A simple guide to starting a business in Berlin

In a competitive field, Berlin is making a strong claim to be the world’s premier city. The German capital can lay claim to reasonable rent, an English speaking population, thriving local businesses, great food and nightlife, and a burgeoning startup scene. It’s not just an attractive place to live - it’s an attractive place to start a business and sell your vision to the world.

With instability affecting more traditional markets like the UK and US, Germany is an increasingly palatable option for a startup or expanding business - and nowhere more so than its crown jewel, Berlin. Here is a brief rundown of the process behind starting a business in Berlin, and a few things you might want to consider about your German startup project.

Planning and costing

The first step for any startup should be to write a comprehensive business plan. This will form the basis of your bylaws, and will act as a guiding document to fall back on any time you’re unsure of which direction to take. It should ideally summarise your business and its mission statement in simple terms, with some outline of your audience, your goals and what you would do in a best and worst case scenario.

Like many of its European neighbours, Germany is proud of its system of benefits and support for employees, and has some different tax arrangements you’ll need to be aware of. A mandatory minimum wage of €17,976 is in place, and rises fairly regularly to match inflation. There are also a range of employee benefits, social security contributions (totalling 21% of the average wage) and health and care insurance, although the latter is tax deductible.

Depending on the nature of the business, you may also require a licence to operate. This includes premises which will be serving alcohol, as well as security companies, veterinary surgeries and other obvious examples. However, it may also include certain trades you would not expect, and is worth exploring. It’s also easy to get caught out by qualifications: a degree or certificate which is valid in the UK or elsewhere may not be valid in Germany.

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EU residents will be able to work freely in Berlin without a visa. Non-EU citizens from exempt nations (including the US, Canada and Australia) can stay and work for up to 90 days without a visa, while long term visas can be acquired with evidence of financial support. If your nation is not exempt, you will have to apply and pay for a short term Schengen visa first.

Pick your premises

One of the most exciting parts of a starting a new business anywhere is choosing your location. This is especially true in Berlin, however, where the trendiest districts aren’t off-limits in the same way as London or New York, and new hotspots for startups appear every year. When you’re looking at new premises, there are a few unique quirks of Berlin you should bear in mind.

An important factor is logistics, and how people and goods will travel to and from your facility. Berlin is well served by both an underground (U-Bahn) and overground (S-Bahn) train service, and currently has two international airports: Berlin Tegel and Berlin Schönefeld. However, Tegel is due to be replaced within the next 3-4 years by a new airport, Berlin Brandenburg, which is being constructed in parallel to Schönefeld.

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Berlin has seen many of its districts revived over the past decade, making your choice as much a matter of preference as targeting your audience. Neukölln is Berlin’s latest equivalent to London’s Shoreditch, and plays host to a multitude of expats and trendy establishments; Friedrichshain meanwhile is an idyllic neighbourhood with a pulsing underbelly, as the home of legendary nightclub Berghain.

Alternatively, the ‘Silicon Allee’ campus in central Berlin is a haven for tech companies, and the beating heart of the city’s new startup ecosystem. It includes co-working facilities, which are also dotted elsewhere around Berlin, and are a perfect option for small and collaborative startups. These facilities offer cheap shared working spaces with great broadband speed, transport links and local amenities, and are a great place to build connections and find new business partners.

Choose a structure

Germany is famous for its Mittelstand - literally ‘mid level’ - of small and medium sized businesses, which form the core of its business strength and economic success. As a result, the process for starting a small business is rigorous and clearly outlined. There are many company structures, but two that are predominantly used by SMEs: the limited liability company (GmbH) and provisional company with limited liability (UG).

The main difference between these two is simply how much capital you’re able to invest in your new enterprise. A GmbH required that you invest a minimum of €25,000 up front; if you are unable to do this, then a UG acts as a compromise. With this structure, you must commit a quarter of your new business’ earnings towards a ‘statutory reserve’. When this reaches the €25,000 threshold, you can convert your business structure to a GmbH.

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It is a common misconception that German company names must always include either the name of the founder or a reference to their products. A GmbH can have any name, so long as it is not misleading and could not be confused with another brand. However, all company names in Germany must include a reference to their liability, such as ‘GmbH’ at the end of the name. Examples of large companies with this convention include Adidas AG and Daimler AG.

You may also trade as an AG, which is a form of public limited company. An AG must have at least one shareholder, but required €50,000 EUR of startup capital, and is subject to more stringent regulations than the other two formats. As such, it is an unlikely choice for a startup, and more likely to be used when your business expands further down the line.

Prepare your documents and finances

Germany has modernised parts of the formation process in recent years, but other traditions are holding firm. Registering your business is split up between an online process and physical documents, which must be submitted in person. This includes your by-laws (i.e. Articles and Memorandum of Association), which need to be notarised by the local Trade Licensing Office ('Gewerbeamt'), and are subject to confirmation of your structure and share arrangements.

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With a minimum of €25,000 required to start a GmbH, you will require a German bank to deposit it in. Typical German bureaucracy means that this can be an arduous task, and is best carried out by native German speakers. Euro Start Entreprises can offer assistance with both of these, opening a bank account on your behalf and making arrangements with local authorities.

Register your business

Once everything is in order, you can finally complete the registration process. This is a difficult enough process if you are incorporating as a GmbH, but even tougher if you’ve decided to register as a sole trader, or some other structures. In this case you will have to register in person at the local trade office, providing photo ID, proof of residence and a valid residence permit (if you are from an EU country).

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Some of the mountains of paperwork required in the past have been cut down, with the trade offices submitting things to tax authorities on your behalf. You’ll have to pay a fee for this privilege, however, and another one when you finally join the German company register (Unternehmensregister). The latter fee will depend on your company structure, with smaller companies generally paying less.

Launch party! 

The formation process in Germany takes an average of 11 days according to the World Bank. If you’ve delegated the job to a formation agent, this gives you plenty of time to lay the groundwork for a successful launch. One of Berlin’s best features is its strong sense of community, particularly in the up-and-coming areas. Reach out, and you’ll likely find a whole heap of support, particularly if you intend to engage local people with your products or services.

Facebook is far and away the biggest platform in Germany, and you would do well to create an account for your business here, as well as searching for local networking groups. Twitter is barely used in the country, while business interests are equally split between LinkedIn and Xing, a local rival. Establishing a German-speaking presence on these platforms will help with customer engagement, not to mention finding the best talent to feed your growing company.

Otherwise, consider your approach to marketing and how you will sell your products. You should be mindful of cultural norms and differences in how things might be received - translating slogans directly can be very dangerous (particularly if you’re doing it via Google Translate!). Again, it’s recommended that you seek advice from professionals in this area, or hire someone locally who can vet your plans and clue you in on the culture and business climate in Berlin.

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Starting a business in a foreign country is always a challenging process, but Berlin has all the right ingredients to make a success of any startup. By following the tips above, planning effectively and (ideally) enlisting the help of a German formation agent, you’ll give yourself the best possible chance to make it in this vibrant and thriving metropolis.

For any further information about company formation in Germany - notary advice, accountants, VAT and visas - or to discuss your plans for setting up a business, please call us on 0033 (0)1 53 57 49 10 or email us from our contact page and we’ll be happy to help.

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