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Karenne Sylvester


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Starting your own language business in Germany
by Karenne Sylvester

Setting up shop in a foreign country might seem like a daunting prospect and in many respects it is, however, with tenacity and the right information, it isn’t an insurmountable task.

The first thing you really need to be is clear on what your objective is. Like any great adventure, venturing into the world of your own business requires a lot of thought and preparation. There are many questions you need to ask yourself: What is it that you are planning on offering? Are you absolutely convinced that there is a market for your product/services? Are you planning on fulfilling a niche or competing with others in your field? How strong is this competition? These are important questions especially if you’re planning on opening yet another language school or institute. If you decide to do this, simply offering lower prices won’t be enough of an incentive to attract new clientele. If you can offer something, perhaps from your own experience that is very much needed in the market, combining usual business or general skills with ESP expertise in a particular field or by offering classes in a town/city with low to no direct competition, you will probably fare better.

Are you sufficiently qualified and/or experienced to provide this service/product? Do you know if you will start off small initially with a handful of clients you’ve already got contracts for or are you planning on a big launch involving high marketing costs? Will you need a website?

Often businesses begin with the director(s) not factoring in a realistic financial projection to cover normal monthly costs like rent/mortgage, food and some entertainment. Do you have savings you can use to invest and dip into when you hit the rough patches? Unless you have another source of income, it is almost always necessary to maintain some percentage of your current job in order to guarantee a survivable income within your first year.

Do you really, really love this job, idea or project - so much so that you’re prepared to risk money, give up time with friends and family, and be utterly exhausted in your first year or two? Do you have a support group around you from which to get advice from? Do you have a spouse or friends who will convince you not to become a workaholic and whom´ll remain patient and loving when you cancel on them for the 150th time because you have yet another crisis that needs dealing with?! If you were easily able to answer these questions and still feel motivated to continue, then proceed with reading this how-to guide to doing this in Germany.

You must create a business plan.

Standard aspects of business planning include: information about the business, marketing strategy and making financial projections. If you haven’t already bought a book on starting a business, (see http://www.amazon.de/ for various titles) or buy the book: Setting Up Your Business in Europe. A Country-by-country Guide by Corine Moriou: http://www.amazon.de/Setting-Business-Europe-Country-country/dp/0749430273/ref=sr_1_13?ie=UTF8&s=books-intl-de&qid=1208188788&sr=8-13 A quick search via Google will supply you with a selection of frameworks to model your plan on if you need one. As you’ll be working in Germany anyway consider using the one available via the BMWi Bundesministerium für Wirtschaft und Technologie http://www.existenzgruender.de/englisch/downloads/index.php This website has a wealth of information and various checklists to adhere to before registering your business. While compiling different aspects of your plan, working out what you’ll be doing soon and how, you should also think about what sort of operation you would like to register as.

According to the BMWi´s list of frequent failures, starting out with the wrong legal structure is one of the main errors new businesses make. If you are setting up alone you have two options: sole proprietorship or one-man limited liability (Ltd). A sole proprietorship, an Einzelunternehmen, is the easiest option when launching a new project: you need no major capital investment and it costs approx €20 to register. However, you are fully liable.

Setting us as an Ein-Personen-GmbH avoids this problem and offers great tax advantages, however the initial investment is high: between €5k (mini GmbH) and €25k. Also, the start-up formalities and accounting procedures are much more complex. If you’ll be working/setting up with others your options include: Parnerschaftsgesellschaft (Partnership) and the GmbH & Co. KG (limited commercial partnership). These options do not require a minimum capital and the members are not only the owners but also company directors. See the BMWi website for other types of business structures available. If you can avoid it, it is highly recommended not to go into business with friends or family members - many relationships don’t survive under this level of stress.

If you are looking around for funds to help support you in your first year, it is worth knowing that some banks do offer loans to entrepreneurs. The BMWi website has a checklist (25) detailing what you should do to prepare for this. After writing your plan, choosing your legal structure, working out your costs and where the funding is coming from, you should register your business with the government. However before doing this, there’s just more major step: get advice!
Find out who, within your circle of friends or acquaintances, has done this before. If you don’t know anyone specifically, join a business association. A good option for a non-German wanting advice in English, is the American-German Business Club, http://www.agbc.de The BMWi website also has a list of business promotion units which support foreigners.

The other day I got a letter from one of these - obviously passed on to me via the Gewerbeamt or Finanzamt. I intend on looking into this as it is a really good way to meet people and hear other people’s thoughts and discoveries as well as being, obviously, a good place to network.

Find out as much as you can regarding banking, taxation, legalities and insurance issues. Have a list of questions ready and make doubly sure your queries are questions you could not easily have found the answers to via the net or by reading a book. Leave a business card and a professional impression.

Once that’s all done you are now ready to face the infamous German bureaucracy. I was personally lucky in this regard as were the friends I know with their own businesses here too so don’t let your fear of this step stop you.

The first place you have to go to is the Rathaus which usually has a business registry office, a Gewerbeamt , where you will be required to fill in a relatively straightforward registration form, a Gewerbe-Anmeldung. The form is only available in German but it isn’t too complex. Making an appointment with them isn’t necessary, but advisable. Find out ahead of time if this government office works on the alphabetical by surname system (as it does it Stuttgart) as you will have to be vigilant about entering the right door! Note that if you are a non EU citizen you will have to bring proof of your right to abode/work here (your Aufenthaltsbescheinigung/Arbeitserlaubnis). The lady I spoke to in my Gewerbeamt was very helpful and understanding when I attempted to explain an internet platform and that my business would be selling teaching materials via the ‘net. She ran around checking with colleagues that I/she wrote the correct company description and she was pleasant, helpful and ever so slightly amused to have a foreigner from der Caribik in her office!

At the end of this meeting you will be provided with a bill that has to be paid separately. Costs depend on what you are registering as - sole proprietorship costs only €20,50! After this you can immediately go to the Finanzamt or you can wait for the Finanzamt to contact you. They’ll send you a form, days or weeks later, a Fragebogen zur steuerliche Erfassung and you have the choice of filling it in and sending back or going to see them by appointment.
I chose to go in in person and to talk through my application. I did this because I wanted to be doubly sure of tax issues and that I would be charging the correct VAT amount. According to the BMWi list of frequent errors, wrong tax payments are another area where people often fail. The guy there was also very helpful and friendly. When I couldn’t provide detailed financial projections for the coming year, he asked irritably "€1,000 oder €100,000?" to which I smiled sweetly and replied in bad German "Ich hoffe für der Große, aber ich denke nicht." He joined my laughing and responded with "Wir hoffen auch - aber wir schreiben zehn und wann es mehr ist, kommen Sie zurück, ja?" Once this Fragebogen has been filled out you will receive a tax number to use on your invoices and now you’re good to go! Viel Erfolg! © Karenne Sylvester, April 15 2008.