A step by by step guide to self-employment. Regardless of whether you are starting up as a main or sideline business, it involves planning ahead, making financial decisions, and completing a series of legal activities. Our roadmap guides you through 10 key steps to launching a business or a liberal profession in Munich. Visit our media center for additional information and contact us for advice on the individual steps.
Let’s start with these questions about your individual starting position:
- Do you plan starting a side business while remaining employed, studying or while on parental or family leave?
- Did you take an honest look at your entrepreneurial strengths and weaknesses?
- Do you have the necessary professional and commercial qualifications?
- Do you have the support of family and friends?
- Do you have a valid residence permit that allows you to go self-employed?
- Do you have a good command of the German language?
- Do you need official recognition of (higher) education certificate or professional qualifications from abroad?
Before you start a business, take the time to think carefully about your business idea. Ask the people or organizations in your target group what they think. Ultimately, the concrete benefits for your customers – and whether customers are willing to pay for them – will determine whether your business fails or succeeds.
When you have thoroughly reviewed your business idea, the next step is to prepare a solid business plan. Just like building a house from a blueprint, a new company must be set up on the foundation of a precise plan with plausible calculations. In many cases, fine details, problems and cause-and-effect relationships only come to light when you see them in writing. Anticipate how to handle potential difficulties that may arise during the course of starting and operating your business.
The business plan will be useful for
- yourself
- the Federal Employment Agency to apply for the start-up grant, the so-called Gründungszuschuss
- potential business partners
- bankers and investors
We recommend writing the business plan on your own. Our free business plan template will help you to create the plan. Get counseling, coaching and support from the relevant industry experts or start-up initiatives. Some may even be eligible for the subsidized pre-start-up coaching support, the so-called Förderprogramm Vorgründungs-Coaching. Do you require an official opinion from a professional body, the so called “fachkundige Stelle”? Read on who to contact for a written expert statement.
Our business plan section provides you with information on:
A frequently asked question is: How much money will I need to set up my new business?
There is no one-size-fits-all answer to this question. The startup cost vary based on the business size, type, and scope. To get an idea of how much money you will need to start and run your business, use our free business plan templates to calculate capital and recurring expenses.
You have various options for raising the capital for the startup phase. If your equity is not sufficient, check to what extent financing and subsidies are an option. These include non-repayable grants, promotional loans and guarantees in the absence of collateral. Crowdfunding or equity and venture capital may also be an option for some founders.
As a general rule, apply for financing and funding before starting your business.
Right at the beginning, you need to clarify whether your planned self-employed activity will be classified as a trade-like business or a liberal profession. Some professions can only be allocated to the liberal professions following a case-by-case examination.
The decision has a number of legal and tax-related consequences.
- What special rules and regulations do you need to comply with?
- Which legal forms can you choose from?
- What is the impact on taxes?
- Do you need to join the IHK – Chamber of Industry and Commerce, the HWK – Chamber of Skilled Crafts or another professional chambers – berufsständische Kammer?
- Where do you have to register your self-employment?
- Do you need official recognition of (higher) education certificate or professional qualifications from abroad?
Beware: The terms “Freiberufler“, “freelancer” and “self-employed” are often confused and used as synonyms. Before registering with the authorities, please check if your activity qualifies as a liberal profession or a trade-like business.
Which legal structure fits best your plans depends on a number of factors, all of which require thorough examination.
The legal structure you choose will affect your personal liability, the startup costs, the taxes you pay, the option of using a business name and various other rights and obligations.
- Which legal structure fits best your plans?
- How does the choice of legal structure affect you and your business?
- How are the business and its participants taxed?
- What to consider when choosing a business name.
- Type of your self-employed activity: Trade-like business or liberal profession?
- Where can I find a private attorney and tax accountant for guidance?
As a business owner or a member of the liberal professions, you will have different tax requirements than you had as an employee. Depending on whether you plan to exercise a business or a liberal profession and which legal form you choose, these decisions will directly influence tax regulations and accounting standards.
- What tax implications does the choice of legal form have?
- Type of your self-employed activity: Trade-like business or liberal profession?
- What are the advantages and disadvantages of the so-called small business owner regulation – Kleinunternehmerregelung?
- Can I buy goods, operating resources or office equipment even before the company is registered with the authorities?
- Single-entry bookkeeping with net income statements and double-entry bookkeeping with an annual balance sheet and income statement?
- Do you know how to issue invoice correctly?
- Are there working-from-home expenses that can I claim?
- Where can I find a tax accountant for guidance?
- Where can I find accounting and bookkeeping classes?
Entrepreneurs conclude numerous contracts on the path to starting a business. General Standard Terms and Conditions are often part of contracts. They contain important provisions that would otherwise have to be individually adapted for every contract. In addition to contract law, other areas of law can play an important role in setting up and running a business. These include, for example, employment law, data protection law, internet law, trademark law and liability law issues. Employment law, social security law and tax law also play an important role in the assessment of issues relating to bogus or false self-employment – Scheinselbstständigkeit and employee-like self-employment – arbeitnehmerähnlichen Selbstständigkeit.
Business insurance can help to protect you and your company against unexpected costs. There are different types of business insurance that provide different types of coverage. The insurance you need depends on your business and the unique risks and challenges it faces. Before signing up for insurance, assess your business’s major risk factors. Professional liability insurance or financial loss liability insurance are compulsory for some activities.
In Germany, people are covered by the so-called social insurance system. Social insurance assists them in emergency situations. These include illness, unemployment, old age and need for nursing care. The contributions to the system are dependent upon one’s income. As a self-employed person, you alone are fully responsible for your social insurance and pension plan. Calculate the precise costs involved and incorporate them into your business plan. Are you planning to start a side business? Social insurance might still be compulsory in some occupations even when maintaining a fixed employment.
Social insurance comprises the following insurances:
- Statutory or private health and long-term care insurance (Krankenversicherung, Pflegeversicherung)
- Statutory pension insurance (gesetzliche Rentenversicherung)
- Statutory accident insurance (Gesetzliche Unfallversicherung)
- Voluntary statutory unemployment insurance (Freiwillige gesetzliche Arbeitslosenversicherung)
Consult an professional for specific advice related to your particular situation.
The right location depends on your business idea. Different criteria are important for a restaurant, a food truck, a flower store or a fashion boutique than for a daycare center, an engineering office, a yoga studio or a naturopathic clinic. Many founders plan to operate their business from home and set up their office there. As different as the startup plans are, so are the requirements for the premises:
- Can I register my self-employment on my home address?
- Can I store, produce, process or sell food from my home?
- Where can mobile vendors set up and trade?
- Where do I find a suitable location and who can I turn to for support?
- What do Munich’s industrial centers – Münchner Gewerbehöfe and the Munich Technology Center – Münchner Technologiezentrum offer?
Register with the trade and tax office
Have you completed our 10-point check? Have you made your entrepreneurial decisions?
Now register your self-employment with the tax office and, if you are starting a trade-like business, also with the trade office. How to register your self-employment in Munich.