Business Legalities

I want to start a business in Germany and while doing so; I want to live here, too. How can that be accomplished?

With the new law, there is now an explicit regulation on the working migration of self-employed persons to Germany. This will not be discussed here but this topic has been introduced to you in the Entry > Reason of Residence: Buisness.
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What is it like to run a business? I have only been employed so far and just recently, I was laid off.

Let me take a deeep breath. The Germans have a nice saying to answer your question. It is derived from the word “selbständig” itself. This word means independent, self-employed, autonomous. The Germans like to say “Selbständig sein bedeutet sich selbst und ständig treten.” or Self-employment means to constantly kick oneself and that permanently. There is nobody else to do it, because you do not have a boss anymore telling you to do this or that.
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What do I need to start a business?

You only need three things: Money, more money and even more money. As you know, “Money makes the world go around…” Okay, now honestly: money, will strength, and endurance. Starting from the conceptual perspective, there are two possibilities: you either have an idea or you buy an idea. Later is called franchise. Coming from the financial side, there are two ways to start: either you have assets or you buy assets – commonly referred to as a loan. Having your own fortune is the easiest way, but I do not think you would be reading this website if you were that rich. Receiving a loan is not the toughest way. Toughest is to obtain a bank loan. No kidding!
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I want to start a business will I need any special – foreigner related – permits besides residence permit?

No. If you need any special permits depends very much upon the business you will be running. As a foreigner, you will not encounter any special restriction concerning foreigners for you to found a business. Certain professions require special permissions but they apply for Germans just as well. Keep reading. In other words, German constitutional law forbids legal rules that say “Indians may not open restaurants.” If that Indian has been sentenced for a couple of years, he will not obtain a permission to open the restaurant due to his imprisonment only.
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What is or who has a free-profession?

In Germany, you have to keep in mind that every entrepreneur follows a business. Furthermore, German law distinguishes between “normal businesses”, so called “Gewerbe”, and free-professions so called “freie Berufe”. The general differentiation between a normal business and a free-profession can roughly be compared to the difference of a “blue collar” and “white collar” job. Even though in official translations of European law, English legalese for “freier Beruf” is “professional”, LG2G still will remain with the literal translation in order to so adopt your thinking to the way German professionals think. The law in §18 I 2 EStG describes a free profession as such: Free professionals are the self-employed activities of:

scientific, artistic, literary, instructing or educational activity, the independent occupation, engineers,

physicians, dentists, veterinarians, lawyers, notaries, patent attorneys, surveyors, sworn auditors,

architects, trade chemists, accountants, tax consultants (Steuerberater), consulting economists and management experts, sworn-in auditors (vereidigte Buchprüfer),

physiotherapists, journalists,

picture reporters, interpreters, translators, pilots,

and "similar professions".

Some wording hints: "I'm a free professional." translates "Ich bin ein Freiberufler. [for men]" "Ich bin eine Freiberuflerin." [for women] or "Ich übe einen freien Beruf aus."

"I'm a tradesman." translates "Ich bin ein Gewerbetreibender. [for men]" "Ich bin eine Gewerbetreibende. [for women]" or "Ich übe ein Gewerbe aus."

Be aware, not everybody determines so strictly. The main relevance for the difference is in taxation.
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To qualify as a free-professional do I have to do all the work all by myself? May I not hire personnel?

Having professionally trained personnel does hinder the qualification of as self-employed activity as long as it is preformed with expert knowledge and at own responsibly. In other words, an artist may hire a secretary to take care of his fan mailings. This artist, however, will come into trouble if his secretary becomes too creative…
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Anything else to consider?

You also have to be aware that there are “chambered” and “non-chambered” free-professionals. “Chambered” are such professions as attorneys, physicians, architects, and pharmacists. Not chambered free-professionals are e.g. translators, artists (singing, painting, drawing, etc.), journalists. The chamber is a administrative office ruling on the professional’s license to practice. Practically seen, there are only two legal differences between a business and free-professional:

first in tax law,
and

second in formal business (better business registration) law.

To make the right choice between both will be very cost effective in the future.
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How are free-professionals treated in tax law?

Generally, the normal rules apply to free-professionals as well as other business persons. Only, if you are self-employed natural person following a free-profession, you will not be subject to business tax (Gewerbesteuer). This is the typical exception to this rule.
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I learned that I have to register my profession. Where am I to do it?

As a free-professional, you do not have to register at the Business Office (Gewerbeamt). Be aware that the Trade Office will usually not decline the registration of a free professional because this promises the municipality more revenues… If you have mistakenly registered contact yourattorney to help you unregister as a trade.
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Overview of the Differences between Free-Professions and Trades

	Free-Professional	Trade
Cumpulsory membership at IHK	–	+
Registration at Gewerbeamt (trade office)	–	+
Permission from trade office	-/+	-/+
Special permission by competent chamber	-/+	–
Subject to trade tax	–	+
Subject to income tax	+	+
Subject to VAT	-/+	-/+
“-/+” implies that the matter depends on the concrete business and no general information is possible

I own a company that produces meats from animals slaughtered following the Islamic ritual. As a result, my customers get what they consider to be ritually clean food. The trade office of my municipality refused me a permit. Why?

No. The German constitutional court recently ruled in favor of certain exceptions to the law in order to allow the slaughter of animals in the Muslim tradition (BVerfG NJW 2002, 1485; NJW 2002, 663). The Law on the Protection of Animals (§4a I, II TierSchG) forbids the slaughter of warm blooded animals without prior anesthetization. The constitutional court held this provision unconstitutional because it hinders believers to follow their mandatory religious rules. The Law on the Protection of Animals is generally valid, it said, but must consider the company involved. A juristic person has no religion and actually cannot enjoy the constitutional right to Freedom of Religion (Art 4 GG). But since this company is in the business of distributing ritually clean meat to believers there must be an exception to the law. Otherwise believers would have to suffer unreasonably.
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