The main steps involved in establishing an undertaking are:

• registering with different bodies
• applying for permits
• registering responsible persons
• proving knowledge and resources

Legal forms

The legal form provides the legal framework within which an undertaking operates, and it has legal, personal, tax and financial consequences.

An undertaking cannot exist without a legal form. If the legal form of an undertaking is unclear, the authorities will assume that it is a sole proprietorship or, in the case of a joint enterprise, a civil-law partnership (Gesellschaft bürgerlichen Rechts, GbR).

Not all legal forms are open to all professions. Tradespersons for example, have different options from freelancers.

Almost all legal forms can be sorted into the following categories.

Sole proprietorships (Einzelunternehmen) include:

• registered merchants
• small tradespersons
• freelancers

Partnerships (Personengesellschaften) include:

• civil-law partnerships (Gesellschaften bürgerlichen Rechts, GbR)
• general commercial partnerships (Offene Handelsgesellschaften, OHG)
• professional partnerships (Partnergesellschaften, PartG)
• limited partnerships (Kommanditgesellschaften, KG)

Corporations (Kapitalgesellschaften) include:

• private limited companies (Gesellschaften mit beschränkter Haftung, GmbH)
• undertaking companies, with limited liability (Unternehmergesellschaften, haftungsbeschränkt, UG)
• public limited companies (Aktiengesellschaften, AG)

Joint enterprises may also wish to consider adopting the legal form of a registered cooperative society (eingetragene Genossenschaft, eG). The main difference between sole proprietorships, partnerships and corporations is the extent of their members liability. With sole proprietorships and partnerships, the members personal assets are at risk. With corporations, the members liability is limited to their contributions.

No minimum capital needs to be raised in order to establish a sole proprietorship or a partnership. The member(s) is(are) are also responsible for managing the undertaking. The bureaucratic effort involved in establishing and subsequently operating an undertaking with one of these legal forms is relatively manageable.

With corporations, the members usually have to make a minimum contribution. With private limited companies (GmbHs), this is EUR 25 000. The bureaucratic effort is higher overall. The members must, for example, involve a notary when they establish the undertaking, and they must thereafter submit regular balance sheets. The members are not automatically responsible for managing the undertaking.

Non-governmental organisations

Non-governmental organisations (NGOs) can be established in almost any legal form. However, they are generally established as:

• foundations (Stiftungen)
• non-profit registered associations (gemeinnützige eingetragene Vereine, e.V.)
• non-profit private limited companies (gemeinnützige GmbH, gGmbH)
• non-profit undertaking companies (gemeinnützige UG, gUG)

In the case of a foundation, a clear purpose and the undertakings assets must be defined in advance, and these assets may only be used in order to achieve the foundations purpose. A registered association is an association of at least seven natural or legal persons. An NGO has full legal capacity as a legal entity from the time that it is entered in the register of associations. Here too, its non-profit-making purpose is key. If it is to be established with start-up capital, the non-profit private limited company (gGmbH) and non-profit undertaking company (gUG) legal forms may be particularly attractive, as they provide clear limitations of liability.

Registration and notification obligations

Any self-employed activity that is planned, carried on with the intention of making a profit and intended to be permanent is a trade and must be registered. This registration obligation will apply regardless of whether the activity is carried on as a main or as a secondary occupation. Acquiring an existing trade or opening a branch of an existing trade must also be registered. Tradespersons and business persons include in particular:

• merchants
• restaurateurs
• artisans

Registration with a trade office

Tradespersons must register their proposed activities with the responsible trade office. The trade office will then inform all the other authorities and institutions, such as:

• public order office
• employers insurance fund
• chamber of commerce and industry
• chamber of crafts
• local court (commercial register)
• trade supervisory office, which is responsible for the health and safety of employees and customers

To register with the trade office, you will need the following documents:

• valid identity card or passport
• depending on the activity (e.g. restaurateur), a permit or approval
• craftpersons card (Handwerkskarte), if you are establishing a craft business
• trade card (Gewerbekarte), if you are establishing a business that is similar to a craft
• extract from the commercial register, if your undertaking is registered in the commercial register
• residence permit, which includes permission to engage in a self-employed trade activity, if you are not a German national
• EUR 10 to 40 for the registration fee

In some cases, you may also have to provide a criminal record certificate or information from the central trade register.

You should describe the nature of the trade activity as precisely as possible. There are also regulations regarding the name of your undertaking. It usually takes only a few days to process a trade registration.

Tax office

A freelance or trade founder must send a completed tax registration questionnaire (Fragebogen zur steuerlichen Erfassung) to their tax office within 1 month of opening their business or commencing their activities.

They must submit the tax registration questionnaire electronically in accordance with Section 138(1b), second sentence of the Tax Code (Abgabenordnung, AO). Electronic tax registration questionnaires and further information on how to submit them are available at the online Mein ELSTER tax office.

The obligation to submit electronically does not yet apply to the following start-ups:

• corporation established under foreign law
• association
• another corporation under private law within the meaning of Section 1(1), Nos 4 and 5 of the German Law on Corporation Tax (Körperschaftsteuergesetz, KStG)

In these cases, you must use the questionnaires that are available from the Federal Revenue Administrations Form Management System (FMS).
In the questionnaire, you will have to include information about your future sales and profits. The tax office will need this information to classify your activity for tax purposes. The tax office will notify you of your tax number when it has completed processing your tax registration questionnaire.

Obtaining permits and approvals

You will need an official permit and/or approval for a wide range of self-employed activities. The Chamber of Industry and Commerce or the Chamber of Crafts will inform you whether and, if so, which permits and/or approvals you need. For example:

• Certificates of competence are required in some parts of the retail sector.
• Transporting passengers requires a permit.
• Manufacturing businesses must obtain permits for their facilities.
• Restaurants and catering start-ups must have received instruction from the public health office.

You can obtain information from the responsible trade supervisory office as to whether your business premises and facilities comply with the legal requirements. If your premises have previously been used for a different purpose and are to be used as business premises in the future, you will need to obtain approval from the responsible building authority for the change of use. You should also agree with the building authority in good time regarding planning permission for any trade alterations or new constructions.

Registering staff

You will need to obtain a business number from the Federal Employment Agency before employing any staff. You can apply to the business number service by telephone, letter, fax or email.
You must register your staff with the statutory pension, health, long-term care and unemployment insurance schemes. You must also notify the employers' liability insurance association of the establishment of your undertaking (for accident insurance).

Changing the legal form

In Germany, you can convert an undertaking to a different legal form by following a particular procedure. The change to a new legal form will involve a significant risk of adverse legal and tax consequences. You should therefore consider any such change with the utmost care before implementing it. You should also obtain comprehensive advice from a tax adviser on the available courses of action.

If you wish to change the legal form of your undertaking, you must comply with the Conversion Act (Umwandlungsgesetz, UmwG). This will require, among other things, a detailed conversion report and approval of the conversion in a members meeting. You will also have to comply with the rules on establishing the desired form of undertaking in accordance with the applicable laws. You will have to apply for the entitys new legal form to be entered in the register in which the converting entity is registered.
There is no universal solution for converting an undertaking into another legal form. You must consider the procedure carefully in the light of the specific circumstances. You should take legal and tax advice in order to minimise the risks.

Reregistering a trade
You must reregister your trade if either of the following events occurs:

• Your undertaking moves its business premises within the jurisdiction of the municipal trade authority.
• Your undertaking changes or expands its business purpose or trade to include non-customary goods or trade services.

The trade reregistration will take place at the responsible trade office. You will need to bring a valid identity card or an electronic residence permit (eAT). You will also need to bring a registration certificate if your place of residence is not the same as your place of business.

Deregistering a trade

You must deregister your trade if any of the following events occurs:

• You give the trade up completely.
• The trade undergoes a change of ownership, but its business continues, for example after a sale, a succession or a lease.
• You move the trades place of business to the jurisdiction of another municipal trade authority.
• In the case of a partnership, a member withdraws.
• The undertaking changes its legal form, e.g. from a sole proprietorship to a private limited company.
• The undertaking changes its legal form pursuant to the UmwG, for example by merger, division, conversion, or transfer of assets.

The trade de-registration will take place at the responsible trade office. You will need to bring a valid identity card or an electronic residence permit (eAT).

• further information on how to apply to the Federal Employment Agency (Bundesagentur für Arbeit, BA) for the business number is available here
• in addition, you can obtain information about the German statutory accident insurance scheme (Deutsche Gesetzliche Unfallversicherung, DGUV) here
• you can obtain electronic tax registration questionnaires and further information on how to submit them at the online Mein ELSTER tax office (only available in German)
• you can, in certain cases, provide information about future sales and profits via the Federal Revenue Administrations form management system (Formular-Management-System, FMS) here
• you can obtain information about the Federal Central Tax Offices VAT identification number (Umsatzsteuer-Identifikationsnummer des Bundeszentralamt für Steuern) here
• you can obtain information about regulations regarding names for undertakings on the business start-up portal (Existenzgründerportal) of the Federal Ministry for Economic Affairs and Climate Action (Bundesministeriums für Wirtschaft und Klimaschutz) here