How To Start a Business in Germany After Your Graduation As A Foreigner

So you’re a student and you’re about to graduate. You don’t want to go to the job market, rather you want to start your own business or startup in Germany. This post is meant for you.

So you’re a student and you’re about to graduate. You don’t want to go to the job market, rather you want to start your own business or startup in Germany. This post is meant for you.

I’ve gone through this process twice, and I thought I would lay it out for you in a simple way.

First, if you are a student, and you want to start your business during graduation. It’s not an easy process, and I’d advise you to start after your graduation or even after 2 years of post-graduation work. I’ll share the reasons in the tips section in the end.

So let’s get started.

During Your Graduation

You might be working as a working student, and you know that you want to start a business. The first thing you need to do is to start hanging out in different startup meetups, hackathons, startup weekend initiatives, your university entrepreneurship societies and courses, and generally be interested in the startup community or work for one of them.

Focusing on the above initiatives will give you ideas and network to get started.

However, the most important thing you need to keep an eye on is the Exit Scholarship Program, more info is here.

You get a 1-year paid scholarship to work on your idea, and this is the best funding available. 

Before graduating, work on ideas, and get your team ready to apply for this program. You’ll get a head start. Exist is best utilized right after graduation. 

Protip: Connect your business idea with some research-related topic. EXIST is more inclined to fund a startup idea based on some research. Ask your university to help you with this.

Post Graduation

Let’s say you have a business idea, and you have solved your funding issues.

Now you’re getting ready for an uphill battle.

Right after graduation, you first need to unregister yourself from your immatriculation with the university and you have to inform Kreisverwaltungsreferat – Ausländerbehörde. 

In that process, you’ll get 18 months of temporary post-graduation work visa. 

Moreover, you need to submit the following documents to get approved as a self-employed person to KVR (which will take 6-8 months).

So, how do you get approved as a self-employed visa from KVR and IHK (Chamber of Commerce)?

Let me quote them:

In order to be allowed to pursue a self-employed activity in
Germany as a third state citizen, you will need a residence permit
pursuant to  section 21 of the German Residence Act (Aufenthaltsgesetz
(AufenthG)). As a Non-EU citizen you will be granted such a permit if
(1) there is an economic interest or a regional need for your
project,(2)  if the activity is expected to have positive effects on the
economy and (3) if the enterprise can be financed either with one’s own
capital or borrowed capital.
 Relevant criteria as to the assessment whether the afore-mentioned
requirements are fulfilled are: viability of the project, considerable
effects on the labour market, contribution to R&D, capital to be
invested, the entrepreneurial experiences of the applicant.
 The viability is a central criterion and can be proved by means of a
detailed business concept to the responsible Chamber of Industry and
Commerce.
Locally responsible is the immigration office, in whose  jurisdiction
the applicant will take residence or usually stays. The  Chambers of

Industry and Commerce are involved in this administrative  procedure and

are asked to issue an assessment as to the fulfilment of

the statutory requirements (economic interest, positive effects on the

economy and sufficient financing). This assessment is part of the

administrative procedure and will be forwarded to the responsible agency

and not to the applicant.

As a successful graduate from a German college or university you might

be privileged and not having to meet the above-mentioned requirements

(section 21 paragraph 2a Residence Act (AufenthG), But his requires that

the envisaged self-employment must demonstrate a connection to the
knowledge acquired during the higher education studies or the research
or scientific activities (see Section 21 paragraph 2a sentence 2 of the
Residence Act (AufenthG)
You will find the arfore-mentioned provisions of the Residence Act
(AufenthG) in English on the internet using this link:

http://www.gesetze-im-internet.de/englisch_aufenthg/englisch_aufenthg.html#p0285

Are you confused? So was I? 🙂

Basically, you need a connection to your degree with the startup, funding available, and that it should have a positive impact on German economy. 

With all that above, you need to submit the following:

  • A financial plan for the next 12-18 months
  • A business plan (either slides or word doc)
  • What happens after 18 months plan too

All of this process took 6-8 months for me, while I was working on the job search visa. This whole process was to get a self-employed visa.

Protip: Start this process before the graduation, so you can get approval at the right time if possible.

The Paperwork

Assuming that you’re going to go through that battle, let me explain how the paperwork happens to get your business registered. You need to be registered in Germany and have a Tax ID.

Before talking about the paperwork, I want to mention if you have an exit strategy for your business/startup already. I’d also suggest you think about having one holding company UG and that holding company invests in your GmbH or another UG. 

Why? Because when you exit, you get tons of money. German state takes almost half of it as a tax. However, if you have a holding company, then you can move that exit sales money, and only pay 1.5% or 1.7% as a tax, and you can keep rolling that amount into other businesses as a business angel. 

Registration with Notary

Appointments with a notary usually take 1-2 weeks, you need to set an appointment. You can’t just walk right away. 

You can find Notary offices just by doing some Google search.

Before going to Notary, you need to first agree on:

  • Do you want an UG or GmbH? You can find more info here but simply with UG you can register for 1 euro in the capital and GmbH you need 25000 euros (or at least 12500 euros)
  • How many shareholders and equity shares? 
  • A standard business template (given by Notar/Lawyer) and clauses
  • I usually suggest adding a vesting period. You can learn more about vesting here.
  • German template or German & English template (both would cost you twice of the price)
  • You need the following documents:
    • Passport & residence card
    • German address document from KVR (Wohnungsgeberbestätigung, or Vermieterbescheinigung)

Then, Notar will give you documents to register for the bank, and one document he/she’ll send to Handles Register (https://www.handelsregister.de/rp_web/welcome.do?language=en) so that you can officially get registered.

In general, a Notar takes 150 to 300 euros and Handles Register takes 60 euros for this process.

Opening a Bank Account  

Those Notar’s documents will be for a bank, I advise you to immediately go to a bank that you are comfortable with and open the bank account with them.

Do this process in a day or two, and once the bank account is opened, share this transfer amount to your Notar so he/she can process it.

Protip: Do this process as fast as possible. Last time, I went to a post bank, and it took me a month. I went with Stadtparkasse. It costs around 7 euros per month for their services.

So, far you’ve got the visa, registered a company, and opened a bank account.

Registration with Finanzamt

Once you have a bank account, you’ll get some Tax ID from Finanzamt, and you need to have that documentation for tax purposes, invoicing, and other related stuff.

You need to show a tax ID (Steueridentifikationsnummer) & a European bank account.

You need to register to Finanzamt to get going. The next step is to declare your business to the Finanzamt. You do this by filling the Fragebogen zur steuerlichen Erfassung. You must submit this form to your local Finanzamt in person or by mail.

This is a long and complicated form. Your tax advisor can fill it for you (I did it myself).

In this step, you will get:

A tax number (Steuernummer)

A VAT number (Umsatzsteuernummer)

Now, the official paperwork is done.

Get a Tax Advisor

So, your paperwork is done. You should definitely get a tax advisor who’ll advise you on the invoicing, payroll, and other tax-related stuff. Apparently, a Tax advisor can help you with the accounting, and you would need that.

Usually, tax advisors are expensive so do your research before getting one.

Protip: Ask for the costs upfront. After 1.5 years of appointment, I found out that I have to pay approx 532 euros for even no business transaction for my holding company. They do yearly closing and reporting, and that costs money. 

Inform Your Health Insurance

Once you have registered, and have a company. You need to inform your health insurance about your new residence status, and how you’re earning money. If you’re a self-employed person, you pay your own health insurance (not your company). Your employer does not pay for it.

If you have public health insurance, the cost of your insurance depends on your income. Since you don’t know your future income, you will give an estimation. If you pay too much insurance, you will get a refund later. If you don’t pay enough, you will get an invoice later.

The Other Costs

There are some other costs you need to pay, and I was not aware of it. I wanted you to be aware of it.

  • IHK charges approximately 150 euros for a yearly membership (you have to pay that)
  • Handles Register cost to keep you registered
  • Bundesanzeiger Verlag cost to do register your yearly accounting registration

Key Tips 

Here are some mistakes I made, and I thought you should be aware of it as some key tips:

  • Always try to have a German partner/shareholder who should be able to help you. There was so much German documentation involved that I didn’t get. So, it’s better to involve a local in this process.
  • Don’t have a holding company if you’re not planning to exit. I did it but it was a stupid idea. I have to pay 1000 euros every year on this as an expense.
  • Avail the grants, and scholarship but have monetary goals. You can learn about my other mistakes here.
  • This must be counter-intuitive but get a proper German residence with Niederlassungerlaubnis (German permanent residence card), and then go the entrepreneurship route. I wasted my 1.5 years of German because they don’t count it, and it takes longer to be a citizen. 
  • If you still want to go with the entrepreneurship route, keep paying your Rentenversicherung (this will get your permanent residence faster). I didn’t pay during that time.
  • Look for grants and other opportunities. Germany has so many grants that can help you, and that can delay the institutional loans. 

Here are some helpful resources for you:

SHARE THIS

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

Best of growth marketing. In your Inbox

  • No Spam
  • Every Tuesday
  • No Ads Ever