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How To Set Up Your Own Business In Germany
British expat Michelle Purse Sweeney did it in Germany 9 years ago, starting her own marketing business, and in this episode she shares her 5 key tips to help make your German business journey, a little bit easier.
Carlie: Hey there, it’s Carlie with the Expat Focus podcast. Going it alone as self-employed and setting up your own business is always a big step. And it’s an even bigger one to take when you’re doing it in a foreign country. British expat Michelle Purse Sweeney did it in Germany 9 years ago, starting her own marketing business. And in this episode she shares her five key tips to help make your German business journey a little bit easier. You’ve been an expat in the country for 15 years. When did you start out as self-employed?
Michelle: Oh my goodness, I think about 9 years ago now. It feels like forever, but just, just 9 years ago. So about more, slightly more than half-way through my journey of, of living here in Germany. I set up a small business as self-employed initially, but I was quickly picked up as a European marketing manager, ‘cause that was my background, for a car distribution company. So I had a really nice job for a good few years almost immediately after I started in Germany.
Carlie: And what was your motivation to go it alone?
Michelle: I think I’ve always wanted to go it alone, but originally I guess I was just scared. I’ve been in marketing for well over 20 years, and I don’t think anything changed between before I had the job and after I had the job, other than just having a bit of confidence and realising that I wanted to be my own boss, and this idea of having to go to somebody and asking them for time off just fills me with horror! So, I realised that the only person I wanted to ask permission from was me!
Carlie: And was that a bit of a daunting task, to do that in a country that you’re less familiar with?
Michelle: Oh God, hell, yes! Very very much so actually, and I think that being self-employed anyway can be quite daunting. Being self-employed in Germany, yeah it, it was terrifying, and sometimes it still is. But thankfully I kind of built a little professional team of people around me that I rely on to make sure that everything is going as it should be and that I’m on top of everything.
Carlie: Based on the years you’ve had now working for yourself in Germany, and I’m sure you’ve made a few mistakes along the way, what would be your number 1 piece of advice to start with?
Michelle: The first thing is, is paperwork. Number 1, and, this’ll come as no surprise to anyone that’s been in Germany for any length of time, or even probably 5 minutes actually. But getting registered and set up with something called a Gewerbeangmeldung which is basically a business registration, is the first thing you need to do as a self-employed person. And you do that just by going to your local Rathaus or Landratsamt and fill in the paperwork there. Then they’ll give you probably about 3 months to come back and show them that you are capable of supporting yourself. So part of that setup does need to be that you need to find private health care as well, and that’s really important. Because without that you won’t be allowed to continue to work here as an expat, as a self-employed person.
Carlie: It’s good that they do give you the time I guess to get your things in order to be ready to go.
Michelle: Yeah it is, but I have to say it, I think that particular, that particular thing I had to do, the, the setup there, was the most terrifying, the most daunting, and probably the most upsetting thing I’ve done in Germany, ‘cause I felt really alone and a bit unwanted, so I think people listening to this might just need to be aware that that can be quite an overwhelming and daunting task. But probably not quite as much as my initial registration, which had me in tears most of the time, but thankfully I’m over those years now and I’ve got a little bit more lead in my pencil and I’ve steeled myself a bit more for some of the bureaucracy in Germany that can be quite upsetting.
Carlie: So what else is there to know if you’re working for yourself in Germany?
Michelle: My second number 1 tip is professional services, and that’s to surround yourself with the right kind of professional support, for, to ensure that you have a successful career and business in Germany. That’s going to include a tax accountant, and a tax accountant that speaks to you I think in English, because although I need him or her to be very au fait with the German tax system, I want someone to really explain it to me, because it’s very very confusing. And so that is something, you can’t have a business here without a tax accountant anyway.
So find yourself one nice and early to help you when you’re setting your business up, and the second thing I would recommend is that you start a private pension initially as well. ‘Cause if you wait for that you’ll never find the right time, there’ll never be enough money. If you’re looking for like permanent residency in Germany going forward, which I am, thank you Britain for your Brexit vote there, that’s something you’re gonna need to do. So the sooner you start that the better, and that’s something that you could either do with a financial advisor, or even discuss with your tax accountant. But those two things I think are really really important when you first start.
Carlie: Are there a lot of people in the market that offer these sort of services for expats?
Michelle: Yes, I mean I didn’t go to somebody specifically that offered the service for an expat, but I did go to somebody that had an English version of their website online, because that to me was really really important. And I know that, and I’m gonna come on to language later, it is important to integrate here and feel part of the language. But like when I go to the doctors and when I’m dealing with my taxes, they are two themes that I want to really make sure I’m understanding what I’m getting into. So I do want somebody that offers that.
So, I think there are quite a lot of people that will offer expat services. My health insurance broker very specifically was quite clear that he offered those services, but my tax accountant just had English on the website, and that for me was a sign that he was gonna be able to handle me and my Englishness.
Carlie: There’s definitely some aspects of life that you really don’t want any confusion with when it comes to language.
Michelle: Yeah, doctors and taxes, that, they’re my, that’s my two, two key areas! (laughs)
Carlie: Yeah, absolutely! And so once you got going with your business, were there any surprises?
Michelle: Yeah, the taxes, and again, this might come as no surprise to some other people, but for me it was a bit shocking actually. So for the first year or two, sometimes even 3 years that you’re in business, you aren’t necessarily going to be paying any other taxes other than VAT. And this is something that’s really different to, if you’re coming from England for example, where there’s a very high VAT threshold before you have to register for VAT.
In Germany, as soon as you start a business, you are responsible for paying and collecting VAT. So, 19% of anything you invoice out, you’re paying VAT on. Anything you’re purchasing you’re claiming VAT on, back from. So instantly you’re in the VAT-zone, or Mehrwertsteuer as we call it here. So that instantly needs to be accounted for and that is usually paid every quarter, about 6 weeks after the end of the quarter. And again, your tax accountant really needs to handle that for you. Secondly, the other taxes that you have to save and allow for instantly, even though you might not pay them for a, 2 or 3 years, are income tax, and business tax.
So, income tax is Einkommensteuer, and business tax is Gewerbesteuer. Einkommensteuer is based on your income, Gewerbesteuer is based on your profit. And what catches a lot of people out here is, you get the first year or two without paying the taxes, but once your accounts, end of year accounts are submitted, the tax office then calculates what you owe them from the start of your business, but will also start charging you in advance for your, for forthcoming years.
So, you could end up paying two or three times the amount of taxes in one year, even though you haven’t been paying them for the first two or three, so right from the outset, save for taxes, talk to your accountant, make sure you understand this.
And one other payment that might surprise you is something called [unclear word 00:08:06], which is industry-handled [unclear word 00:08:10], which is your local chamber of commerce. And even though you may not want to join your local chamber of commerce, as a business, as a registered business, you have to. You will be automatically signed up to it, and you will have to pay their fees, which, depending on your income, could be a hundred or a few hundred euros a year. And they are due very quickly. And those things can really catch people out, so again, going back to my second point about getting the right professional advice, then make sure that your accountant is really clear on how much you should be putting aside for future tax payments immediately.
Carlie: It sounds like you really need to do a bit of future forecasting too, when it comes to your earnings.
Michelle: Yeah, you really really do. Because it catches a lot of people out, and even though I’ve been in business for several years here, it can still hurt me. So if I have a, I’ve had a really successful year, it’s going to affect the, what they call Vorsteuer, so advance taxes that I have to pay next year, as well as what I have to pay for the previous year. So, I might have a really good year last year, but not such a good year this year. That’s gonna really hurt my cash flow, because I’m paying tax, future taxes based on last year’s earnings, until they catch up with me, if that makes sense. So yeah, it can be, it can be quite tough. It’s something you really have to allow for, forecast, and plan for.
Carlie: What about when dealing with German clients or customers? Are there any particular nuances that you might not be familiar with if you’re coming from another country?
Michelle: Most of my clients, although they’re German, I’m dealing with them in an English-speaking environment, because I run a, a digital marketing agency, so usually they’re coming to me for my Englishness. They’re either looking to attract English clients or American clients, we have a lot of military based, American military based in Germany and I specialise in, in that market as well. So, actually what’s quite nice for me is that I get to kind of bring my culture to the table. So, when dealing with Germans there are some cultural differences, punctuality, and the different, different types of small talk, and people being a bit more direct. But actually, I guess my quirkiness is my Englishness, so I get to utilise that quite well with my clients and I guess that’s my brand.
Carlie: Now you mentioned earlier, Michelle, about language. Obviously that’s a big one. How does it factor in when you’re self-employed in Germany?
Michelle: Oh, it’s massive! And it’s not just about being self-employed, I think this is about just having a good life here, and not feeling so isolated. So, OK I work predominantly in English, but there are, I’m getting mail all the time in German, my, even though I’ve got accountants and people that speak English with me, you don’t constantly want to be relying on other people to translate everything for you. I think you will quickly feel, I feel like a child sometimes when I can’t, I’m not quite brave enough to pick up the phone to make quite a, a complicated appointment, or have a conversation on the phone. So I think it’s really really important that you develop some German language skills.
And one of the things I did reasonably early on which was brilliant, and I can give you a link to put this in the show notes, was to do an Integrations language course here in Germany, which pretty much I got paid for by the German government. There’s some slight changes in what they’ll cover now from when I did it, but, you can get a huge amount of financial support for doing a pretty comprehensive German language course, which also comes with some, a little bit of background about the history of Germany and its politics, and its education system and, and legal framework and things like that, and I found it really useful, really fascinating, it really, it did what it said, basically, it helped me integrate into Germany and German society much better. And I think it's going to really improve your quality of life if you can do that.
Carlie: That sounds like a brilliant one. And, are there courses or similar courses you can do that are focused on, on business language and techniques in Germany?
Michelle: Absolutely. I did my Integrations course through my local Abendakademie, so evening school. But the quality of the, the la-, the teaching there was excellent. I’ve also done intensive courses through places like Goethe Institute, which offer really high-quality courses. And, most places, I think if you just do a quick google of where you’re in, where you’re living in Germany, and look for business, you’re looking for German as a foreign language, or Deutsche als Fremdsprache, and if you basically look for business courses as well you’re going to get that.
You’re gonna pay more for a business course, because yeah, naturally, they’re gonna charge you more for anything if it comes related to business. So, initially perhaps just do a general speaking course anyway, to get a bit of a grounding. But then you could look at a more specific business course to help you with that kind of ele-, that, that side of things.
Carlie: Language is never something to overlook of course when you’re moving to a new country anyway, but especially when you’re running your own business I think it’s so important just to have that feeling of control about your own affairs, and that you’re not as you said relying on someone to translate every bit of business mail you receive.
Michelle: Exactly. I think it’s about independence, and, you know, ‘cause on the one hand I feel, you know, quite professional and independent, I’m, I’m here running a, you know, it’s a small company, I run a micro-business, but it’s a successful micro-business. But there are times when I just put my hand on the phone and just, my heart sinks, because even though I’ve been here so long, I think anyone will tell you, I think the average is 25 years to be fluent in German, and I’m only 15 years in, and, yeah, that feels about right, I feel like I’ve got another 10 years to go.
But yeah, my heart sinks sometimes before I pick up the phone, ‘cause I just don’t quite yet have it. So anything you can do to help yourself just feel that little bit more at home here, a little bit more independent, a little bit more confident, is gonna make a huge difference to, actually to your mental wellbeing as much as anything.
Carlie: And you said you run a micro-business, does that mean you are working alone, or do you employ staff?
Michelle: Yeah, it means I’m working alone, and this actually comes rea-, leads us really nicely to my fifth point about being self-employed. I work alone, and I work at home, so I am by myself all day every day. And, although I do enjoy that, and I am really self-motivated, one of my recommendations for anyone starting out by themselves is to get yourself a support network. That might mean, maybe even a facebook group of other entrepreneurs that are in a similar scenario to you.
I am in constant contact with another group of six business women, most of them are based in the UK, but we’re in contact via Slack every day. And they’re kind of like my little Board of Directors. Because we all, each have different businesses, and we’re in touch every day talking about the different elements of our, our work, which is fantastic. I employ some freelancers, which helped me with some very specific technical elements when I’m building websites and things like that. I have, I employ a German woman actually, but she’s based in the States, who’s a Google AdWords specialist.
So I’m in touch with her in a different time zone. So that’s kind of nice on a professional level. But I think it’s also really really important that you build a really strong social network as well, because it can become really easy to get cabin fever, and I guess step back from being social, because you’re not used to it. So I do things like I, I set up a park run in my local town of Mannheim, I don’t know if any of your listeners will be familiar with that, but it’s a free weekly timed 5 kilometre run, they take place all over the world, and we helped bring that to Germany, and it’s starting to roll out.
And that’s something we do every Saturday morning, and that has probably made me feel more integrated and at home here in Mannheim in the last 6 months than I have in the last 15 years, because I have this, I have this focus on a Saturday, I’m gonna meet lots of different people, I speak more German than I would normally because I’m not alone and I’m, I’m mixing with expats and locals, and that has become a real high point of my week. And it’s made me a lot more social and a lot more open to being more social with other locals and international residents as well.
And I think that’s something that’s just so important. Using websites like Meetup to find people that have similar interests as you, I think is, is such a great tool to ensure that you just don’t become isolated and alone here.
Carlie: And how’s the German administration when it comes to needing to get some help? You have your professional service providers, but what about when you’re just dealing with government departments?
Michelle: I haven’t had to have a huge amount of direct contact with that, because when it comes to things like taxes, I throw my accountant between me and the tax office. I’ve had a, you know, very little direct contact with the tax office. In my opinion that’s what my accountant’s paid to do. I just don’t feel confident enough handling that by myself. When it comes to like health care and things like that I’m, I’m pretty OK with it. My doctor speaks to me in English even though I speak to him in German (laughs). So, yeah, I guess in terms of other areas, it’s been pretty limited with what I’ve needed to do. But I am going back to do another intensive German course myself, with the local university here in Mannheim in October, and I think that will just give me that extra confidence to be able to deal directly with some of these other service providers and departments myself anyway.
Carlie: What would you say your biggest lesson learnt has been since you started working for yourself and, and what would you really want to press onto others who are gonna be doing the same thing?
Michelle: I would take my last two tips, which is language and support network. Those two things, when I first started I was, got quite stuck into both of those, but I guess I got a bit of cabin fever, I got a bit isolated, but I have really recommitted to both of those things this year. And it’s just made a huge difference, both to my professional business and the success of, financial success of my business, I guess there’s a lot to do with, you know, what you’re projecting and what you’re open to, and then just in terms of my personal wellbeing, my mental health, you know I really feel at home here now, and a lot of that has got to do with, I guess, recommitting to making Germany my home.
Carlie: So, there you have it. If you’re planning to work for yourself in Germany, Michelle’s key pieces of advice are, get your paperwork in order from the start, get a good accountant, save for those future taxes, get a handle on the language, those Integration courses sound great, and, establish a strong professional and personal support network. If you want to share your own tips for being self-employed in Germany, head over to expatfocus.com, follow the links to our forums and facebook groups. Remember to check out our previous episodes, covering all aspects of expat life, and I’ll catch you next time!