Attention: it's advisable to seek professional advice, such as from an accountant or business advisor, to ensure you comply with all legal and tax requirements when setting up your sole proprietorship as a contractor in the Germany.

In Germany, you are not allowed to operate as individuals to be a contractor. You will need to register a legal entity. This legal entity could be a sole proprietorship, business, organisation or partnership. The most common one for contractors is sole proprietorship.

There are different types of sole proprietorships, each of which offers its own set of pros and cons, depending on the kind of business you want to run. Under the sole proprietorship banner are:

This type of sole proprietor is one entered in the commercial registry. That’s what the e. K. stands for. You qualify for this type if your business is a trade (§ 1 Para. 1 HGB). You may be exempt from registering depending on the size and type of your trade (§ 1 Para. 2 HGB).

As a kleinunternehmer, due to your low earnings you’re not required to pay VAT. Not having to do this keeps your taxes very simple, however you can choose to charge and pay VAT if it will benefit you in the long run.

A type of sole proprietorship restricted to a set of professions according to income tax law income tax law (EStG § 18), a freelancer in Germany pays taxes depending on their amount of income.

Once you have chosen the type of legal entity that you would like to operate in, there are 3 steps:

Visit the local trade office in the city where your business will be located. You'll need to fill out a Gewerbeanmeldung (business registration form). Bring your identification (passport or ID card) and any other required documents.

After registering with the trade office, you'll automatically receive a tax number (Steuernummer) from the local tax office (Finanzamt). If your annual turnover is expected to exceed €17,500, you'll need to apply for a VAT identification number (Umsatzsteuer-Identifikationsnummer).

If you're not already covered, you'll need to arrange health insurance and contribute to social security.

Depending on your business activities, you may need to register with the Chamber of Commerce and Industry (Industrie- und Handelskammer). This is typically required for tradespeople and certain service providers.

Depending on your business activities, you may need specific permits or licenses. For example, if you're starting a restaurant, you'll need health department approval.

If you plan to hire employees, you'll need to apply for an employer identification number from the Federal Employment Agency (Bundesagentur für Arbeit).