Starting A Business in Berlin

Starting a Business in Berlin
A Beginners Guide
Starting a Business in Berlin

A Beginners Guide
Contents
WHAT ARE MY STRENGTHS?
Personal characteristics
Specialist qualifications
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7
WHAT EXACTLY DO I WANT?

Reasons for starting a business
Idea screening
8
9
WHERE DO I FIT IN?

Self-employed 10
Freelancer 10
Trader 11
Start-ups as a sideline
11
Businesses requiring certification or a licence
12
Start-ups by foreigners
12
Notifying the authorities
13
Craftsmen and tradesmen
14
Crafts and trades requiring certification
14
Crafts and trades not requiring certification and associated businesses 15
Mixed enterprises and crafts and trades as a sideline
15
WHAT LEGAL FORM SHOULD I CHOOSE?
A commercial enterprise or a small-scale business?
Entry in the Commercial Register
Some legal forms and their special features
Sole proprietorships
Partnerships constituted under civil law (GbR)
General commercial partnerships (OHG)
Limited commercial partnerships (KG)
Limited liability companies (GmbH)
Entrepreneurial companies (UG with limited liability)
Registered cooperatives (eG)
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WHAT NAME SHOULD I CHOOSE?

Sole proprietorships and partnerships constituted under civil law
The naming of companies
Key criteria when naming a company
An important reminder
24
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26
WHAT TAXES MUST I PAY?

VAT 28
Small business operator regulation
29
Income tax
30
Wages tax
30
Trade tax
30
Corporation tax
31
WHAT ORGANISATIONS DO I NEED TO THINK ABOUT?
The Chamber of Skilled Crafts (HWK)
32
The Chamber of Commerce and Industry (IHK)
33
Professional bodies
34
The GEZ the licence fee agency for public-service broadcasters
34
GEMA 35
WHAT SORT OF INSURANCE DO I NEED?
Personal insurance
Business insurance
Social insurance for employees
36
38
39
HOW DO I PLAN MY NEW BUSINESS?

Business model
Elevator pitch
Business plan
The successful basis of a business plan
What should I include in my business plan?
How do I start writing my business plan?
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WHAT CALCULATIONS DO I NEED TO MAKE?

Capital requirement and investment planning
46
Profitability forecast
48
Liquidity planning
52
Financing 54
Franchising as an alternative
56
Takeovers as an alternative
57
WHERE CAN I FIND MORE HELP?
Contacts for new businessmen at IHK Berlin
Contacts at HWK Berlin
Local contacts in Berlin
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Imprint 64
4
WHAT ARE
MY STRENGTHS?
Whether your new business succeeds or fails in the long term is
entirely up to you. At the end of the day, failures are always the
result of businessmen* making errors of judgment when it comes
to their own personality traits or performance. You dont have
to have all the attributes and knowledge required to start a successful business from Day One. You should, however, be able to
make a realistic assessment of your own abilities and have found
a way of dealing with your shortcomings before you become selfemployed.
Personal characteristics
Successful businessmen tend to have certain personality traits in common,
such as self-discipline, determination, a fertile imagination, organisational
skills and risk awareness. Successful types also tend to be able to communicate well with others both verbally and in writing. A supportive social
environment also plays an important role.
Examples of success factors
Self-discipline
Determination
Originality
Fertile imagination
Organisational skills
Risk awareness
Communication skills
Ambition
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Realistic view of oneself

Commitment
Resilience
Good health
Creativity
Sense of responsibility
The support of ones family
The support of friends
Specialist qualifications
Commercial and specialist expertise are the nuts and bolts of any successful business activity. And the same applies to self-employment and your
enterprise as a whole. Start-up advisers are constantly hearing, Im doing
something artistic the business side doesnt interest me, or Ill get other
people to do that. Failure is only a matter of time. In the early days, the
founder of a company must not only be aware of the basics of commerce,
but also apply them. A bit of good will and sound common sense are all you
need. Its alright to ask for advice on specialist matters, but as an entrepreneur, you have to take personal responsibility for keeping an eye on the big
picture financially, and not just leave it up to your tax adviser. In addition,
businessmen must know their market and understand how to find and handle customers. If you lack certain qualifications, you can often catch up by
attending seminars or taking courses.
Seminars
and courses
www.wdb-berlin.de
Skills which contribute to a successful start-up

General business training
Professional qualifications (training, study, courses and seminars)
Professional experience (in a variety of positions and companies)
Specialist knowledge about your sector
Knowledge of administration (both business and political)
Networking with other market players
*To avoid complicated sentence structures and make this brochure easier to read, the
masculine gender is used to refer to both men and women.
WHAT EXACTLY
DO I WANT?
Okay, so you want to be self-employed, or are at least seriously
considering the possibility. But assessing your abilities realistically also means being clear about your motives.
Ways to
self-employment
www.existenz
gruender.de
Keyword: Ways to
self-employment
If you are currently unemployed, a protracted series of unsuccessful job

applications should not be the main or indeed only driving force behind
seeking to be self-employed. And it would be quite wrong to justify your
decision to become self-employed with the fact that you are unable to
find work with anyone else. Businesses set up for want of an alternative
are viewed with suspicion almost universally. A goal such as I want to
earn as much money as possible is also a weak motive when considered
at closer quarters. For in business circles, money is a means and not an
end. In practice, it has been demonstrated again and again that money
can only provide very short-term motivation, especially given the enormous
mental and physical challenges facing the self-employed. So if you are in
any doubt, you should examine your own motives carefully. And remember
that one goal of your entrepreneurial activity should always be to benefit
the customer!
When you are first weighing up your idea, you should do some thorough
research and not be afraid of discussing it with friends and family.
For a more objective view of your business concept, it is useful to consider
three main things.
Idea screening
Where is there a gap in the market? What products or services have you or the
people around you been looking for without success?
What are the trends? What kind of innovative business models survive and are
imitated?
What is technically possible today? Applying minor technological advances in a
completely different context can open up major new business fields.
Reasons for starting a business
Bringing your own ideas to fruition
Performance-related returns
Self-determination
Power
Freedom
Prospects
Prestige
Spirit of adventure
WHERE DO I FIT IN?

Self-employed
www.deutscherentenversicherung.de
Self-employment in a business sense means earning an income

at ones own financial and social risk. There is no employment
contract or employment relationship with the customer, i.e. the
self-employed person is not obliged to obey third-party instructions and is not a fixture in the customers work organisation.
The latter definitions are particularly important when it comes
to clarifying any potential doubts about bogus self-employment.
Example: During the initial stage of your self-employment you work mainly
for a single customer for a relatively long period of time, as is not uncommonly the case. This might cause the social security authorities to suspect
bogus self-employment, a suspicion which you will have to rebut. You should
therefore notify the clearing house of the German Statutory Pension Insurance Scheme (Deutsche Rentenversicherung Bund) of your status as early
and in as much detail as possible, or the consequences for you and your regular customer may cost you dear!
10
relevant tax office will also decide whether the activity concerned is a freelance occupation or a trade.
Trader
The freedom of economic activity is a fundamental right in Germany; in
other words, anyone is entitled to carry on a trade unless exceptions or
restrictions have been prescribed or permitted by law.
What are the characteristics of a trader?
You are a trader if you work:
in self-employment;
long term, i.e. with the intention of repeating and continuing your activity and of
making a profit; and
you are working neither in a freelance profession nor in primary production
(agriculture and forestry, fisheries, etc.) or the civil service, or in a job which is
basically against social mores (e.g. organ trafficking).
Freelancer
Start-ups as a sideline
Freelancers are self-employed people working as scientists, academics,

artists, novelists, teachers, educationalists, etc. Typical freelancers include
doctors, lawyers, tax advisers, business consultants, journalists, artists and
academics. Freelancers are not governed by the German Trade Regulation
Code in their work, so do not have to notify the authorities of their business.
A freelancers self-employment therefore formally begins when he applies
for a tax ID number from the relevant tax office. In cases of doubt, the
While many entrepreneurs work full-time on making a living from their

own idea, an important role is also played by those who start businesses as
a sideline. This is when, in addition to their often time-consuming principal
job as white-collar workers, homemakers or students, or during periods of
unemployment, they work for themselves in a job which is not their main
profession. They are subject to the same legislation as their full-time counterparts. For instance, they have to notify the regulatory agency (Ordnung-
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samt) in the district in which their business is based that they are trading.
Similarly, if one engages in freelance activity this must be registered with
the relevant tax office. Differences do exist between this and starting up a
venture which provides ones sole source of income, however; for instance
when it comes to the subsidies available and to social insurance.
words, the residence permit should not contain a note to the effect that the
holder is prohibited from conducting business. If they are already living in
Germany, whether or not they will be able to apply to the Aliens Authority
to have this note deleted will depend on the type of visa with which they
have been issued.
Businesses requiring certification or a licence
Notifying the authorities
Restrictions on the freedom of economic activity exist mainly in areas

where either the common good or the health and safety of individuals
might be jeopardised. Those wishing to run such a business must generally
obtain a special permit from the authorities in addition to notifying the
Ordnungsamt in the normal way. The authorities will require regular proof
of personal trustworthiness and evidence that ones financial affairs are in
order. For some professions, proof of specialist knowledge and competence
is required too. In individual cases, the workplace must also comply with
special conditions.
Before commencing your business activity, you must notify the regulatory
agency (Ordnungsamt) in the district in which it will be based. You must be
able to present your identity card or passport, as well as any licences which
are required. If several people wish to run a business together (as a business
partnership), they must all attend together. If giving notification of a new
corporation (GmbH, UG or AG), an extract from the Commercial Register
must also be submitted. The tax office, Employers Liability Insurance Association (Berufsgenossenschaft), Chamber of Commerce and Industry and/
or Chamber of Skilled Crafts are among the organisations which will be
informed of the notification. Although the Employers Liability Insurance
Association will normally be informed about the start-up automatically
when notification is given, this does not release the businessman from his
legal obligation to notify it himself. Article 192, Book VII of the Social Code
stipulates that entrepreneurs regardless of whether or not they employ
others are obliged to report to the appropriate Employers Liability Insurance Association within one week, and to inform it of the nature and object
of the business, the number of insured persons, and the start-up details of
the company. In order to speed up registration with the tax office, you may
notify it directly that you are starting the business. You are obliged to notify
the Ordnungsamt not only that you are establishing the business, but also
about any changes.
Examples of businesses requiring certification:

Ambulance service, auction sales, brokerage, capital investment brokerage, car
rental, catering establishments serving alcohol, coach services, construction
support, credit brokerage, debt advisers, debt collection agencies, detective
agencies, employment services, estate agencies, fast-food outlets, financial
consultancies, financial services, gaming machine installation, housing agency
services, insurance brokerage, investment advice, investment brokerage, itinerant trades, labour leasing, land agencies, legal advice, loan brokerage, market
trading, organising lotteries, pawnbroking, pest control, podiatrists, property
management, provision of accommodation, road haulage, securities-related
services, security work, taxi services, temporary employment agencies, trade in
firearms, trade in pesticides, trade in second-hand goods, trade in vertebrates,
travel agencies, wholesale pharmaceuticals
What information has to be supplied to the Ordnungsamt?
Start-ups by foreigners
Aliens Authority
www.berlin.de
Keyword:
Auslnderbehrde
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In principle, the right to freedom of economic activity applies only to German citizens. But persons from a Member State of the EU or the EEA (Norway, Iceland and Liechtenstein) have the same rights as Germans; they
therefore enjoy freedom of establishment and can run a business on the
same terms as Germans. Members of states which have negotiated special
arrangements with the Federal Republic of Germany (e.g. the USA, Canada
and Switzerland) can be commercially active under relatively relaxed conditions. All other foreigners who are still living in their home country and
wish to be commercially active in Germany must lodge an application for an
unrestricted residence permit with the respective German embassy. In other
The date when the business is to start operating for the first time
N.B.: The date in question is that on which you actually start work on your project,
e.g. you rent premises, promote your business in the marketplace or recruit
employees.
The opening of additional business premises (even in the same locality),
especially if you are opening another branch or a dependent branch office
A change of address of your business premises (even within the same locality)
A change in the type of activities your business carries out
Expansion into an unconventional area (e.g. a bookseller who also sells wine)
The installation of gaming machines
The closure of the business
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www.startercenterberlin.de
N.B.: The Berlin StarterCenter can help you save time by letting you prepare a
lot of registrations online (notification of new business, tax office, Employers
Liability Insurance Association, etc.). If you want to become a self-employed
craftsman or tradesman, visit the StarterCenter run by Chamber of Skilled
Crafts Berlin at 68 Blcherstrasse, Kreuzberg. There you can be entered in the
Register of Craftsmen or on the list of associated businesses.
Craftsmen and tradesmen

Crafts and trades are categorised as a commercial activity, and must therefore be registered with the Ordnungsamt. Craftsmen and tradesmen are
generally described as being those members of a profession who supply
certain services upon demand and/or manufacture craft products to order.
The industry is governed in Germany by the binding regulations of the Crafts
and Skilled Trades Code (HWO). Before working as a craftsman or tradesman
or in a similar capacity, one must first sign up to the Register of Craftsmen
and/or the list of crafts and trades not requiring certification or the list of
associated businesses at the Chamber of Skilled Crafts. A comprehensive list
of the activities covered is contained in Annexes A and B to the Crafts and
Skilled Trades Code (HWO).
Crafts and trades requiring certification

Chamber of Crafts
and Skilled Trades
+49-30-25903-107
rolle@hwk-berlin.de
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Annex A lists the total of 41 crafts and trades for which certification is
mandatory; a Master Craftsmans Certificate is a prerequisite for entry in
the Register of Craftsmen and therefore for a licence to start up or take over
a business in this sector. The requirement for such a qualification can be
justified, among other things, by the especially hazardous nature of some of
these trades, which results in correspondingly stringent consumer protection regulations and the need for a solid vocational background. Examples
of tradesmen requiring certification are bricklayers, carpenters, automotive
engineers, electrical engineers, bakers, butchers and hairdressers.
Under certain circumstances, however, you may also work in a self-employed capacity without a Master Craftsmans Certificate as a journeyman
or skilled worker in a craft or trade normally requiring certification. You
must be able to provide evidence that you have at least six years experience
in the profession for which you have trained, and that four of these were
spent in a senior position in which you had independent decision-making
authority. Hearing aid technicians, opticians, orthopaedic technicians, orthopaedic shoemakers, dentists and chimneysweeps are exempted from this
journeymans regulation. Businesses can also practise a craft or trade requiring certification if a master craftsman is employed as works manager by
the respective sole proprietor, business partnership or GmbH, etc. Engineers,

university graduates and state certified technicians may be entered in the
Register of Craftsmen with the craft or trade requiring certification which
corresponds to the key area in which they were examined at school or in
further education.
In addition, it is possible to carry out simple craft or trade activities in a
self-employed capacity which are part of crafts or trades normally requiring certification. This means that no masters examination is required for
jobs which can be learned within two to three months. Because of the
complexity of the available options for registration, you should contact
the Handwerksrolle (Register of Craftsmen) department at the Chamber of
Skilled Crafts if you require further clarification about your specific circumstances.
Crafts and trades not requiring certification and associated businesses

Annex B is in two sections. The first lists crafts and trades not requiring
certification, which number 53 in total. No formal qualification is required
by those wishing to start up such businesses. Examples include floor tilers,
clockmakers, goldsmiths and silversmiths, photographers, violin makers and
manufacturers of signs and neon advertisements. The same applies to the
57 associated businesses listed in Section 2. These only need to be registered with the Verzeichnis der handwerkshnlichen Gewerbe (register of
craft or trade related businesses) for one to be able to conduct business.
This category includes floor layers, drain and sewer cleaners, alteration tailors, beauticians, undertakers and others.
Mixed enterprises and crafts and trades as a sideline

Businesses which carry out activities covered by the Chamber of Commerce
and Industry and also provide craft or trade services are described as mixed
enterprises. Their respective divisions are members of the Chamber of Commerce and Industry and the Chamber of Skilled Crafts respectively, and pay
their contributions on a pro rata basis. In individual cases, a mixed enterprise may wish to conduct craft, trade or related activities as a sideline. One
example of this might be a car dealership which also carries out repairs for
third parties.
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WHAT LEGAL FORM

SHOULD I CHOOSE?
This is one decision you simply cant avoid. Even if you just march
off and register your business, youve automatically chosen a legal form! If you start up your business alone, it will be a sole proprietorship from then on. A partnership constituted under civil
law (GbR) or a general commercial partnership (OHG), if your
enterprise requires a commercially organised business operation,
is set up as a team effort. Since the legislation which applies to
your business depends on its legal form, it stands to reason that
the choice of legal form is of particular importance.
A commercial enterprise or a small-scale business?

This distinction is an idiosyncrasy of German company law with widereaching consequences. It is frequently confused with the so-called small
business operator regulation under tax law (cf. the chapter on What taxes
must I pay?)
A small-scale businessman is someone who is not a commercial trader.
Characteristics of a commercially organised business enterprise
Annual turnover (e.g. more than 175,000 for a service provider)
No. of employees (more than five)
Business assets (more than 100,000)
Volume of credit (more than 50,000)
More than one branch office
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Entry in the Commercial Register

Commercial enterprises must be entered in the Commercial Register, and
small-scale businesses can be entered. The following legal forms must also
be entered: e.K. (registered commercial trader), OHG (general commercial
partnership), KG (limited commercial partnership), GmbH (limited liability
company), UG (limited liability entrepreneurial company) and AG (joint
stock company). Special formalities must be observed when entering them
in the Commercial Register.
FAQ about
Company Law
www.ihk-berlin.de
Dok.-Nr. 87103
Businessmen who have an entry in the Commercial Register have a company name which describes the commercial enterprise. Businessmen may
choose a personal, descriptive or imaginative name for their company. By
being entered in the Commercial Register, a one-man business becomes a
sole proprietorship whose name must be completed with a designation such
as e.K., e.Kffr. or e.Kfm. Examples: Bruckers Buchhandel e.K., Hotel Himmelbett e.Kffr., or Putzblitz e.Kfm. (there is more on this topic in the chapter on
What name should I choose?)
The advantages of registration might be that, for instance, the businessman
can grant power of attorney to his employees, and has the right to appear
under his company name (rather than his own name), perhaps enabling the
company to appear more reputable or to improve its image. In addition, only
companies listed in the Commercial Register can be sold, bequeathed or
leased, and open independent branches. Some banks, businesses and trade
associations will only enter into a business relationship with companies
listed in the Commercial Register. On the other hand, one disadvantage of
registration is the obligation to use double-entry bookkeeping and prepare
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a balance sheet in compliance with the Commercial Code, which is more

time-consuming than a simple profit and loss calculation. Commercial traders are also subject to the stricter legal requirements of the Commercial
Code and must, for instance, notify their suppliers immediately if they receive faulty goods, so as to retain their right to make warranty claims.
Suitable for at least two business partners

No minimum capital required
No listing in the Commercial Register required
Unlimited liability of all partners (i.e. including personal assets) vis--vis the
companys creditors (joint and several liability)
Some legal forms and their special features
No company name in the legal sense (the first names and surnames of all partners
must be given in the company designation, as must the legal form suffix GbR)
Sole proprietorships
This is by far the most common legal form in Germany, and is very easy to
set up. A sole proprietorship exists from the time you start work, if you have
not chosen another legal form, and if you are starting up alone. The sole
proprietorship is managed solely and independently by its owner, but of
course staff can still be recruited.
Notification of the Ordnungsamt is mandatory and, if required, licences must be

obtained by all partners
Profile of a sole proprietorship

Suitable for an entrepreneur working alone
No listing in the Commercial Register required
Unlimited liability of the owner (i.e. including personal assets) vis--vis the
companys creditors
No company name in the legal sense (the first name and surname of the owner
must be given in the company designation)
Notification of the Ordnungsamt is mandatory and, if required, a licence must be
obtained
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Profile of a GbR
Partnerships constituted under civil law (GbR)

A GbR is the simplest form of start-up where a team of people is involved. It
forms automatically when individuals collaborate to pursue the same commercial goal, for instance by preparing a business plan in order to go into
business together. Although a written partnership agreement isnt essential,
it is a good idea for you and your partners to draw one up. Otherwise the provisions of the German Civil Code (BGB) will apply automatically, which is why
this legal form is also known as a BGB company. As far as the management
of the GbR is concerned, the BGB states that all of the partners should make
decisions together and should also represent the company jointly vis--vis
third parties. This means that all the partners must act as one to conclude
each and every legal transaction. Since this can prove inconvenient in practice, the partners are able to make alternative internal arrangements in their
partnership agreement (e.g. they may appoint a single partner to manage or
represent the company). If your GbR grows to such an extent that it becomes
a commercial enterprise, its legal form becomes that of an OHG by law. In this
case, you are obliged to have the OHG entered in the Commercial Register.
General commercial partnerships (OHG)

At least two businessmen are required to set up an OHG. Each is entitled to
manage and represent the company individually; in other words, each partner can act on his own initiative in the normal course of business, with the
other partners merely being entitled to object to his actions subsequently.
Legal transactions can be effected by the partners individually. Alternative
arrangements can be made in the partnership agreement.
Profile of an OHG
Suitable for at least two business partners
Listing in the Commercial Register required
Unlimited liability of all partners (i.e. including personal assets) vis--vis the
companys creditors
A company name in the legal sense can be used
obtained by all partners
Limited commercial partnerships (KG)

The main difference between this and the OHG is that liability is limited
to a specified amount for one or more of the partners. These partners are
known as limited partners (Kommanditisten). A partner with unlimited liability is called a general partner (Komplementr). With this legal form, it is
very simple to strengthen the equity base by taking on new limited partners
who are not, however, given decision-making powers with respect to the
day-to-day running of the company. In this case too, a written agreement
is not essential but is strongly recommended.
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Profile of a KG
Suitable for at least one entrepreneur and one further partner
Unlimited liability (i.e. including personal assets) vis--vis the companys creditors
of at least one (wholly liable) general partner
Liability of at least one limited partner up to the level of his investment
Management by the general partner
obtained by all general partners
Limited liability companies (GmbH)

It is no accident that the GmbH is the most popular legal form in Germany
after the sole proprietorship. This is because liability is restricted to the level
of company assets. In the case of insolvency, creditors cannot generally
access the personal assets of the partners, but only the total assets of the
business, in other words the share capital at the very least. The minimum
share capital is 25,000, at least half of which has to be deposited when
the company is started up. This can be made up of material assets instead
of cash.
Profile of a GmbH
Suitable for one or more business partner
Minimum capital of 25,000 required
The company has a legal personality (is a legal entity)
No personal liability on the part of the partners (in normal circumstances)
May be managed by an employee
lored to your individual requirements. This agreement can include additional

provisions which go further than the minimum specifications required by law
for the articles of association of a GmbH, thereby precluding potential differences of opinion between the partners later on.
Entrepreneurial companies (UG with limited liability)
This legal form is a specific type of GmbH. Essentially, the same strict rules
apply as for a GmbH, but the minimum capital required when setting it up is
just 1, and specimen documentation can be used to facilitate its formation. If there is more than one partner, however, one should think carefully
before using the specimen documentation, as it does not for instance
contain any regulations about dealing with disputes.
According to the German Companies Act, a legal reserve must be created
in the balance sheet to which one quarter of annual net profit must be
transferred after first deducting any loss carried forward from the previous
year. This reserve must be built up until the sum of 25,000 is reached and
a GmbH is registered.
Profile of a UG with limited liability
Suitable for one or more business partner
Minimum capital of 1 required
The company has a legal personality (is a legal entity)
May be managed by an employee
obtained by the UG (with limited liability) in the person of the managing director

obtained by the GmbH in the person of the managing director
N.B.: Legislation provides both specimen documentation for the formation

of a one-shareholder company and specimen documentation for the formation of a company with up to three shareholders. The partners can also
form the company by drawing up an individual memorandum of association
which must be certified by a notary. We recommend that when setting up a
multi-shareholder company, a GmbH agreement be drawn up which is tai-
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Registered cooperatives (eG)

In the past, very few people would have considered setting up a cooperative. But this all changed with the amendment of the Cooperatives Act in
August 2006, and for very good reason. Where before there had to be seven
founding members, today only three are required. Little or no start-up capital is needed, setting up the company is relatively easy, and this legal form
enjoys the reputation of being a safe bet, thanks to the regular auditing
of cooperatives by the Auditing Association. Written statutes are required,
but certification by a notary is not necessary; however, the regional Cooperative Association will assess whether the venture appears viable. If they
pass this test, the founding members will be much more successful when,
for instance, applying for loans. So if your team is looking for a binding
organisational structure with a low risk of insolvency and the support and
financial scrutiny that comes from being part of an association, this might
be just the legal form you are looking for.
OUR SERVICES
FOR START-UPS
Profile of an eG
Suitable for at least three business partners
No minimum capital required, but the Cooperative Association will assess whether
there is sufficient equity capital available
Listing in the Register of Cooperatives required
The enterprise has a legal personality (is a legal entity)
Managed by a board (one person will suffice if there are 20 members or fewer)
22
www.ihk-.berlin.de/business
WHAT NAME
SHOULD I CHOOSE?
The importance of choosing the right company name should not
be underestimated. Changing your name at a later date, perhaps
because it is prohibited under competition law, might not only
prove expensive, but could also annoy your customers. So it is
essential to comply with the law, while at the same time finding
the best name to promote your company.
Sole proprietorships and

partnerships constituted under civil law
As a sole proprietorship, you must use your first name and surname in business transactions. Descriptions of your type of business and information
about the work you do can be added, e.g. Klara Kunze, Art Dealer. Partnerships under civil law must list all the names of the partners (first names
and surnames). In addition, sole proprietorships and partnerships under civil
law may use so-called establishment or business designations, such as Fine
Dining for a restaurant or Heartfelt Letter Agency for a writing service.
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prise under which it is listed in the Commercial Register, and which appears
in business transactions and in the conclusion of contracts.
One advantage of being listed in the Commercial Register is that the company is then protected against companies wishing to use the same or a
similar name, at least at regional level. The Commercial Code (HGB) governs
how a company is named, with the same principles applying to all legal
forms.
Key criteria when naming a company

Legal form suffix
Every company name must include the appropriate suffix so that the businesss liability commitments are clear to third parties. Abbreviations which
are readily understood can be used, such as e.K. for registered commercial
trader (eingetragener Kaufmann) or GmbH for a limited liability company
(Gesellschaft mit beschrnkter Haftung).
However, these designations are not part of your companys official name.
Although they are permitted, they may not be registered with official agencies (such as the Ordnungsamt) and may not be used in isolation in business
correspondence.
Standing out from the crowd

Company designations such as Lederwaren OHG (Leather Goods OHG) or
Reise KG (Travel KG) would be much too general. More suitable options
would be Gisbert Gerber Lederwaren OHG or Santa Nirgendwo Reise KG.
The naming of companies
Clearly distinguishable
During the registration process, the court of registration will ascertain
whether the chosen company name is the same as or similar to that of
another business within the same borough (of the state of Berlin).
Many people starting up in business refer to their company, although their

enterprise is not strictly speaking a company unless it has been entered in
the Commercial Register. The company name is the legal name of an enter-
25
Unambiguous and honest

Misleading names are unlawful. Thus they must not contain information
which might tend to confuse potential customers about the true nature
of their business. Examples would be Deutsche Sicherheit e.K. (German
Security e.K.) for a small, regionally operating one-man security business, or
Hundeglck GmbH (Doggy Joy GmbH) for a car dealership.
Personal names
Of course, the company designation of a business may be formed from the
surname of the owner or the names of the partners, such as Dahlke & Dietz
OHG. In these circumstances, first names can but do not have to be
used.
Imaginative names
These can be formed from pronounceable words (such as Rollriesen Spedition e.K., meaning Rolling Giants Haulage e.K.) or combinations of letters
and/or numbers (e.g. QRY33 GmbH) which do not constitute pronounceable words.
THE BUSINESS STARTUP

NETWORK IN BERLIN
All Addresses
All Events
All Information
Descriptive names
In this case, the area of activity or sector of the business is indicated using
a generic term, such as Handelsgesellschaft mbH (Trading Company mbH).
Such a name would not be distinctive enough, however, and would need a
prefix to individualise it, using either a combination of letters or numbers,
such as 4U Handelsgesellschaft mbH, or a made-up word like Halligalli
Handelsgesellschaft mbH. Thus combinations of objective, imaginative and
personal names can be formed.
An important reminder
In addition to abiding by the provisions of the Commercial Code, remember
the protection extended by German competition and trademark legislation. To avoid the possibility of confusion with another company name, you
should conduct your own extensive research (using Internet search engines)
early on, before your company is entered in the Commercial Register by
the notary; you should also contact your local Chamber of Commerce and
Industry. If you plan to operate nationally or internationally, you should
instruct a trademark lawyer or similar specialist to conduct the necessary
research on your behalf.
26
www.gruenden-in-berlin.de
WHAT TAXES
MUST I PAY?
Dont be alarmed; you only need to have at least a basic understanding of just four or five types of tax. And need to applies even if youve had the help of a tax adviser from Day One.
Because without a basic knowledge of the tax system, it will be
difficult for you to evaluate your performance and organise your
business processes.
Taxes you need to know about
VAT and/or input tax
Income tax
Wages tax
Trade tax
Corporation tax
VAT
VAT (turnover tax) is payable in the case of nearly every purchase or sale
of products or services. The only exceptions relate to the typical turnovers
of specific professional groups (e.g. doctors, physiotherapists and insurance
brokers) and small business operators, who are exempt. As a businessman,
you must charge your customers VAT and submit a preliminary VAT return
to the tax office. When you make purchases for your company, the VAT you
have paid becomes a so-called input tax. This input tax can then be set off
against the VAT you have collected.
If you start up a company, you are obliged to file a VAT return every month
during the first year and the following calendar year by the 10th day of the
month following the reporting period.
28
Generally speaking, debit taxation is used for VAT: you must pay the VAT
as soon as you have invoiced your customer, and not wait until the invoice
has been paid. Freelancers and small businessmen can apply to delay their
reporting and payment of VAT until they have received payment from their
customers (actual taxation). This exemption is also applicable to businesses
obliged to maintain accounting records (commercial traders) if their total
turnover in the previous calendar year did not exceed 500,000. If you wish
to shift from debit taxation to actual taxation, you must submit an application to this effect to your tax office.
Small business operator regulation

If your turnover in the previous calendar year was 17,500 or less, and if
you do not expect it to rise above 50,000 in the current calendar year,
you automatically qualify for the small business operator regulation. If you
start operating part of the way through a year, you must make a projection of your annual turnover based on your actual results. Since, in this
case, no figures are available for the preceding years turnover, a threshold
figure of 17,500 is assumed for the first year of business so that you can
be classified as a small business operator.
You will then be exempt from submitting preliminary VAT returns and paying VAT to the tax office. As a small business operator, however, you will be
unable to include a charge for VAT on your own invoices. Neither can you
claim the input tax back from your tax office when you make purchases.
If, as a consequence of high capital expenditures, you are having to pay a
substantial amount of input tax, it may be worth considering whether you
would be better off exempting yourself from the small business operator
29
regulation, even if your turnover is within the qualifying limits. If you wish
to do so, you must file an application with the tax office. However, your
decision will remain binding for five years!
Income tax
Sole traders and members of business partnerships (GbR, OHG and KG) pay
income tax. This is calculated based on income from business activities:
generally speaking, the company profits. Income tax is calculated over a
calendar year. Personal allowances are taken into account, while insurance
contributions for old age, illness and accidents are deductible as provident
expenditure. The tax system allows losses to be offset against profits from
other income categories or from other years. If taxable income is less than
the basic tax-free allowance, no income tax will be payable.
free allowance. However, in both cases it is important to note that trade tax
cannot be defined as an operating expense.
Corporation tax
All corporations (such as the AG, GmbH and UG) are liable to pay corporation tax. It must be paid to the tax office every quarter in advance. Once
again, it is the companys profits which are taxed. Retained and distributed
profits are subject to a standard corporation tax rate of 15 percent. A further 5.5 percent of this amount is payable as a solidarity surcharge under
the German reunification regulations.
N.B.: Every year, the tax office calculates a specific sum which you must
pay quarterly in advance. If your income in one year is higher than initially
anticipated, you can expect to pay a balancing payment in the following
year. The balancing payment plus the new, higher payment on account have
caused many a young entrepreneur to get into serious financial difficulty.
You should therefore set aside the funds in good time to settle any potential
balancing payment.
Wages tax
Wages tax is a special form of income tax. Although it is the employee who
owes the tax, you as the employer must undertake to withhold it by deducting it at source, and to pay it to the tax office. Payments of wages tax must
be pre-registered with the tax office electronically. As well as wages tax,
the solidarity surcharge and, if applicable, church tax must be withheld and
paid to the tax office.
Trade tax
30
Every businessman in Germany is subject to this tax. It is the most important source of income used by local authorities to fund their public services,
and in Berlin a standard rate is levied in all boroughs. Taxation is based
on trade earnings, i.e. the businesss profits adjusted in accordance with
special guidelines. Payment of this tax must be made quarterly in advance.
Here too, it is important to set aside an adequate reserve if ones profits are
rising. Individuals and partnerships are entitled to a tax-free allowance of
24,500 per annum. A lump sum for trade tax can also be set off against
personal income tax. Corporations may not set off the tax, and have no tax-
31
WHAT ORGANISATIONS
DO I NEED TO THINK
ABOUT?
When they become self-employed, traders join either the Chamber of Skilled Crafts or the Chamber of Commerce and Industry.
German legislation provides that membership of a body which
can exercise official authority, represent the interests of all its
members on a political level and provide a comprehensive package of services, is statutory. New entrepreneurs should also be
aware of the GEMA and the GEZ, which play an important role
in copyright protection for musical works and the funding of
public-service broadcasting, respectively.
The Chamber of Skilled Crafts (HWK)

The Berlin Chamber of Skilled Crafts (Handwerkskammer) delivers a wide
range of advisory, educational and service provision for local businesses in
the sector and their employees. Two educational centres run a wide range
of courses providing advanced training which can lead to qualifications. The
Berlin Chamber of Skilled Crafts speaks out for the interests of its members
and their employees and apprentices. It represents the sector in public and
on a political level and dedicates itself to achieving a positive economic and
political environment for small and medium-sized enterprises. It maintains
a register of craftsmen, tradesmen and apprentices, as well as lists of crafts
and trades not requiring certification and of craft and trade related businesses. It regulates and supervises vocational training, swears in experts,
and is responsible for determining whether a business is suitably equipped
to provide training.
32
The Chambers own advisory centre focuses on the needs of business, and is
used by both new and existing enterprises. In accordance with the principle
of empowering people, business plans can be drawn up, capital requirement and financing plans prepared and viability tests carried out as part of
the advisory service for new start-ups. Help is also available on choosing a
suitable location, deciding which legal form to adopt, developing marketing techniques, the formalities to be complied with, and issues relating to
accounting and costing.
A two-part fee is charged for membership of the Chamber of Skilled Crafts,
comprising a basic sum and an earnings-related amount. However, no contribution is payable during the first year of trading of a sole proprietorship,
and a reduced rate is levied during years two to four, provided the trading
profit does not exceed 25,000.
The Chamber of Commerce and Industry (IHK)

The work of the Berlin Chamber of Commerce and Industry (Industrie- und
Handelskammer) is geared towards making Berlin a better place to do business for the companies which operate there. This is achieved by actively
involving entrepreneurs from across industry in the work of the Chamber in
an honorary capacity, thus helping to determine its future direction.
In areas where government regulation is unavoidable, the IHK exercises official authority. This is particularly evident in the area of vocational training,
where government intervention is replaced by a DIY approach.
The IHK offers a wide range of services to all its members, including its
future ones. This gives newcomers in particular the opportunity to attend
advisory sessions aimed specifically at their needs, where they can find out
33
early on about the steps which need to be considered when embarking on

self-employment. Help is also offered to those seeking suitable financing
and funding instruments. Feedback is available on business plans, and the
department specialising in law and taxation can offer additional useful
advice.
The IHK pays for its work by charging a membership fee based on the
business performance of the particular company. In this way it remains
independent of the state and of the goodwill of individual wealthy businesses. New entrepreneurs are exempt from the fee for the first two years
provided their profits do not exceed 25,000 per annum, they are sole
proprietors, and they are not listed in the Commercial Register or Register
of Cooperatives.
GEMA
The Society for Musical Performing and Mechanical Reproduction Rights
(GEMA) is a collecting society which represents the performance and reproduction rights of the composers, songwriters and music publishers who
are its members. Royalties must be paid to GEMA for public performances
of copyright-protected musical works. Many small businesses do not realise
that they must notify GEMA if they play music for which royalties are payable even just on telephone switchboards or to enhance voice messages on
answering machines. Revamping websites through the use of audio branding which includes music is also becoming more popular. GEMA must be
notified of this use too.
Professional bodies
The typical responsibilities of professional bodies include ensuring that businesses have a suitable environment in which to operate, improving competitive conditions, helping newcomers on the path to self-employment,
and supporting businesses through periods of adversity. Nearly every branch
of industry has its own representational body these days to champion its
interests externally vis--vis politicians, officialdom, the trade unions, the
media and the general public.
Participation and membership tend to be voluntary, and a fee is usually
levied. In the area of crafts and skilled trades, it is the guilds which act on
behalf of their various members. In all other commercial and freelance sectors, associations assume these functions.
The GEZ the licence fee agency for

public-service broadcasters
In Germany there is a statutory obligation to pay a licence fee, because the
first, second and third TV channels and the public-service radio stations are
largely financed in this way.
Following the latest reform of the Interstate Broadcasting Agreement, every
household in Germany must pay a contribution for radio equipment from 1
January 2013. A lump sum is payable which covers all the equipment in the
home. The situation has also changed for businesses. The amount payable
by companies and institutions depends on the number of business premises,
employees and company vehicles.
34
35
WHAT SORT OF
INSURANCE DO I NEED?
When you become self-employed, you leave behind you the social
network familiar to you as an employee. That is why you should
waste no time in ensuring that you have personal and social protection. But dont forget that there may be unforeseeable events
ahead for your business, too.
Preconditions for those seeking voluntary insurance with the GKV
That is why it is also advisable to insure against incidents which might

damage your business. The type and level of cover you should purchase will
depend on your personal and business circumstances. Take an objective look
at your actual insurance needs, and beware of underinsuring, or you may
find that you are paid nothing at all if you do claim. The most important
thing is to cover the greatest risks first, and to avoid double insurance.
Nursing care insurance

Insurance to meet your care needs is also compulsory. New entrepreneurs
can again choose between private and statutory insurance. N.B.: If you
leave the statutory insurance scheme, you will not be able to rejoin it again
while you are self-employed.
Personal insurance
Health insurance
In Germany, every citizen must have statutory health insurance. Whilst as
an employee you were automatically a member of a statutory health fund
(GKV), you now have a choice: you can either take the opportunity to remain with the GKV on a voluntary basis, or you can contract private insurance (PKV). When it comes to sick pay, it may make sense to opt for a combination of the two. The cost of your premium with a PKV will depend on
your age upon entry to the scheme, the state of your health, and the level
of cover you require. No free cover will be available for family members, as
is the case with the GKV.
36
You must have had compulsory insurance with the GKV for at least twelve months
before becoming self-employed, or for at least 24 months in the previous five
years. Your period of self-employment must have commenced no more than three
months previously.
Pension insurance
Entrepreneurs are personally responsible for ensuring that they have made
adequate provision for their old age. They can choose to remain in the
statutory Deutsche Rentenversicherung scheme or take out a life insurance policy, etc. instead. Some categories of self-employed people are,
however, obliged to obtain statutory pension insurance. This might apply,
for instance, to craftsmen, midwives, teachers, artists and journalists. A list
of self-employed professions for which statutory insurance is required can
be found in Art. 2 of Book VI of the Social Code. Additional information is
available from Deutsche Rentenversicherung (DRV).
Mandatory insurance for craftsmen
Anyone practising a craft or trade for which certification is required must
purchase pension insurance. In the case of sole proprietorships, this applies
to all business owners listed in the Register of Craftsmen who have a qualification pursuant to craft and trade legislation. In the case of partnerships
37
too, it applies to partners with a qualification pursuant to craft and trade

legislation. You may apply for exemption from this obligation if you can
provide evidence of having paid contributions for 18 years (216 months).
Young persons (who started up in business less than three years previously)
may, upon application, be permitted to pay half the statutory amount. For
the current rates, contact the Deutsche Rentenversicherung in Berlin. People
working in crafts and trades for which no certification is required or in craft
and trade related businesses (listed in Annex B1 to the Crafts and Skilled
Trades Code) are under no statutory obligation to purchase such insurance.
www.dguv.de
www.arbeitsagentur.de
Accident insurance / Employers liability insurance associations

In some industries, entrepreneurs are obliged to join the German Statutory Accident Insurance scheme (Deutsche Gesetzliche Unfallversicherung
or DGUV). This accident insurance is provided by the employers liability
insurance associations (Berufsgenossenschaften). The statutes of the your
particular association will indicate whether your membership is compulsory. This statutory insurance will only help you if you have an accident
at work. It may make sense to purchase private accident insurance as an
alternative to the DGUV or to complement it, especially if you do not have
any disability insurance.
Voluntary unemployment insurance
Entrepreneurs are not obliged to insure themselves against unemployment.
Since 1/2/2006, however, the self-employed have been able to apply to the
Federal Employment Agency to continue to make voluntary contributions
to the unemployment insurance scheme. The following conditions must be
met: the applicants work must take up at least fifteen hours per week,
and he must have been employed in a job with statutory social insurance
for at least twelve out of the 24 months immediately preceding his selfemployment. The application must be submitted no later than three months
after he takes up self-employment.
Pension fund for craftsmen and tradesmen
If you wish to ensure that you and your family receive your full pension entitlement in old age, it is important to start topping up your contributions as
early as possible to meet your future needs. As a self-employed craftsman
or tradesman, you have the opportunity to insure yourself and your family
through the above pension fund at particularly favourable rates.
Business insurance
38
Depending on the individual circumstances of the business, it may be advisable to consider other types of insurance which are not listed here. As
a general principle, you should obtain and compare several quotes before
purchasing cover.
Employers liability insurance
Employers liability insurance covers loss or damage to people and property
and consequential pecuniary loss caused by the workplace, the entrepreneur or his staff as a result of business activities. Extended product liability
insurance is additional cover within employers liability insurance. This is
required in particular by the manufacturers or quasi-manufacturers of raw
or intermediate products. (A quasi-manufacturer is a seller who attaches his
own name or trademark to a product, thus creating the impression that he
is the actual manufacturer.)
Buildings and property insurance
You can insure your businesss fixed and current assets against loss or damage by taking out fire, water, storm, glass breakage and burglary insurance.
Legal protection insurance
This insurance covers the costs of legal disputes with third parties. You
should consider whether you require legal protection for cases involving
transport, compensation, or the criminal, employment or social courts. The
right policy for you will depend very much on the business risks involved.
You should review your needs accordingly.
Business interruption insurance
If your business is forced to shut down temporarily because of specific
events or damage (water damage, fire, etc.) this insurance will, within certain limits, bear the costs of continuing to operate and provide compensation for lost profits.
Social insurance for employees

Social insurance for employees comprises unemployment, health, accident,
pension and nursing care insurance. As an employer, it is your responsibility to notify their health insurance fund immediately when you employ a
member of staff. It will then notify the employment office and pension
provider in turn. Accident insurance offers the employee financial security
in the case of accidents at work or whilst commuting. This insurance is
provided by the relevant employers liability insurance association. All of
the contributions are paid by the employer, who must notify the employers
liability insurance association within one week of the employees recruitment. Short-term employees and those in mini-jobs must be registered
with the mini-job centre.
www.minijobzentrale.de
39
HOW DO I PLAN MY
NEW BUSINESS?
So youve taken a good hard look at yourself and come up with
a few answers (such as Id prefer to start a business as part of a
team). You have also firmed up some thoughts on how to classify yourself and your business concept (e.g. Ill be the managing
partner of a GmbH). You also have some idea of the unavoidable bureaucratic and financial costs of running a business (e.g.
permits, taxes, duties and insurance). What you have to do now
is to assemble the individual elements of your vision, mould and
interlock them, so that a viable business edifice emerges.
Business model
Your business model enables you to define, in a greatly simplified form,
what financial, material and human resources are being invested in your
business, and how its internal creation process can translate these into
marketable goods and services. Your business model should be concise and
to the point, and you should use every possible opportunity to sound it out
with other people. It should contain a description of the following cornerstones of your business edifice:
40
Essential elements of a business model

Goals
What benefits will be generated by the business activity?
What exactly is the concept? Who will be willing to pay to enjoy its benefits?
What kind of success (e.g. sales, profits, market share) are you trying to achieve in
the short and long terms, and from what sources (products, services)?
Instruments
What concrete measures will help you achieve your goals?
What resources are available, or are still needed?
What specific success factors (innovations, specialist knowledge, etc.) characterise
your business?
Knowledge
What restrictions (limitations) apply to your area of activity, and how will you
deal with them? (Important factors outside your sphere of influence, such as
legislation, customer habits, competitors, etc.)
N.B.: You should work very carefully on this business model. If it is well
thought-out, it will prove valuable in several respects further down the line:
for instance, as the basis for an elevator pitch or for the executive summary of your business plan.
41
Elevator pitch
This concept first emerged from American sales training courses in the
1980s, and is now part of the established repertoire of a good salesman. Essentially, one should be able to interest ones opposite number in a product
or project in a maximum of sixty seconds (the duration of a longish elevator
ride). You should practise making your case in a brief, articulate and engaging way. This can be very useful when talking to your bank, soliciting new
customers or introducing yourself, as well as in many other situations!
Find out who is the right person to contact, and address the document
accordingly.
Do not submit an incomplete document. If bank staff, officials, consultants
or others have set conditions, make sure you comply with them.
Produce an attractive document: clean, well-organised and with an
appropriate layout.
Ensure that the executive summary is written to the best of your ability.
Business plan
What should I include in my business plan?
While the business model represents the most important cornerstones of

your mental image of a business edifice, your business plan will have to
combine these elements in a constructive way: creating the walls, ceilings
and foundations, as it were. You should draw up your business plan with as
much care as you would like taken with the construction of your house. This
is essential if you are to succeed in convincing your reader that the concept
behind your business is a viable one.
You will find detailed suggestions on how to organise the content of your
plan by using the enclosed links and reading the relevant literature. So instead, we will concentrate here on the most important aspects of the document and the most frequent omissions within its overall structure. In very
general terms, not every section will be equally relevant to every start-up
project. The same applies to the length of your document: there is no standard size. That said, fewer than ten pages of text (with single-line spacing
and font size 11) would be slim indeed, and fewer than six pages practically
emaciated. Of course, this is without the sets of figures and any Annexes.
Functions of a business plan

A planning guide for the entrepreneur
An aid to persuading potential partners, investors and advisers of the businesss
merits
A beacon which helps the person starting up the business and others involved in
the process to keep on track
N.B.: Steer well clear of pre-packaged business plans! You can download
them from the Internet and they are handed out to new entrepreneurs at
seminars, but they are usually unfit for purpose. It is not your own business
that is being described, nor does it bear your personal imprint. So it is of no
value to you, let alone to people who dont know you. Your business plan will
take up at least two to three 40-hour weeks of your time!
The successful basis of a business plan
42
How your business plan can create a good first impression
Put yourself in the shoes of the person reading your business plan; he probably doesnt have much time, so he will want to get a quick first impression of your document. This often means that by the time he has skimmed
through the table of contents and the summary, taken a look at your CV and
glanced at your figures, his mind is already made up. The moral? Make sure
you create the best possible first impression!
Executive summary
This is your opportunity to dazzle your reader. You should stress the advantages which only your start-up project can provide. If you like, you can
include promotional claims, but you will then have to back these up in the
bullet points which follow. The most important information to include in
the summary is the business concept, the expertise of the start-up team,
the benefit to customers, the businesss USP, the potential level of sales and
return on investment, the businesss legal form and its capital requirements.
Basically, your reader should be able to decide whether he wants in or out
on the basis of the executive summary alone.
The person/people behind the business
Explain to your reader what it is that makes you or your team especially
well-qualified to meet the challenge ahead. Commercial expertise and a
knowledge of the sector can be decisive: you will have to back these up in
your CV and provide documentation.
The business concept
Make a convincing case about what it is that makes your product or service new, better and more useful. In particular, what is the likelihood of it
sustaining a long-term demand? Dont forget that while being able to do
43
something more cheaply but to the same standard may still be an improvement, this alone may not be enough in the long term. You must be able to
put clear blue water between yourself and your competitors if you are to
stand a good chance of surviving.
Market awareness
Demonstrate your awareness of the market. Describe your potential customers in three dimensions, and not just in terms of age, gender and income; who is your target group (students, managers, pensioners) and
what sort of behaviour do they exhibit (conventional, extravagant)? Make
it clear that you know who your competitors are, and that you take them
seriously.
Marketing
Formulate your output in terms of costed products; if you are providing services, parcel them up into costed packages. Describe your costs, prices and
sales volumes in relation to your output. Your reader will then know what
factors you are basing your figures on. Describe your distribution channels.
When referring to marketing, dont just include advertising media (flyers,
websites, etc.), but explain your ideas for promoting your products and go
into the details. Estimate your marketing costs and the impact you expect
this to have on your sales.
tions may be able to provide some figures for comparison. If not, calculate
some simple ballpark estimates for yourself.
Annexes
If you havent included your CV in the section on the person/people behind the business, enclose it with the document as an annex. Dont forget
the most important documents. These can include existing contracts and/
or draft contracts (rental agreement, cooperation agreements, articles of
association, etc.) as well as market analyses, trade mark rights, and so on.
How do I start writing my business plan?

Begin with one of the headings which means most to you, and just start
writing. Use your own words. Write short, simple sentences. Thorough research is more important than eloquent prose, just as you need a sound
basis for your budget figures if they are to be of any use and not just look
good. Show that you have thought your idea through carefully and have
demonstrated that it is practicable.
Organising the business

Often, not enough attention is paid to organisation, particularly by the lone
wolves for whom it is most important of all. Specify how much time is
scheduled for which activity. Also: are the team members playing to their
skills? Who is responsible for what, and what is the pecking order?
Opportunities and risks
It is at this point that the experienced reader of business plans will get a particularly good idea of the depth you have gone into. So you should answer
the following questions as accurately as possible: which of your strengths
will help you seize which opportunities? Which risks can be averted with
which strengths? How can weaknesses be turned into strengths? How can
you prevent your weaknesses from inflicting damage on the business?
44
Financing the business

Be as detailed as possible, and provide as much justification for the figures
as you can. For instance, solicit offers for planned purchases, conversions
or external services and append these to the document. Dont forget to list
your living costs. Explain your figures, if you havent already done so in the
text. Do some research; associations, consultancies and financial institu-
45
WHAT CALCULATIONS
DO I NEED TO MAKE?
Anyone planning to enter self-employment with their own business concept generally intends to be in it for the long haul. If you
are actually going to succeed in this, you will need to do some
careful financial planning before starting up in business.
Beware if you are planning to apply for a loan: dont sign any binding contracts in connection with your new business and dont enter into any other
financial commitments (such as a rental agreement or ordering goods) before your financing has been approved!
Any issues about costing, profitability, financing the capital requirement
and safeguarding liquidity should be clarified in advance. What investments
are to be made? What are the levels of sales and profits expected to be in
the first few years of the new business? Are the solvency and liquidity of the
business guaranteed at all times?
N.B.: The tables shown here serve only to explain which elements need to
be included in the set of figures in a business plan. Your own figures section
should contain more thorough and detailed information. Help is available in
the literature, at banks and Sparkassen, and on the Internet.
term and long-term needs are clearly apparent. This distinction between
the short term and the long term is necessary, because different financial
instruments might be needed. Your long-term capital requirement is apparent from your investment plan, in which you list all of the investments
needed for you to start up in business, with the corresponding initial outlay
or costs. If possible, it should be based on cost estimates, price lists or valuation reports. Otherwise, you will have to manage initially with estimates.
Investment plan
Business premises
Buildings
Building work
Additional building costs
Basic workshop outfitting
Machinery, equipment, etc.
Vehicles
Office equipment
Initial supply of materials
Initial supply of goods
Miscellaneous
= Long-term capital requirement
+
+
+
+
+
+
+
+
+
+
Capital requirement and investment planning
46
Establishing a business is generally associated with costs and expenditure.

Your existing equity will often be insufficient, and you will need to obtain
additional financing. If this is to be placed on a solid footing, you will need
a detailed capital requirement and investment plan from which your short-
Generally speaking, one finds that in the initial weeks and months after the
business is set up, operating costs and expenditure are not counterbalanced
by corresponding levels of income, because there is usually a long gap between the first orders being received and processed and the first payments
coming in. The working capital requirements for this start-up period (such
47
as wages, salaries, rent, insurance, advertising, interest, loan repayments,

but also personal expenditure) represent your short-term capital requirement. This can be met either from equity capital reserves, an overdraft facility from your own bank, or working capital financing over a fixed term.
(See Liquidity planning below for how to calculate your short-term capital
requirement.)
Long-term capital requirement
+ Short-term capital requirement
= Overall capital requirement
Once you have determined your overall capital requirement, you must find
the optimum way of financing it. Publicly funded loans or schemes are often available to new businesses. You must establish your debt service limit
so as to ensure that the burden of paying interest and repaying your debts
from external financing is not greater than your business can bear.
How to determine your annual personal expenditure:

General living costs
(food, clothing, leisure)
Private rent, other commitments related to
+ accommodation (incl. ancillary costs)
+ Car / bus and rail

+ Phone, radio, TV
+ Holidays
+ Pension
+ Health insurance
+ Life insurance
Expenditure on private loans

+ or other commitments
Anticipated deductions for income tax,

+ church tax and solidarity surcharge
+ Miscellaneous (e.g. maintenance payments)
This is a profit and loss calculation based on a projection of the businesss
cash flows. It will help clarify whether the anticipated level of annual sales
will generate sufficient profits once all operating costs have been deducted,
or vice versa: how high annual sales will have to be if the business is to be
economically viable and you are to be able to survive on the profit generated.
You should bear in mind that, to enjoy the same standard of living, the
profit you need for your income as a self-employed person will have to be
considerably higher than the income of an employee, because you will have
to bear all your social security costs pension provision, health insurance,
accident insurance, etc. alone. If you are starting up in business after a
period of unemployment, find out whether any financial support is available
from your employment agency.
48
= Annual personal expenditure
Your level of personal expenditure represents the minimum amount of profit you must generate. As a one-man business, you live from your profit, or
what is on the bottom line. If you establish a GmbH, remember that as
an employed managing partner you draw a salary from the business, and
possibly also a share of the profit or sales. In this case, you will not pay for
your personal expenditure out of the company profits, but instead out of
the salary paid to you by the GmbH, which should be sufficient to cover
your outgoings.
49
Before you can draw up a profitability forecast, you must first estimate the
anticipated level of annual sales.
(Annual calculation: net, i.e. without VAT and input tax)
Revenue
from services
+ from trading activities
+
from licences, commission, etc.
= Total revenue
Costs
- Materials used
- Cost of merchandise
=
-
Gross profit I
Gross wages and salaries
GmbH managing directors salary
Ancillary personnel costs (social security deductions)
= Gross profit II
Other costs
- Rent/lease
- Heating/fuel
50
Vehicle costs
Postal costs
Insurance, fees, contributions
Tax and legal advice
Advertising
Interest on external loans
Miscellaneous costs
Low-value commodities, repairs

and maintenance
Depreciation on vehicles, machinery,

equipment, buildings
Net profit
The net profit expresses the anticipated profitability of your business. But
liquidity (the financial resources actually generated over a period) is also
an important variable; this can be calculated by adding the depreciation
itemised as an expense but which does not result in any direct expenditure to the net profit:
Net profit
+ Depreciation
= Cash flow
You will have to deduct your living costs, expenditure on investments and
loan repayments from this so-called cash flow, which banks in particular
regard as an important criterion when making lending decisions. In the case
of a GmbH, your living expenses are already covered by your managerial
salary and do not have to be funded from the cash flow.
At the same time, you can use your cash flow to calculate your individual
debt service limit, the maximum financially sustainable burden of interest
and repayments, and thus establish the maximum sum you can borrow from
external sources:
Net profit
+ Depreciation
+ Interest on external loans
+ Life insurance
=
+
=
Extended cash flow

Miscellaneous income
Personal expenditure
Income, trade and church tax
Debt service limit
51
Liquidity planning
Cash flow refers exclusively to the liquid financial resources generated by
the business. But liquidity can also be increased or secured by other means,
such as loans, private investments, earned interest, etc. As the actual liquidity of the business determines its creditworthiness and whether it is able to
meet its payment obligations at any one time, it must be planned with great
care. Short-term problems can make it very difficult to obtain advance financing from creditors, etc. Longer-term problems can result in insolvency!
Too little attention is often paid to this, especially when planning a new
business. To determine your financing needs for the initial phase (i.e. your
short-term capital requirement), you should draw up a liquidity plan which
compares your available liquid resources with your expenditure, not forgetting the sum required to cover your personal living costs.
In most cases, the funds available will be insufficient to cover expenditure
during the start-up phase, and there will be a shortfall. This should be met
with an overdraft or operating loan from your own bank, which you should
apply for on the basis of your liquidity plan. Do not postpone your application until you actually need the money it isnt easy to negotiate with the
bank from a position of weak liquidity!
LIQUIDITY PLAN
(in Euro)
A | Liquid resources
Cash holding
Bank credit balance
Surplus from previous month
B | Income
Proceeds from sales
Loans / other income
Personal deposits
1st
month
2nd
month
3rd
month
4th
month
5th
month
6th
month
A+B = available resources

C | Expenditure
Materials used
Cost of merchandise
Third-party services
Gross wages and salaries
Ancillary personnel costs
Rent/fuel
Maint./repair/low-value commods.*
Vehicle costs
Insurance/contributions/fees
Tax and legal advice
Advertising/travel costs
Miscellaneous costs
Interest on external loans
Loan repayments
Taxes
Subtotal
Deficit from previous month
Investments
Personal drawings
Total expenditure
A+B-C = Surplus/deficit
Current account balance
Liquidity
52
* Low-value commodities can be written off completely in the year of acquisition
53
Financing
Once you have determined your capital requirement, the question arises
of how to obtain financing and where the money is to come from. Firstly
from your own pocket, then from your bank, and finally from the regional
authorities (via Investitionsbank Berlin and BBB Brgschaftsbank zu BerlinBrandenburg GmbH) and national authorities (via Kreditanstalt fr Wiederaufbau).
Your own capital
You can invest your own resources in the form of savings and/or assets in
kind. In addition to capital assets (machinery, fixtures & fittings, motor
pool, etc.), assets in kind can also be intangible goods (patents or other
rights). In the case of a GmbH in particular, it can often be problematic to
assess the value of assets in kind. It may be necessary to obtain an expert
opinion from a specialist. The Chamber of Skilled Crafts offers free evaluations to its member businesses and to the owners of new craft enterprises.
Participation
If your own resources are insufficient, you should check whether you can
perhaps encourage family members or others to participate in the future
enterprise with their own funds, or whether they are prepared to make
venture capital available to you.
Finance may also be available from capital investment companies. Companies like these can provide equity for young businesses. However, they only
participate in a company for a specified period usually ten years. During
this period, a fixed rate of interest may be payable on the capital they have
supplied, or a participation fee and/or share in the profits may be agreed.
You must read the terms and conditions very carefully before signing. Capital investment companies are sometimes funded by financial institutions,
and sometimes by private investors.
Investment loans from financial institutions
Since your own funds will only very rarely be adequate, you may have to
meet your capital requirement by topping up with external finance. Loans
from financial institutions can be used to fund capital assets. They are
available for the medium to long term, collateralised according to standard
banking practices (possibly by a surety bank), and may attract a fixed or
variable rate of interest. The interest charged by banks own financing programmes tends to be higher than that for public funds.
54
Public funding
Public-sector funding for new start-ups tends to be made available to individuals. Long-term loans at reasonable fixed interest rates and the suspension of repayments for the first one or two years can provide much-needed
help during the early days of a new business.
Public-sector loans generally also have to be collateralised according to
standard banking practices. If they have insufficient security, new startups in Berlin can apply to the BBB Brgschaftsbank zu Berlin-Brandenburg
GmbH for a deficiency guarantee. However, they have no legal entitlement
to financial assistance from the public sector.
Minimum preconditions for public-sector funding
The project must not have been launched before the application was submitted
You must have adequate technical and commercial qualifications (vocational
training and practical work experience)
You must make a reasonable contribution from your own funds to the overall
financing package
Overall financing of the project must be secured
The project must have a good prospect of establishing a sustainable and fullyoperational business
The Frderfibel (subsidy guide) available from the IHK, the HWK and elsewhere, provides a comprehensive review of business development programmes in the state of Berlin and of national initiatives which are also
available to businesses in the capital.
Subsidy Guide
www.ibb.de
Keyword: Subsidy
Guide
Start-up bonus for master craftsmen

This bonus provides special assistance to master craftsmen starting a business in Berlin. It comprises a one-off payment of 7,000 upon start-up (basic funding). The grant must be repaid in specific circumstances. In addition,
after three years have elapsed it is possible to apply for 5,000 sponsorship
for a workplace, provided you have taken on an employee or apprentice.
55
Preconditions for applying for a master craftsmans bonus

You must enter self-employment for the first time as a master craftsman in the
craft or trade in which you have trained within three years of passing the German
master craftsmans examination
The application must be submitted to Berlin Chamber of Skilled Crafts before the
business is started up
You must not have any additional income from work in which you are not selfemployed or from other self-employed work
A few sample questions:

yy How long has the franchiser been operating?
yy What competitive edge is there in fact?
yy Have industrial property rights been registered?
yy Are there any pilot businesses?
yy How many franchisees are associated with the franchiser?
You can obtain an application form for the master craftsmans bonus from
the Berlin Chamber of Skilled Crafts on +49-30-25903-467.
Franchising as an alternative
Franchising might be seen as a way of starting a business without the
dreaded jump in at the deep end. Names such as Subway, Mrs Sporty and
essanelle are familiar and, as things stand, would appear to demonstrate
the success of this sales method.
Franchising is close commercial cooperation in the marketing of goods or
services which operates on a voluntary basis. The franchiser and franchisee
contractually regulate this collaboration between legally and commercially
independent entrepreneurs. Franchisees have access to the entire knowhow of the franchiser and profit from the name recognition of a familiar
brand. They enjoy the advantages of a successfully practised business concept and the professional services of a large head office. Thus and this is
the basic idea behind franchising the advantages of a large operation can
be combined with those of the smaller owner-run business.
Before becoming involved in the franchise system and taking on a contractual commitment, you should examine the quality of the concept and
ensure that the franchise contract strikes a fair balance.
56
yy How successfully do these operate (figures required)?

yy What is the franchisees status in the system
(advisory bodies, information exchange groups)?
yy How comprehensive are the service packages?
yy Is the franchiser a member of the Deutscher Franchise-Verband e.V.?
Franchisees and those interested in starting a business can contact the
Deutscher Franchise-Verband e.V. at Luisenstrasse 41, D-10117 Berlin
Tel.: +49-30-2789020.
The IHK in Berlin has a leaflet on this subject which is available from the
service centre and on the Internet.
Takeovers as an alternative
If you are thinking of taking over an existing business rather than starting
up one of your own in the traditional manner, check out the specialised
service offered by the transfer marketplaces of the IHK and the HWK. They
list small and medium-sized enterprises from across industry which are up
for sale. The Berlin Chamber of Skilled Crafts has a transfer marketplace
specifically for its own sector, which can be accessed via its business advisory service.
57
WHERE CAN I
FIND MORE HELP?
Contacts for new businessmen at
Chamber of Commerce and Industry Berlin (IHK)
We will help you take those first few steps towards self-employment. We
can give you advice and suggestions on how to plan your business setup in
Berlin:
IHK Start-up advice in English
Julia Knack
Tel.: +49-30-31510-439
E-Mail: julia.knack@berlin.ihk.de
Local contacts in Berlin

Bezirksamt Charlottenburg-Wilmersdorf von Berlin
Wirtschaftsfrderung (Business support)
Otto-Suhr-Allee 100, D-10585 Berlin
Tel.: +49-30-9029-13107
www.berlin.de/ba-charlottenburg-wilmersdorf
Regulatory agency (Ordnungsamt) / Notification
Hohenzollerndamm 174 177
D-10713 Berlin
Bezirksamt Friedrichshain-Kreuzberg von Berlin
Frankfurter Allee 35-37, D-10247 Berlin
Tel.: +49-30-90298-2273
www.berlin.de/ba-friedrichshain-kreuzberg
Business service / Notification
Yorckstrasse 4 11
D-10965 Berlin
Business consultancy at the

Chamber of Skilled Crafts Berlin (HWK)
We can answer a wide range of questions on starting a business, finance,
subsidies, buying existing businesses, etc. Take advantage of this free
service:
HWK Start-up advice in English
Betriebsberatung
Tel.: +49-30-25903-467
E-Mail: betriebsberatung@hwk-berlin.de
Bezirksamt Lichtenberg von Berlin

Mllendorfstr. 6, D-10367 Berlin
Tel.: +49-30-90296-4338
www.berlin.de/ba-lichtenberg
Grosse-Leege-Str. 103
D-13055 Berlin
Bezirksamt Marzahn-Hellersdorf von Berlin
Alice-Salomon-Platz 3, D-12627 Berlin
Tel.: +49-30-90293 - 2611, -2612, -2613
www.berlin.de/ba-marzahn-hellersdorf
Premnitzer Str. 11
D-12681 Berlin
58
59
60
Bezirksamt Mitte von Berlin

Mllerstr. 146 / 147, D-13353 Berlin
Tel.: +49-30-9018 - 44372, -44373, -44374
www.berlin.de/ba-mitte
Bezirksamt Spandau von Berlin

Carl-Schurz-Strasse 2/6, D-13597 Berlin
Tel.: +49-30-90279 - 3101, -2266, -7547
www.berlin.de/ba-spandau
Trade office / Notification

Karl-Marx-Allee 31
D-10178 Berlin

Galenstrasse 14
D-13597 Berlin
Bezirksamt Neulln von Berlin

Karl-Marx-Str. 83, D-12043 Berlin
Tel.: +49-30-90239-2390
www.berlin.de/ba-neukoelln
Bezirksamt Steglitz-Zehlendorf von Berlin

Martin-Buber-Str. 2, D-14163 Berlin
Tel.: +49-30-90299-5257
www.berlin.de/ba-steglitz-zehlendorf

Juliusstrasse 67
D-12051 Berlin
Trade office (Gewerbeamt) / Notification

Knigin-Luise-Str. 96
D-14195 Berlin
Bezirksamt Pankow von Berlin

Frbelstrasse 17, D-10405 Berlin
Tel.: +49-30-90295 - 5664, -5665
www.berlin.de/ba-pankow
Bezirksamt Tempelhof-Schneberg von Berlin

Rathaus Schneberg, John-F.-Kennedy-Platz, D-10825 Berlin
Tel.: +49-30-90277-4251
www.berlin.de/ba-tempelhof-schoeneberg

Frbelstr. 17
D-10405 Berlin
Business matters / Notification

Tempelhofer Damm 165
D-12099 Berlin
Bezirksamt Reinickendorf von Berlin

Eichborndamm 215 239, D-13437 Berlin
Tel.: +49-30-90294 - 2282, -5670
www.berlin.de/ba-reinickendorf
Bezirksamt Treptow-Kpenick von Berlin

Alt-Kpenick 21, D-12555 Berlin
Tel.: +49-30-90297-2500
www.berlin.de/ba-treptow-koepenick

Lbener Weg 26
D-13407 Berlin

Salvador-Allende-Str. 80A
D-12559 Berlin
61
Helpfull websites with start-up information

www.existenzgruender.de
Englisch version of the business start-up portal of the Federal Ministry of
Economics and Technology
www.gruenden-in-berlin.de
Business Start-up Network Berlin
www.berlin-partner.de
Berlins corporation fr economic development and location marketing
www-berlin.de
Official website of the city of Berlin
www.gtai.de
Germany Trade and Invest
www.ibb.de
Development bank of the Federal Land of Berlin
www.ihk-berlin.de
Chamber of Commerce and Industry of Berlin
www.hwk-berlin.de
Chamber of Skilled Crafts Berlin
62
Imprint
Published by
Berlin Chamber of Commerce and Industry
Fasanenstrasse 85
D-10623 Berlin
Tel. +49-30-31510-0
www.ihk-berlin.de
Berlin Chamber of Skilled Crafts
Blcherstrasse 68
D-10961 Berlin
Tel. +49-30-25903-01
www.hwk-berlin.de
1st English edition, March 2013
Photo credits
Title page: SeanPrior | clipdealer
Graphics: Jesus Conde | istockphoto
64
Printed by
Koebcke Information Partners
Axel-Springer-Strae 54
10117 Berlin

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Starting A Business in Berlin

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Starting a Business in Berlin

Starting a Business in Berlin

WHAT EXACTLY DO I WANT?

WHERE DO I FIT IN?

WHAT NAME SHOULD I CHOOSE?

WHAT TAXES MUST I PAY?

HOW DO I PLAN MY NEW BUSINESS?

WHAT CALCULATIONS DO I NEED TO MAKE?

Realistic view of oneself

Skills which contribute to a successful start-up

If you are currently unemployed, a protracted series of unsuccessful job

Reasons for starting a business

Bringing your own ideas to fruition

WHERE DO I FIT IN?

Self-employment in a business sense means earning an income

Freelancers are self-employed people working as scientists, academics,

While many entrepreneurs work full-time on making a living from their

Businesses requiring certification or a licence

Notifying the authorities

Restrictions on the freedom of economic activity exist mainly in areas

Examples of businesses requiring certification:

What information has to be supplied to the Ordnungsamt?

Craftsmen and tradesmen

Crafts and trades requiring certification

the respective sole proprietor, business partnership or GmbH, etc. Engineers,

Crafts and trades not requiring certification and associated businesses

Mixed enterprises and crafts and trades as a sideline

WHAT LEGAL FORM

A commercial enterprise or a small-scale business?

Entry in the Commercial Register

a balance sheet in compliance with the Commercial Code, which is more

Suitable for at least two business partners

Some legal forms and their special features

Notification of the Ordnungsamt is mandatory and, if required, licences must be

Profile of a sole proprietorship

Partnerships constituted under civil law (GbR)

General commercial partnerships (OHG)

Limited commercial partnerships (KG)

Limited liability companies (GmbH)

lored to your individual requirements. This agreement can include additional

Notification of the Ordnungsamt is mandatory and, if required, a licence must be

N.B.: Legislation provides both specimen documentation for the formation

Registered cooperatives (eG)

Sole proprietorships and

Key criteria when naming a company

Standing out from the crowd

The naming of companies

Many people starting up in business refer to their company, although their

Unambiguous and honest

THE BUSINESS STARTUP

Small business operator regulation

The Chamber of Skilled Crafts (HWK)

The Chamber of Commerce and Industry (IHK)

early on about the steps which need to be considered when embarking on

The GEZ the licence fee agency for

Preconditions for those seeking voluntary insurance with the GKV

That is why it is also advisable to insure against incidents which might

Nursing care insurance

too, it applies to partners with a qualification pursuant to craft and trade

Accident insurance / Employers liability insurance associations

Social insurance for employees

Essential elements of a business model

What should I include in my business plan?