Reason for Residence: Entrepreneurship

Foreign entrepreneurs have to fulfill some legal expectations

This page will introduce you to legal expectations when you lead a company and want to live here to run your business.

I want to start a business in Germany and while doing so I want to live here, too. How can I do that?

Since the amendment of the law in 2012, the law wants to promote business immigration because the formal requirements for a successful application have been extremely reduced. The latest changes in 2019 have brought no further difference or relief.

Pursuant to §21 I AufenthG, you need to show:

  • the economic interest or a regional need for your line of business,
  • positive effects of your business for the German economy,
  • secure financing of your project through equity or a loan promise of a bank.
Oh, come on. Do I really not have to invest 250 k€ and hire five employees to get the permit?

Absolutely not! This was the main rule valid from 2005 - August 2012. Of course, it will be very positively considered as an advantage for Germany's economy when you invest so much and do hire 5 or more persons from scratch. The success of your application stands and falls with the business plan and the first results while still abroad! It is seriously more important to have a persuading business idea than more money and a "boring" idea.

Now how much money do I really need?

Well, the law does not answer this question. Let us think practically, you have to have funds to open and run your business and funds for your private livelihood – each for one year. If you want numbers, I hardly can give you any. The amount of money for your business (= investment capital) depends on your setup (personal vs. corporate) and what specific needs your company's line of business requires. Your private livelihood depends on your martial status and whether you have any children. Immigration expects that you bring the financing for the first year.

The thing is I personally do not have so much money. Is a loan going to ruin my chances?

Yes and no. You have to have either equity or a bank loan. If you lack own money, you will need a loan from a bank. This bank may be in Germany or in your home country. I have no real experience on how foreign banks work. Any German bank will want securities from you and a normal bank loan is expensive. However, that may be, the state is very interested in supporting start-ups that it gives out subsidized loans with very lucrative conditions! The state does not want securities because they will trust your project. The state wants to foster start-ups! If you do not have any interesting securities and still need some, that is still not the end of your project. State public banks, i.e. guarantee banks, can personally vouch for you – for a minor fee. Further going details around state subsidized loans have been discussed in the article "business coaching / states subsidies". N.B. You will typically need a certified business consultant to support you with the business plan and the public loans. This consultant as well will be subsidized by the state!

What is interesting for the German economy?

Generally, everything is welcome that will bring momentum to Germany. Digitization, automatization, IT, export, enhancing business relationships abroad, technique / consultation around renewable / green energy will typically always work. What German authorities do not want is illegal or already existing business lines in abundance. Typical examples of what is not wanted is:

  • waste economy,
  • restaurants for foreign cuisines,
  • any line of business exclusively triggering consumption on small scale,
  • etc.
Seriously, no waste economy? I hold a patent on converting plastic garbage into reusable material! This sounds unfair.

Indeed, this sounds unfair. However, there is no rule without exception! Since your invention combats a general need for industrial countries, cares for our environment, reduces the mountains of waste, the authorities will surely embrace this business idea! My guess is that they will roll out the red carpet for you.

How will they test the workability of my business idea?

You will have to hand in a business plan. Based upon that plan, the authorities will test your case for its feasibility. Count on this test to take two months' time. Relevant authority is typically the state ministry of economy and / or Chamber of Commerce in the area of the prospected business. They will test your idea based upon:

  • your experience as an entrepreneur,
  • the level of capital you are investing,
  • the effects on the employment and the training situation, (i.e. how many employees and trainees, your company will be hiring)
  • the contribution you have made to innovation and research.

§§§ - §§§§

I'm a senior business woman, 45 years old with 20 years of professional experience. I do not want to deal with all of that greenhorn stuff like a business plans. In respect to my outstanding experience that will surely make things easier for me, correct?

Sorry, your experience does not at all relieve you of the formal prerequisites! You must still hand in a business plan. The only advantage you will have is that after recognizing your decades of experience the authorities might even agree more quickly. But there is also a catch: §21 IV AufenthG requires that you have a reasonable pension plan for retirement in place.

What constitutes as a reasonable old-age precaution?

You need to show a private or public pension plan that will "guarantee" your financial sustainability when you turn 67. Private assets are also feasible. You need to show that you will have around 171 k€ p.a.

I guess, I will have to go every year to immigration and get my permit renewed. How long do I get from the beginning?

You will get up to three years from start. Any extension requires you to prove to the authorities that you are making money.

I'm worried about my daughter. She just graduated and got her masters. Since she has no experience in business whatsoever, does this mean, she will have no chance also?

Relax. If she has no experience they will not instantly kick her out. She will get her chance when she has a persuading business idea that is in line with her education. An example, she studied mechatronics and her paper was about what she developed during an internship. She aligns her line of business developing this idea to marketability. This is what the authorities are looking towards.

I graduated here and got my German diploma. In how far does that help me?

First of all, congratulations on your success! It really does help you significantly. The authorities have to use their discretion to grant you the permit. This might sound complicated. Normally, the authorities search for loopholes in the application in order to deny it. Graduates of German universities are by all reasonable means to be granted a permit for self-employment. So, if your business idea is only "so-so", you are to get the permit. In the case, you have no ideas, no funds, nothing but the pure wish to remain, then do not expect an approval. §§§

But all this seems to get me all wound up in red tape, where is the advantage of opening a business in Germany and not coming as an employee?

Alas, you shall be, if not not pampered, but treated favorably. After successfully running your business for three years, you can receive permanent residency and not, as the general rule after five years. All you have to show is the success of your business, secured funds for your livelihood derived from your business and sufficient health insurance.

But what if my plan fails? Will they immediately kick me out?

Relax. Plans can change – for good or for worse. Latest when the extension is due, you will have to show as a minimum that you break even and have enough private assets to finance yourself for another year – in spite of your business losses. However, do not reckon that the authorities will be very happy with such "failure". If you cannot explain your negative situation and persuade the that you will have a prosperous future, then you will have to expect that they might decline the second extension. Case law "guarantees" you the first extension. It is a truism that business income is not always stable, you already invested a lot and worked hard. You are virtually entitled to at least one renewal.

I want to live in Germany, I have enough money. Can I not just open the company and come over? I will instantly hire a director and remain only shareholder!

I share your happiness in being so well funded. However, immigration authorities are less concerned about your financial value but interested in your entrepreneurship. Being exclusively just a shareholder, and not a director as well, is irrelevant for immigration purposes! Again you are only showing a financial value but not a business idea.

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