Trade licence and business registration

Receipt of the trade licence and business registration

If you want to work independently in Germany and intend to make a profit from your activity, you must always register a business. To do this, you apply for a trade licence and register your business. However, not every profession is obliged to do this and not every sector is so easy to become self-employed in.

The so-called "liberal" professions are an exception to this rule: Pharmacists, doctors, lawyers, notaries and auditors are some of them. They are treated differently in accordance with Section 18 of the Income Tax Act.
Other exceptions are professions in skilled trades such as hairdressers. Here, only people who have certain proof of professional qualifications are allowed to become self-employed. For example, only hairdressers with a master craftsman's qualification are allowed to run a business.
Hostesses and promoters are not subject to any of these exemption categories, meaning that in accordance with Section 1 (1) of the Trade, Commerce and Industry Regulation Act (GewO), anyone who wishes to do so can register a business in these areas.

Applying for a trade licence

You can apply for a trade licence at the trade registration office of the municipality in which you live. Colloquially, this office is often referred to as the "trade office" and is based in the city, municipal or district administration, which is located in the town hall, the citizens' advice centre, the public order office or a similar institution.

The registration itself does not generally take long. In the best cases, you can take the trade licence with you straight away. The only requirement is that you have all the necessary documents with you.
The required documents are:
  • The completed application form: The form for applying for a business licence can be downloaded directly from the Internet from most local authorities. Simply google the name of your town + business registration.
    You can also obtain the form directly from the relevant authority.
  • In the case of trades requiring a licence or special requirements (e.g. as an insurance broker, in the trades or in the hospitality industry), you must submit the relevant licences and evidence
  • Cash as a processing fee: Depending on the municipality or city, this fee varies between EUR 15 and EUR 60.
  • A copy of your (currently valid!) identity card or passport
  • Nationals of other countries may also require a residence permit

Please note: Even if you are considered a "small trader" as soon as you receive your trade licence, you are not authorised to start a business for this reason alone. The tax office must first be involved. This is done by receiving a form for tax registration of the business from the trade office after registration. You fill out this form and submit it to the local tax office. In some cases, you can also fill in the form directly at the trade office, which then forwards the information to the tax office. After a few days of processing, the tax office confirms the registration of the business and issues a tax number. This completes the business registration process and the small business owner can start trading and issuing invoices.

The advantage of registering a business is that it is inexpensive and easy to carry out. No equity capital is required to start a business, which has to be paid in as company assets, for example. On the other hand, as a small business owner, you are also liable with your private assets for any liabilities arising from the business.

Important notes on invoicing for work on a trade licence
Anyone who runs a small business works on their tax number and on account. After fulfilling an order, the self-employed person, i.e. the trader, writes an invoice to the client. For this to be legally valid, at least the following details must be listed:
  • The name of the trader/contractor including the tax number assigned by the tax offic
  • The name of the client
  • The date of the invoice
  • A unique invoice number that is consecutive (it is particularly easy to use the year followed by a consecutive number)
  • The service description (type and scope of service, customer, time and place of action)
  • The performance period (may be included in the promotional period)
  • The net amount of the service and, in the case of small businesses, the VAT and the gross amount
  • The payment term
  • The Contractor's account details (bank, sort code, account number)
  • The signature of the contractor
 

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