Setting up a company in Germany

Over the past two years I've been living in Schleswig-Holstein, I've seen a huge lacking of companies aside from the larger franchises (such as Berlitz) which offer language courses (I'd preferably like to offer English, Danish, Spanish and Mandarin, to start), interpreting and translation services, and so, after much thought, I've decided to open up a company of my own which offers all of those services. Mind you, this isn't something which will be done by next Tuesday or even within a couple of month's time, but I'd like to have the company up and running within a year's time.

My work permit allows me to take up self-employment and I am American. What are the legal requirements (e.g.: finances, permits, regulations, etc.) for an American resident to open a small company here in Germany? I've heard something about a foreigner being able to own a company, but not being allowed to take up the position as the CEO. Can anyone help me sort out my confusion?

Also, I would think it'd be wise to take out an Entrepreneur Loan, as the Germans call it, perhaps from the KfW. How difficult is it to obtain a loan from the KfW? I'm quite new to all of this, but I'm eager to learn and make sure I've got it all sorted out.

The thing about a foreigner not being CEO is total nonsense. I know several and they don't even have to be resident as long as they travel to Germany on a regular basis. I would suggest you attend an Existenzgruender course. The local IHK can point you towards one in your area. They are either 1 day courses or done by a Gebruefte Buchhalter (Certified Bookkeeper) or similar experienced person and they can tell you all about the costs of company formation, financing sources and generally how to run it once you get set up.

I'll definitely be looking out for an Existenzgruender course, but in the meantime, I'd like to read more replies.

What I'm most curious about at this point is how difficult it is to obtain a loan from the KfW. Also, how long does it normally take to receive the loan after the bank has sent the approval to the KfW?

A KfW loan has to be applied for through your "Hausbank". So to even get a foot in the door at the KfW you have to make a case and convince your Hausbank first. It will also depend on how much money your require. The more money you want to borrow the more hurdles the bank will throw in your way. The bank will want security. Have you got a house or a Capital Life Insurance Policy, shares anything the bank can access for security? Do you have any own capital? Have you got a business plan?

Also the bank/finance will want to see that you have the "Kaufmann" side of the business covered. They will want to see that either you are qualified (it is not enough to be capable) to undertake the economic and business analysis, reporting and record keeping that they will require or that you have employed someone to do this for you. Depending on the amount involved an accountant and book keeper may not be sufficient to satisfy the bank... Be prepared to forkout for an Unternehmensberater. Many states offer 50% grants to cover this sort of consultancy, but beware, many consultants just turn out to be blood-suckers and although they may be registered and recognized as "bank approved consultants" they can turn out to be crap. (You can end up teaching them more about your branch of business than they purport to know). The grant can look enticing but you may have to spend up to €20K in order to get back the 50%. It can be money well spent (if you get the loan) or it can turn out to be an expensive investment for not much return - or both. Finally, the bank/finance institution may insist that you contract your Unternehmensberater for a number of years. This can be helpful in getting your business started (if you really don't know very much ) and if your "Berater" is any good can be helpful in finding further finance for expansion or it can turn out to be an expensive burden. In any case - getting money from any bank or financial institution is all about them reducing their risk. So anything you can do to minimize the risk elements in your business makes it more likely to get a loan.

Thanks for your reply, Yarra.

I'm aware of the fact that I've got to first convince my bank to approve the loan, but I was moreso curious about how long the process takes after the approval has been made. Any idea about this?

There's a center nearby where I can rent out an office and have full access to a wide range of teaching rooms, and access to an Unternehmensberater is included in the rental price that I pay each month along with two receptionists. The Unternehmensberater will help me as much as he can at no extra cost.

Nature and business do not normally tollerate any kind of vacume, if there really were any demand it would rapidly be taken care of. I do not live in Schleswig-Holstein but I think your observation might not be correct. There are too many people trying to make money out of languages for it to be a viable business for all of them. Have you tried to find any clients yet? Have you even got one? It sounds like you don't and finding worthwhile customers is not at all easy. I would suggest before you waste your time looking for money to spend you do things the right way round and try and figure out how this business is going to earn you money. If you don't have at least one class you don't need a classroom.

I have heard it could take 3 weeks but I have also heard people are still waiting after 8 weeks

Just curious what you will have to pay for rent per m2 including the receptionists and Unternehmensberater...

@LeChamois: I do have classes and in the past, it was a pain in the ass to find places to teach them at first. I use rooms at the previously mentioned center to teach students who aren't learning on company grounds (where I travel to in order to teach there), and so, it makes much more sense to have an office there than to work out of my home, despite how appealing that may sound to many people.

@Yarra: the price is 4 EUR per qm plus a minimum of 80 EUR as a service fee plus 2,81 EUR per qm for all utilities, cleaning, etc.

Hi BBN www.bbn-velbert.de should be able to help they are a German company but the CEO speaks fluent English they provide a range of consultancy services from self employed to multinational companies.

There really is no lack of companies offering English Language Teaching - for businesses and individuals.
It's a classic business which needs little start-up capital and hence is cut-throat and crowded.
Gummibaerchen makes the mistake of assuming these ELT schools are all advertising away merrily.
No, most get their business by 'phoning around (at least those that are looking for business customers - who pay more) ..