Small and medium enterprises are the vital part of Germany's economy and so the Government makes it easy for residents and non-residents to start and run a small business in any part of Germany. After considering whether a small business is perfect for you and your lifestyle, you can decide from the five different forms of business ownership. The next step is to choose an appropriate name for your business and then you can apply to the German Federal Ministry of Economics and Technology for license and permits. Understand the taxation rates of Germany and then look for means to brand your business using the right media. When these steps are undertaken, you are all set to begin your small business. The success rate in Germany is fairly high and this means, you have a fairly good chance of being successful.
The procedures and formalities involved starting a small business in Germany is fairly straight-forward. This is because the German Government and the society as a whole understands the importance of small business to their economy and has made it easy to encourage entrepreneurs like me. This paper aims to describe what I should do to start a small business in this country.
It discusses the different aspects that I should consider including the lifestyle changes that I have to make. The next step is to decide a form of business ownership and choose the right name for my business. This is followed by an in-depth understanding of the licenses and permits required and the taxation rates. Finally the branding and marketing techniques that I will use for my business is discussed. The paper ends with an overview of the statistics to encourage me to start a business. Based on all the procedures and formalities and the rate of success of small businesses in Germany, I am confident that my business will be a success.
It is easy to start and run a small business n Germany because the society understands its importance and so, the procedures are fairly simple. This paper will elaborate on the simplicity of the procedures and other steps that need to be taken from the point-of-view of the entrepreneur who is looking to start a small business enterprise in Germany.
Aspects to consider before starting a small business
Small businesses are a satisfying way to earn money provided I have my priorities right. I want to ascertain whether this is the right option for me and in order to understand this, there are some questions that need to be answered.
The first and foremost question is why I want to start a business? For me, the answer is clear. I want to have my own company and be self-sufficient when it comes to income. This will reduce my dependence on jobs and the politics that come with it. Besides, a good revenue stream will also help me to live comfortably. The second question is whether I am willing to put in the time and effort required to start a small business because this can be a huge factor in the long run (Weidemann,2007). Until the company is up and running, it requires considerable amount of money, resources, time and effort and I am willing to put in everything. Since I am young and single, this makes it easier for me and I think this is the right time for me to start a business.
The next question is whether I can start it alone. An important part of a successful venture is human capital. It is defined by Cooper & Burke (2011, p.72) as, "the knowledge, skill and experience that top management brings to a venture, which influences venture success." So, I have to look for a partner who is skilled in the areas I am not so that we can complement each other well. Further, my lack of experience and limited financial resources necessitate a reliable partner and this person should share the same business goals and ambitions like I do. Also, he or she should have a passion in this line of business and a diversity of skills would help too. Finally, understanding the amount of risk that I am willing to take in the business should be ascertained at the beginning. There should be an upper limit, which can be a certain percentage of the initial capital or the maximum amount of money that I can afford to lose. If at all I get to that point, I need an exit strategy.
After ascertaining all these aspects, I believe I am a good fit to start a small business and I am going to move on to the next step.
Choosing a form of business ownership
Germany offers five different forms of business ownership and they are:
Limited Liability Company -- This is one of the most common forms of business ownership in Germany and the minimum share capital required to start such a company is €25,000.
Joint Stock Company -- This is a public limited company that requires five members and an initial capital of €50,000.
Subsidiary -- This company is a subsidiary of a foreign company that is registered in Germany to perform operations within this country. Since the parent company has unlimited liability, there is no minimum amount required to start this form of company.
Partnership -- In this form of business ownership, there is a legal contract between the partners and the operations should be based on this contract. All the partners have unlimited liability.
Sole Proprietorship - This is a flexible form of business that can be owned and operated by one individual or by two or more individuals. The basis of the operations of the company is a contract that is signed by all the partners and this contract should also include the terms of liability.
I am going to choose the last option (sole proprietorship) because I am looking for a right partner to work with me. In case, if I am unable to find such a person within the next few months, I would start off alone and as the business expands, I may look for new partnerships. I need a flexible option and I believe this is perfect for me.
Naming the business
Naming the business is harder than what most people think because the name should reflect the line of business that the company is involved in. At the same time, it should also stand out and the customer should find it easy to remember and relate to your business. Another aspect that the name should convey is the size of the business so that it gives the customers a clear idea of what to expect from the business.
The name should convey the qualities of your business. For example, if it is a home-based bakery business, then the name should give out warmth, freshness and a homely atmosphere that customers would love to buy from. Lastly, you have to consider the legal aspects of your business name. Your business name should not be in existence already and it should not give rise to law suits from others in the same line of business. All these require a fair amount of time and research to decide that require a lot of time and effort. However, its worth the effort because business name is the first communication that you have with your customers.
License, formalities and permits
According to the German Federal Ministry of Economics and Technology (2011), there are certain formalities that should be followed to register your company.
Health Insurance -- The move to self-employment should be informed to the health ministry so that they can make necessary changes to your health insurance.
Tax Office -- If you are planning to offer freelance or independent professional service such as a doctor or lawyer, you should register with the tax office and obtain a tax number.
Trade Office -- Anyone starting a business in Germany should register their company with the trade office. For this, you need a personal ID or passport, a residence permit, ten to forty euros for registration, a craft permit if your business is in the craft industry and a permit if your business is in the services sector. Once you register with the Trade Office, they will inform other departments such as the chamber of business, local court's trade register and the trade supervisory office. This saves a lot of time and effort for the business owner and it is a part of the efforts taken by the German Government to encourage small businesses in the country.
Health Office -- Your business needs a permit from the health office if your business is in the business of catering, preparing or selling food items and childcare. The trade supervisory office officials will inspect the process of production as well as the hygiene and will issue certificates accordingly. In some regions, this inspection will take place periodically.