Starting a Business in Germany as A British Citizen After 1 January 2021
For the time being, for British nationals wishing to travel to Germany to set up a new business, no visa or residence permit is needed. This is possible because although the UK has now left the EU, the terms of the transition agreement between the UK and the EU means that British nationals retain the same free movement rights as EU nationals, but only until the end of 2020. From 2021, British nationals who would like to travel to Germany to start a new business will need to follow the process for nationals of ‘third countries’. In this article, we will explain how a British citizen can start a new business in Germany after 1st January 2021.
How can a Entrepreneur Obtain a Residence Permit in Germany?
Citizens of third-countries who wish to set up a new business in Germany are first required to apply for a self-employment visa through their local German consulate. Nationals of some third countries (referred to as ‘privileged countries’), including Australia, Israel, Japan, Canada, New Zealand, South Korea and the USA are permitted to travel to Germany without the need to apply for a visa first. It is not yet clear whether the UK will acquire this status, and for this reason it may be necessary to apply for a visa before travelling to Germany.
Once in Germany, you will be able to apply for a temporary residence permit for the purpose of self-employment. Section 21 of the German Residence Act states, “A foreigner may be granted a temporary residence permit for the purpose of self-employment if:
1. an economic interest or a regional need applies,
2. the activity is expected to have positive effects on the economy and
3. personal capital on the part of the foreigner or a loan undertaking is available to realise the business idea”.
When applying for a residence permit for self-employment in Germany, you will need to submit a detailed business plan and evidence that these criteria will be met by your idea. Section 21 provides more details on how your application will be assessed, “Assessment of the conditions in sentence 1 focuses in particular on the viability of the business idea on which the application is based, the foreigner’s entrepreneurial experience, the level of capital investment, the effects on the employment and training situation and the contribution to innovation and research. The competent bodies for the planned business location, the competent trade and industry authorities, the representative bodies for public-sector occupational groups and the competent authorities regulating admission to the occupation concerned are to be involved in examining the application”. This confirms that business plans are assessed by industry and occupational bodies with the knowledge and skills to review your application. For this reason, it is vital that you prepare your business plan to the highest possible standard.
How do I Create a Business Plan for a Self-Employment Residence Permit in Germany?
There is no ‘one size fits all’ business plan template to follow, but it is essential that you include all of the information necessary to enable those reviewing your idea to make a complete assessment. If you are unsure of how to proceed, it is advisable to secure the help of an immigration lawyer who can take you through the process and review your plan prior to submission. At every stage, always relate your business plan to the above three criteria, to ensure that they are being answered in full. Your business plan may include (this is a summary of the German Federal Ministry for Economic Affairs and Energy’s guidance on business plans):
- The type of business entity you plan to setup
- Where you plan to set up your business and why
- An explanation of your business idea and/or your project
- An introduction to the founder(s)
- A description of your product or service
- A description of your target customers
- A description of your competitors
- The suppliers you want to use
- Your HR planning
- The price/s you will charge for your product or service
- The distribution partners will you use
- Your marketing plan
- The risks and opportunities of your project
- Your equity requirement and how you can cover this equity requirement
You will also need to provide a detailed financial plan; to do this, you may need to:
- Calculate how much start capital you will need - Work out how much capital you need to establish the company and for the early start-up phase
- Make a list of all short-term and long-term cost items
- Calculate your projected earnings
- Identify all possible sources of finance
What are the Business Legal Entity Types in Germany?
One of the key questions you will need to consider before setting up a business in Germany is the type of business entity you will use. In terms of setting up a limited company, there are four main types:
Limited Liability Company (GmbH) – a GmbH requires a minimum of one partner and a minimum share capital of EUR 25,000.
Limited Liability Entrepreneurial Company ("Mini GmbH") - a Mini GmbH also only requires one partner but has a lower minimum share value of EUR 1.00. There are also fewer formalities when setting up this type of company.
Stock Corporation (AG) - AG’s require only one partner, and a minimum share capital of EUR 50,000.
Partnership Limited by Share (KGaA) – a KGaA requires at least 2 partners and a minimum share capital of EUR 50,000.
If you are serious about setting up a business in Germany as a British national, it may be highly advantageous to do this now before the end of 2021. If this is not viable, you will still have a route to achieving your goal, but the process will be more complex and time-consuming when the UK becomes a third-country. We wish you the best of luck with your new business venture in Germany in 2021.