Can You Start a Business or Work as a Freelancer in Germany as a Student?
Are you a student in Germany and want to open a business or work as a freelancer? Are international students permitted to do so? Germany is a highly regulated country, so you will need to look into the rules to know the answer. Setting up a business or freelancing is an excellent opportunity to earn a good income in the strong German economy.
International students can start a business in Germany if their residence permit allows self-employment; otherwise, they can get appropriate approval at the immigration office or apply for a new residence permit.
Students often come up with business ideas while studying at university; also, the great commercial environment in Germany stimulates their creativity even more. We usually separate international students from EU citizens and non-EU citizens. Different rules and regulations apply to both of them. Thus, they need to keep it in mind when planning self-employment in Germany.
Starting a business in Germany as a foreign student
As an international student studying business, I wanted to start a business for the last two years, but it’s not as easy as it seems. Your ability to set up a business and become a self-employed or a freelancer depends on your nationality and current residence permit.
When can international students start a business in Germany?
Firstly let’s look at regulations in Germany for EU and non-EU students.
Students from the European Union or EEA countries will have much fewer difficulties if they want to start a business in Germany. Fortunately, freedom of establishment and freedom of trade applies to all persons within the EU, the EEA, and Switzerland.
This means everyone from these countries can set up a business in Germany and all other member states. Additionally, freedom of movement applies to them as well. Thus, students can move and stay for a prolonged time in the EU without a residence permit.
However, students from non-EU/EEA countries can only open a business in Germany if they meet one of these criteria:
- To have a valid residence and work permit with permission for self-employment
- To have a trade permit
- To have a credible business idea
So the main drawback for non-EU/EEA students can lie in their residence permit because it often doesn’t have authorization for self-employment.
How to start a business in Germany as a non-EU student?
So as you learned before, EU citizens don’t encounter many obstacles when starting a business in Germany and can just go for it. Non-EU students can still become self-employed too, but they need to know some additional information.
As a student, you have a student residence permit, which is purposed to study in Germany. Firstly, international students must check their residence permit and see if self-employment is allowed.
If you see words like “Erwerbstätigkeit gestattet,” then the student is already legally permitted to start a business in Germany or become a freelancer.
You can run your business only part-time as a student
Despite the permission, a student will be limited in working hours/time they can spend in the business. Because you are supposed to study most of the time with this residence permit (according to § 16 Residence Act), Germany allows students to work only 120 full or 240 half days during the year.
For this amount of time, students can work/run their business without approval from the Federal Employment Agency; if they wish more, permission is required. However, keep in mind, If you want to start a full-time self-employed activity, you will hardly get permission.
What if you don’t find this statement on the residence permit?
Your current residence permit doesn’t allow you to start a business, so what now? Fortunately, German law isn’t that strict and offers some possibilities for foreigners.
1. Apply for permission to be self-employed during your studies
Since you already have a residence permit in Germany, you could ask an immigration office (“Ausländerbehörde”) to authorize your self-employed activity separately (Erlaubnis zur Ausübung einer Selbständigkeit).
One paragraph in the law says that a person with an existing residence permit in Germany might get approval for self-employment. They must be capable of performing the selected business activity and prove it with certifications or licenses.
Also, in that case, the student is only allowed to work 120 full or 240 half days in a year. Self-employment must not hinder the success of the study.
2. Start the company without permission for self-employment
In Germany, international students can be part of the start-up/company even without permission for independent work!
However, they will only be able to hold shares in GmbH, for example. Thus, you can start a company alone or with other partners and have your shares. International students without a permit shouldn’t be involved in the managerial work of the company.
Therefore, you and your partners need to hire people immediately from the beginning to avoid working in the company (unless your partners are permitted to self-employment). However, it may be possible in some instances if the position of managing director isn’t categorized as a self-employed activity.
3. Extend your student residence permit after graduation
In Germany, all students have the opportunity to look for a job for 18 months after graduation. Thus, upon successfully completing the studies, you can apply for an extension of a residence permit for up to 18 months.
During this time, students are permitted to work in any position, including self-employment, until they have found a suitable to their degree job. Moreover, graduates aren’t limited by working time anymore and can work on their business full-time.
Be aware that after 18 months, you will either need to find a job or apply for a different residence permit.
4. Apply for a new residence permit for self-employed
The last option will be to apply for a new residence permit which will allow you to open a business in Germany or become self-employed. The benefit of this permit is that you can still study at university as long as you have a visa and money to support yourself.
So it allows you to run a business and study simultaneously or entirely focus on the company if you don’t study anymore. It all sounds good, but there are difficulties with this visa.
Thus, one must fulfill the criteria of a residence permit for self-employed, which include:
- there is a high economic interest or a special regional need
- the activity can be expected to have a positive impact on the economy and
- the financing of the implementation is backed by equity or a loans
As a rule, the first 2 criteria are automatically met if at least 250,000 EUR is invested and five jobs are created. But if it’s not the case, your business idea must be very valuable and reasonable for Germany.
The criteria of the first requirement are based in particular on the sustainability of the business idea, the entrepreneurial experience of the student, the amount of capital invested, the impact on the employment and training situation in the country, and the contribution to innovation and research.
As you can see, it’s not easy for foreigners to get a business residence permit, but one should try anyway! Most importantly, you must present all relevant information about founding a company in Germany, such as a business plan, a certificate of profitability, and plausibility.
Apply for a business residence permit in Germany
Probably the only option you have now is to apply for a business residence permit, which will allow you to run the business full-time and study if needed.
The first step is to proceed with the business idea and prepare all the documentation. After that, you can apply for a permit within Germany, assuming your previous residency is still valid.
According to German regulations, the following persons are considered to be self-employed and should apply for a business visa:
- Sole proprietors, including freelancers or owners of the trade
- General partner of the limited partnership
- Managing directors and representatives of partnerships and corporations, if they have contributed capital to the company
- The biggest shareholder of a GmbH
Documents you need for a business residence permit
The primary documents required for the application for a business residence permit in Germany:
- Valid passport
- Proof of qualifications and formal requirements for self-employment
- Certificates and qualifications of the most recent activities
- Evidence of securing the financing of livelihood and self-employment
- Business plan
- Profit forecast
- Health insurance
For people older than 45 years additional requirement to have a pension plan applies. Moreover, a rental contract and proof of health insurance are beneficial.
Nonetheless, keep in mind the main criteria for your business in Germany we discussed. If an applicant doesn’t fulfill them immigration office won’t approve the visa/residence permit.
- there is a high economic interest or a special regional need
An economic interest can be assumed if significant investments are made; thus, new job places are created. It also includes some resulting improvements in the market situations of already resident companies, or technically high-quality products are manufactured.
- the activity has a positive impact on the economy, and
- the financing of the implementation is backed by equity or a loan commitment
If you need money to finance your business in Germany you can apply for one of the easy to get loans, such as Auxmoney.
Have a business plan
In addition to a solid business idea, you should prepare a business plan. A business plan will give a better overview of the various steps and requirements of the business. It’s also helpful to have when a student applies for approval of part-time self-employment.
Thus immigration office (Ausländerbehörde) will see all scope of your self-employed activity and its part-time intent.
Your business plan for a self-employed residence permit should emphasize the following moments:
- the economic viability of the business idea
- the intention of making a profit
- finances and investments
- entrepreneurial and personal experiences
- possible economic effects and impact on the employment & training situation of the region
- a possible contribution to research and Innovation
Will you get it?
Rules for non-EU citizens are pretty strict. Your business idea will go through examination where the German government will decite if you can open a company in Germany and, therefore, receive a residence permit or not.
The decision of the immigration office will depend mostly on your financial situation and business idea. They look at all cases very individually.
The examination will approve:
- Economic or regional interest in your business
- The amount of invested capital
- If labor and education markets are affected by your business
- Sustainability of the startup
- The profitability of the startup
Keep in mind that you will most likely need to sell your product or service to the local market unless you create a location-independent online business.
Take legal advice from the local layer before you make any crucial decisions. You can request a consultation with experts here.
If an applicant receives it, it will be limited by some period of time, usually 1 or 3 years (according to § 21 AufenthG). If the company ends up being successful and the owner’s livelihood is secured. Already after 3 years, you can apply for a permanent residence permit in Germany.
Starting a company or becoming a solo proprietor in Germany
In Germany, you can become self-employed in different ways, e.g., start a company or sole proprietorship.
Sole-proprietorship in Germany
The easiest and less expensive way to work on yourself (especially as a student) is to become a sole proprietor (Einzelunternehmer). The owner will have unlimited liability for the debts and obligations that arise. Many online businesses are often founded this way.
The process is super uncomplicated and low-cost. Steps to take when setting up as a solo proprietor in Germany:
- register in the Handelsregister, the German Trade Register
- apply for a Gewerbeschein (trade license)
- pay 20 EUR the Gewerbesteuer (trade tax)
- register the business with the tax office (Finanzamt)
Starting a company in Germany
Firstly you need to choose which form of company you want to start. There are 4 different forms of enterprises in Germany:
- GmbH – Limited liability company
- KG – Limited partnership
- AG – Public limited company or Joint-stock company
- Offene Handelsgesellschaft (OHG) – General partnership
GmbH – is the common LLC and the most common way to start a business in Germany. It is suited to small and medium-sized enterprises.
Unfortunately, starting capital for LLC is at least 25,000 EUR, from which 12,500 EUR must be deposited in a corporate bank account during the registration procedure. So you can start with 12,500 EUR and deposit the rest later on.
The incorporation procedure is relatively simple, as the company’s shareholders must sign the deed of formation and the articles of association. The process is performed with the assistance of a public notary in Germany.
KG – The limited partnership – to start a German limited partnership, you need a capital of 50,000 EUR, which has to be split into shares. This type of company is more suitable for small and medium-sized businesses.
AG – Public limited company – also not a rare case in Germany; many big companies operate this way. To start AG, you need a capital of 50,000 EUR and must be registered in the Register of Companies.
OHG – General partnership – to start a general partnership in Germany, there is no need for capital. In contrast to GmbH and AG, the partners in an OHG have unlimited liability. A general partnership has to be registered with the Trade Register.
Steps To Take
It’s essential to mention that you can’t set up a company in Germany without visiting Germany. The company founders need to sign the application for registration in front of the notary.
Generally, company formation consists of preparing required documents and registration with several German authorities. Below you can see the most crucial steps for company formation in Germany:
- Choose a form of business or company type: this ranges from a sole proprietorship, limited liability company, joint-stock company, or limited partnership.
- Choose a company name: the name of the new legal entity needs to be unique and can be checked for availability.
- Execute the formation with a notary: take the steps we listed above in the pricelist.
- Deposit the share capital.
For all those procedures, you will need a banking account, get an easy online setup with this bank at minimal costs!
Don’t forget about taxes for self-employed in Germany
How to be a business owner, self-employed, or freelancer in Germany and avoid the bureaucratic nightmare? Get Sorted!
It’s an online tool for managing all your tax obligations, reports, payments, and communications with the Finanzamt (tax office) in Germany. The tool will do all the bookkeeping, tax, and VAT declarations.
Sorted is available for small business owners, freelancers, and for people with a side income. So whether you study, have a side job, or do business in Germany, this tool will be super helpful.
What can you do with Sorted?
- Legally register as a freelancer or self-employed if you are just starting out
- Create legally correct invoices
- Prepare and submit tax reports
- Get help from professional tax advisers
- Connect to your bank account for the full transparency
- Track your income and expenses
- Full overview of taxes
Most importantly, it allows you to submit your tax reports to the German tax office. Based on your income and expenses, Sorted will automatically fill in all of your tax reports, and after that, you can submit it online with one click.
Moreover, all necessary features are available at zero monthly costs, but you can sign up for the Pro or Business version at any time. Sign up for a free account here.
Thousands of freelancers and business owners already happily use Sorted; read reviews here.
What are the costs of starting a business in Germany
Depending on which business you want to start and which form, it will cost you a different amount. Below you can see the basic expenses when opening an LLC/Joint-stock company or becoming a solo-proprietor
To set up the business in Germany will cost you 1,011 EUR for LLC (GmbH), 2,500 EUR for the joint-stock company (AG), 2,000 for GmbH & Co. KG, and 50 EUR for a sole proprietorship.
Self-employed/Sole trader/Sole proprietor
A sole proprietorship is the most inexpensive and easy option to become self-employed in Germany. You only need to register a business or trade in Gewerbeamt (trade office) of your city, which costs between 15 and 65 EUR.
GmbH – Limited Liability Company
Share capital is a must if you want to set up a GmbH. You must have at least 25,000 EUR to start an LLC in Germany.
When setting up a limited liability company, you must hire a notary to help you with registration. You will need a wide range of their services, which comes to 850 EUR. Plus VAT – taxes on received services 19% – a total of 1,011 EUR.
Read the full article on the cost of starting a business in Germany.
Health insurance for business owners & freelancers
Health insurance is one of the most significant expenses for self-employed people in Germany. Previously you probably have paid for student insurance, or your employer was responsible for it, but not now.
Self-employed people are obligated to pay their health insurance every month in accordance with their income. In Germany, you can choose either a statutory or private health provider.
Public health insurance costs a fixed monthly rate – 14,6% of your income, not the revenue but actual profit.
Thus, the benefit of private insurance is tremendous for business owners in Germany. The private provider can be a better choice for a business owner; it has a monthly/yearly rate that doesn’t depend on the income.
Why self-employed in Germany should consider private health insurance?
Private insurance will be a wiser decision since it doesn’t charge a percentage of your profits but the pre-agreed fixed rate.
Most freelancers, self-employed, and ex-pats can opt for Ottonova and Feather in Germany. The price ranges between 261 EUR and 480 EUR per month. And if you’re a younger, healthier business owner, private insurance will be even cheaper for you.
Besides that, you can sign for public insurance, which costs a minimum of around 300 EUR a month.
As your earnings grow, public health insurance contributions will grow as well. That’s why we recommend private coverage – it doesn’t depend on your income.
Hence, taking out the private plan from the beginning is a better idea.