German Business: An Overview

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Germany's cosmopolitan nature is well known. Around 22,000 foreign businesses are located in the country, and the 500 largest companies in the world are represented there.

Consulting House have taken the time to give you the basics on business in Germany.

Why Choose Germany?

Entrepreneurs from around the world are always welcome in Germany, a country that offers the ideal conditions for successful business transactions. Investors profit from Germany's central location in the heart of Europe, an excellent infrastructure, the country's position as leading logistics location in Europe, a qualified workforce, an excellent research landscape, and finally the large European market.

Germany's cosmopolitan nature is well known. Around 22,000 foreign businesses are located in the country, and the 500 largest companies in the world are represented there. All in all, foreign companies employ 2.7 million people. The German market is open for business investments in practically all sectors; there are no business sectors dominated exclusively by the state. As a result of the privatisation of previously state-owned companies such as the German rail company Deutsche Bahn, the postal service, or in the telecommunications sector, the government has given up the kind of state-dominated business sectors that still exist in France or the United Kingdom, for example.

Germany makes it easy for businesses to invest: taxes have been lowered, the labour market is flexible, bureaucracy has been further reduced, and the education sector in Germany has been expanded with an eye to the future. Germany is therefore one of the most competitive countries in the world.

Economy

With a population of over 82 million, Germany is the largest country in the European Union. A labor force of almost 39 million, including four million entrepreneurs, make the country the continent's largest economy, with a gross domestic product of around 2.2 trillion euros in 2004.

The German economy is characterized by small and medium-sized enterprises, which make up 85 percent of all companies. As a result, the economy is particularly flexible, varied, and competitive. Many highly specialized companies enjoy a leading position on world markets, because research and development is particularly fostered in the SME sector. By quickly implementing innovations, companies are able to secure their leading roles in their fields.

The EU

With a population of 450 million, the European Union (EU) is the largest economic area in the world, with a gross domestic product of over 13 trillion dollars. The heart of the EU is the European Community (EC) formed in 1957, the aim of which was and is the economic integration of the member states in order to create a single common market.

To achieve this single market, the EC grants all EU citizens four fundamental freedoms: the freedom of movement of persons, the right of establishment, the freedom to provide services, and the freedom of movement of goods. The purpose of these is to enable all EU citizens to conduct business activities in any other member state without obstructive restrictions. In particular, an EU national conducting business activities "across borders" with another member state is not subject to business regulations stricter than those applicable to that country's own citizens (known as the "ban on discrimination").

Establishing A Company

Anyone can establish a business in Germany irrespective of nationality or place of residence. Entrepreneurs are classified as either business persons (Kaufleute) or freelancers (Freiberufler), and dealt with by the tax authorities as "self-employed persons. There are different procedures for establishing a company for the two groups. They are also dealt with differently in terms of tax.

A business person is anyone who operates his or her own business in the area of industry or the skilled crafts. A business (operation) is any business activity that someone conducts at their own cost, own responsibility, and with the long-term aim of achieving a profit. The business must only be registered with the trade licensing office (see Business registration). A trade tax must also be paid.

Anyone exercising a freelance profession must only register with the tax authorities and, depending on the profession, possibly with the relevant professional association. Trade tax payments are not levied. In principle, independently exercised scientific, artistic, writing, teaching, or educational activities are freelance professions. Anyone who works on one's own account as a doctor, lawyer, notary, patent lawyer, surveyor, engineer, architect, consultant chemist, auditor, tax advisor, economic consultant, certified accountant, tax consultant, healer, dentist, physiotherapist, journalist, press photographer, interpreter, translator, or pilot is also a freelancer.