. The company requires one director and shareholder.
Read also: 5 key documents needed to live and work in Germany
Mini-GmbH (AnUnternehmergesellschaft -UG)
A “mini-GmbH” (AnUnternehmergesellschaft -UG) can be incorporated with as little capital as €1 or any amount up to the €25,000 required for a regular corporation (GmbH). This type of company is considered popular among international investors, who aim to find low investments as an advantage in their strategy to develop and grow the business in Germany. Quarter of a mini-GmbH’s annual profits is to be contributed to its capital reserves until they reach €25,000, at the point the UG can become a regular GmbH.
Stock Corporation (AG)
This corporation form is the standard for major public companies in Germany. The company may have a minimum of one shareholder, with a minimum share capital of €50,000. This company type is subjected to heavy regulations as a listed company. They have a “two-tiered board” plan, consisting of a supervisory and management board. The supervisory board is under shareholders control, with the management board directly runs the company. Members from the management board may be removed by supervisory board.
Partnerships
These are in two main legal forms; General partnership (OHG) and Limited Partnerships (KG). For the OHG, partners are fully liable for the partnership debts, while in KG there are general partners with unlimited liability and limited partners whose liability is restricted to their fixed contributions to the partnership. For family-owned and small business in Germany, partnerships are widely used.
Public trading company
Incorporation as a public trading company (Offene Handelsgesellschaft – OHG) is a particularly attractive option for wholesalers. To accomplish this, your business needs to establish a formal partnership agreement in the commercial register. You don’t need to bring minimum capital to secure this business form, and shareholders won’t be liable for any debt or bankruptcy with their private assets.
Limited partnership
A limited partnership (Kommanditgesellschaft – KG) requires capital, including a formal partnership agreement and registration as a public trading company in German commercial register. The owner is expected to submit profit and loss reports to the local tax office each year, with the partners’ contract determining profit share to each partner. The owner is liable in the event of bankruptcy or debt, with the partner’s liability extending as far as their investment.
When you’ve made the decision on which company is right for you, follow these steps.
Pick a unique business name
Come up with a unique name for your startup business. To avoid choosing a name that already exists in Germany, check the commercial register (Handelsregister) to ensure the name you’ve chosen is available.
Submit clear business plan
According to German law, you are required to declare an official purpose (Unternehmensgegenstand) when registering your business. This includes activities you engage in. Before submitting an official statement, carefully think through your company’s objectives and activities.
Read also: Christmas bonus in Germany: What employees need to know
How to register business in Germany
The registration process in Germany is known to be complicated. These are the necessary steps for all Africans in Germany hoping to start a business:
Schedule appointment with notary
Gather your shareholders and visit a notary to get your business registered. Depending on the type of business, you might have to register with both commercial register (Handelsregister), and with the German trade office (Gewerbeamt).
Make sure to carry the necessary documents such as; articles of association, list of shareholders, and official purpose documents. The notary can advise on the documents needed if you are not sure. You will receive an invoice in the post and until you pay the register fees, you will not receive your business license.
Open a German bank account
For business, salary and tax transactions, you will need a German bank account. This will officially allow you to start paying taxes, and you can pay your share capital (Stammkapital) in cash or via bank transfer. We wrote about banks that offer free accounts in Germany here: Germany: Only these 14 German banks still offer free bank accounts
Register business with tax office
Once the necessary steps are completed and you have all the required documents, you can register your business with the tax authorities in Germany. The tax office may have automatically been notified of your business registration, and send the necessary forms to you. If not, you may pick it up from your local tax office. The registration document (Fragenbogen zur steuerlichen Erfassung), is quite long and complex especially for a non-German speaker. Many companies at this point enlist the help of a tax advisor.
Get your tax numbers
Once you have completed registering the business you will receive a tax identification number from Finanzamt, the number required for all local tax transactions. You’re now registered and nothing left to do but start operations, best of luck