How do I start a small business in Germany? Mr Beam explains
Starting a small business can be an exciting opportunity to turn your own business idea into reality while working flexibly and independently. The small business offers you the opportunity to easily set up your own company. Despite the perceived simplicity, it is still important that you go through the incorporation process carefully to ensure both the long-term success of your business and legal security.
Starting a small business - the importance of a strong business idea
For you, the development of a convincing business idea is the first step on the way to founding a successful small business. The choice of a niche that is as lucrative as possible is of great importance, as this will help you to set yourself apart from the competition with your offer.
A solid idea is the foundation of your small business. Therefore, your idea should be as innovative as possible, offer a solution to an existing problem or even fill a gap in the market. In order to develop such an idea, it is first important that you take your own skills and interests as a starting point. Think carefully about what talents and experiences you have and how you can use them. Also take into account current trends and developments that play into your hands if you want to start a small business.
In addition, the implementation of a market analysis is crucial. This shows you the potential of your business idea. Market research tools such as surveys, interviews or statistical data can be helpful here. After all, the success of your business depends on your market position. You can only score points with unique selling propositions if there is enough potential. From this point of view, the development of the business idea and a meticulous market analysis form the basis for founding a small business.
The right legal form for your small business: advantages and disadvantages of sole proprietorships, GmbH and UG
Choosing the right legal form is an important step when starting a small business. Depending on the individual needs and goals of your company, there are various options for you.
The sole proprietorship is the simplest and at the same time most common legal form for small businesses. This is a company that is run by one person and has no legal separation between the company and the owner. Thus, the entrepreneur is ultimately liable for all debts and obligations. The advantage of the sole proprietorship with the aim of starting a small business is the possibility that you can keep profits directly. On the other hand, there is the risk of personal liability.
The GmbH is also a popular legal form for small businesses. It is particularly suitable if you value limited liability. The basis of the GmbH is a legal entity in which the business assets are separated from the private assets of the partners. Liability is limited to the company's assets. On the other hand, the higher bureaucratic effort and the obligation to publish annual financial statements are disadvantageous.
Liability limited company
The last option of the legal forms is the limited liability UG. The UG is a variant of the GmbH and is particularly suitable for people who want to set up a small business and only have a small amount of start-up capital. The UG offers similar advantages to the GmbH, but there are also significant disadvantages. So you have to put part of the profit into the reserve until the share capital has reached a specified minimum amount.
When deciding on the right legal form, you should consider different criteria. Liability risks, capital requirements, tax aspects and bureaucratic effort must be weighed up. If in doubt, it is advisable that you seek contact with a tax advisor or lawyer in order to make an informed decision.
Business registration for your small business
In order to set up a small business, a business registration is required. This enables you to officially register your company and to be active as a trader from a legal point of view. The process of registering a business often begins with the local trade office and the responsible authority. Here you have to appear in person or register online. The exact requirements may vary depending on where you live.
Basically, there is a large number of documents that are required for the business registration. Specifically, these are the completed registration form, which you can obtain from the trade office or online, an identity card or passport and a residence permit if you are not an EU citizen. In addition, a tradesman's license and other documents are sometimes required, which may be necessary depending on local requirements in order to be allowed to set up a small business.
If you want to avoid long waiting times, we recommend making an appointment with the trade office. As soon as you have submitted the documents and paid the fee due, you will receive your business registration and a business advertisement. The business registration must be clearly visible in your business premises.
Tax obligations for small businesses
As the owner of a small business, you have to meet certain tax obligations in order to meet all legal requirements. The first step is to register with the tax office. After founding the business, you must register with the responsible tax office in order to receive a tax number that you can use for tax matters in the future.
As a trader, you may also be obliged to pay sales tax. In this case, you must submit regular sales tax advance returns to the tax office. The pre-registrations are usually made monthly or quarterly, depending on the turnover of your business.
In addition to the advance sales tax return, you are obliged to submit an annual profit declaration to the tax office. This records income, expenses and profits for the entire financial year. It is important that you carefully keep all relevant receipts and documents.
Bookkeeping and invoicing for small businesses
Starting a small business and being successful with it is one thing. The other is proper bookkeeping, with the help of which you can keep an eye on the finances and meet the legal requirements. Bookkeeping acts as the basis for preparing annual accounts and tax returns and is therefore an essential part if you want to start a small business.
Part of the bookkeeping is to systematically record all income and expenditure. The bookkeeping consists of sales documents, invoices, receipts and account statements. It can also include operational expenses such as rent, supplier payments or insurance. It is advisable that you clearly separate private and business expenses.
For the bookkeeping of your small business, you can use different systems that make it easier for you to record the data. These include, among others:
- Excel spreadsheets
- journal accounting
- EDP accounting programs
As a small business operator, you are legally obliged to keep certain documents for a certain period of time. You should therefore never throw away invoices, receipts, contracts and bank information. Instead, it's a good idea to stow them away so you can refer to them when you need them. How long the respective deadlines are depends on the country and the document. Therefore, find out about the regulations in your region and keep the documents in a timely manner.
Check your insurance
If you want to start a small business, depending on the industry, this is only advisable with appropriate insurance cover. They offer important protection for your company and your existence.
Business liability insurance is one of the most important types of insurance for small businesses. It protects you from the financial consequences of damage that may occur in connection with your business activities. This includes, among other things, personal injury and damage to property caused by customers or third parties. If the worst comes to the worst, business liability insurance will cover the costs of legal defense and possible claims for damages.
Depending on the trade, additional insurance may also be useful. These include, for example, goods and transport insurance, professional liability insurance or company health insurance if you want to start a small business and hire employees.
Commercial Regulations and Permits
Every industry has different regulations and permits. This can include, for example, handling certain materials, complying with hygiene regulations or adhering to safety standards. Therefore, it is important that you inform yourself about the applicable regulations and that your small business meets all requirements.
In addition, certain certifications or permits are required in some industries in order to be able to carry out commercial activities. This can be, for example, a business license, a building permit or a health-related certification. While these aspects must be taken into account, they also offer you advantages. This is how they testify to the quality and seriousness of your small business.
Marketing and customer acquisition
With the help of a coordinated and effective marketing strategy, you can win and retain customers. As soon as you want to start a small business , you should therefore deal with the target group analysis, your unique selling points and your online presence. Social media, such as TikTok and Instagram , and an appealing website or web shop are indispensable media for customer acquisition these days. Find out, for example, in our article on sales promotion measures at the POS .
networks and cooperations
The so-called networking and cooperation are the most important tools to strengthen your small business. By exchanging ideas with other tradespeople, you gain access to additional resources and expertise. With their help, you can optimize your business practices and sometimes even generate new ideas. In addition, you strengthen the reach and visibility of your company through cooperation.
Other important aspects if you want to start a small business
When starting a small business, there are a few other important aspects to consider. All in all, they are essential factors that determine the success of your company. Therefore, pay attention to the following points:
- Financial planning including business plan
- Price calculation for your services or products
- Legal aspects such as requirements and obligations
- Work-and Healthprotection
- training and development
- sustainability and environmental aspects
Conclusion on starting a small business
By founding a small business, you create the opportunity for yourself to realize your business idea. When setting up, pay attention to the choice of the appropriate legal form, the business registration as well as the bookkeeping and any necessary insurance. Before founding a company, it is essential that you deal extensively with each of these aspects. If you are also courageous and willing to accept the challenges ahead, your professional independence will no longer stand in the way. Alternatively, you can also become self-employed on a part-time basis .
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