Do you want to sell something on the side, offer a service or take your first step into self-employment? In Germany, that path often runs through a small business, known as a Kleingewerbe. It is the simplest way to start out legally and with little effort. Registering a small business costs little, is quick to do and fits a lot of small business ideas.
Even so, plenty of questions come up at the start: what exactly is a Kleingewerbe? When does the duty to register kick in? Which documents do you need, what does registration cost and which taxes apply? In this guide we walk through the whole process step by step, from the trade registration to your first order.
The key points at a glance:
- A Kleingewerbe is a commercial business of limited scope. It is not entered in the commercial register (Handelsregister) and needs no start-up capital.
- You register at the trade office (Gewerbeamt) of your town or municipality. The fee is usually between €20 and €60.
- The duty to register applies as soon as you act regularly and with the intention to make a profit, not only above a certain turnover.
- With the small-business rule (Kleinunternehmerregelung, § 19 UStG) you charge no VAT, as long as your turnover stays below €25,000 in the previous year and €100,000 in the current year.
- For bookkeeping and taxes, the simple cash-basis accounting (Einnahmenüberschussrechnung, EÜR) is usually enough.
Registering a small business – an overview
Registering a Kleingewerbe is more straightforward than many people think. You register your activity at a single authority, the trade office, receive a trade licence (Gewerbeschein) and shortly afterwards get a letter from the tax office. After that you can write invoices and officially get going. The administrative effort is low and the whole process often takes only a few days — a simple start to your own business formation.
What is a Kleingewerbe?
A Kleingewerbe is a commercial business run on a manageable scale. Legally, it is a trade that does not require a commercial business set up in a merchant-like way. This means you do not count as a merchant under the German Commercial Code (HGB) and you do not have to enter your business in the commercial register.
That brings several advantages. How do you register a small business without a lot of red tape? That is exactly the point: there is no duty to keep double-entry books, no balance sheet and no minimum capital. A Kleingewerbe is usually run as a sole proprietorship, but it can also be set up as a civil-law partnership (GbR) with several people.
Typical examples of a Kleingewerbe are a small online shop, a mobile hairdresser, a tutoring service or selling handmade products. Many digital services also count, such as web design, copywriting or social media management. What matters is not the industry but the scale: as long as your business does not require a merchant-like operation, you stay within the small-business framework.
Kleingewerbe vs. Kleinunternehmer – what is the difference?
These two terms are often mixed up, but they mean something completely different. The Kleingewerbe describes the size and legal classification of your business. The small-business rule (Kleinunternehmerregelung), on the other hand, is purely a VAT rule under § 19 UStG.
In practice the two often go together, but they are not the same. You can run a Kleingewerbe and use the small-business rule at the same time. You can also decide against it and charge VAT. The following overview shows the difference at a glance:
| Feature | Kleingewerbe | Kleinunternehmer |
|---|---|---|
| What it governs | Legal size and form of the business | VAT (§ 19 UStG) |
| Basis | Trade regulations & HGB | VAT Act |
| Registered at | Trade office (Gewerbeamt) | Tax office (tax registration questionnaire) |
| VAT | Possible in principle | Not charged |
| Limit | No fixed turnover limit | €25,000 previous year / €100,000 current year |
Who is a Kleingewerbe worth it for?
A Kleingewerbe suits anyone who wants to move into self-employment with manageable risk. If you want to register as a small business owner, you benefit from the low effort and the low costs. This form is especially useful for:
If your business grows later, you can switch to another legal form at any time, such as a UG or GmbH. The Kleingewerbe is therefore a good entry point, but not a one-way street.
When do you have to register a small business?
Many people believe they only need to act above a certain turnover or profit. That is not quite right. When registering a small business becomes mandatory depends mainly on the type of your activity, not on the level of your income. As soon as you act regularly and with the intention to make a profit, the duty to register usually begins.
When does the duty to register apply?
A trade registration is needed once three features come together: you work independently, you act on a lasting and repeated basis, and you want to earn money with it. Public presence counts too, for example through a website, social media or an online shop.
A one-off private sale is not a trade. But if you sell regularly, buy goods specifically to resell them or offer services on an ongoing basis, that counts as a commercial activity. In that case you have to register your business before you start or right at the beginning.
The liberal professions (freie Berufe) are an exception. Anyone working as a doctor, lawyer, tax adviser, journalist or in an artistic profession usually does not register a trade, but only registers a freelance activity with the tax office.
Can you register a small business retroactively?
Registering a small business retroactively is possible in many cases. The trade office then records the actual start of your activity. A late registration does not stay without consequences, though. Anyone who registers too late risks a fine, which depending on the municipality can be up to €1,000.
On top of that come possible queries from the tax office and back taxes for the period in which you were already active. So the rule is: register your business early. If you are unsure whether your activity already counts as a trade, ask the responsible trade office directly.
Requirements for registering a Kleingewerbe
The requirements for registering a small business are manageable. You need neither start-up capital nor an entry in the commercial register. Still, you should clarify a few personal and legal points beforehand so that the registration goes smoothly.
Personal requirements
In principle, any person of legal age with legal capacity may register a Kleingewerbe. Minors need the consent of their legal guardians and, in many cases, approval from the family court. Anyone without a German or EU passport additionally needs a residence permit that allows self-employed work.
Beyond the formal points, your entrepreneurial responsibility matters too. As the owner of a Kleingewerbe, you are liable with your private assets. You should factor that in from the start, especially if you buy goods or sign contracts.
Legal requirements & permits
Some activities require a permit. Anyone opening a restaurant or café needs a catering licence. In the skilled trades, an entry in the register of craftsmen (Handwerksrolle) may be necessary. Special rules also apply to security services, estate agents or financial brokerage, often including proof of expertise and a certificate of good conduct.
So check early whether your planned activity needs a permit. The trade office or the responsible Chamber of Industry and Commerce (IHK) can give you information. That way you avoid your registration stalling later on.
What do you need to register a small business?
For the actual registration you only need a few things. If you want to apply for the small-business rule later, you indicate that in the tax office questionnaire. This checklist helps you prepare everything:
Registering a small business – step-by-step guide
To help you keep track, we have turned all the formation steps into a practical small-business registration checklist. These steps take you from the first registration to a fully set-up small business. That way you can set up your Kleingewerbe step by step. Depending on your activity, not all points will be relevant for you.
Set up your small business in 8 steps
The first step is the trade registration at the trade office (Gewerbeamt) of your town or municipality. You fill in the form “GewA 1” and state your activity, the legal form and the business location. In person you often receive the trade licence straight away; online, processing can take a few days.
Many municipalities let you register the small business online. Through the relevant service portal you upload your data and documents and pay the fee digitally. That saves the trip to the office. Whether this option exists depends on your municipality – a look at your town’s website will tell you.
After the trade registration, the tax office gets in touch automatically and sends you the tax registration questionnaire. You usually fill this in via the ELSTER portal. Here you state your expected turnover and then receive your tax number.
In the same questionnaire you can choose the small-business rule under § 19 UStG. You then charge no VAT and save yourself the monthly advance return. This is worthwhile above all if your customers are private individuals. If you work a lot with businesses, input-tax deduction can make standard taxation more attractive.
With the trade registration you automatically become a member of the Chamber of Industry and Commerce (IHK) or the Chamber of Skilled Crafts (HWK). A separate registration is usually not needed. Small businesses are often exempt from the contributions in the first years or pay only a reduced rate.
Every trade usually has to register with the responsible employers’ liability insurance association (Berufsgenossenschaft) within a week. It is in charge of statutory accident insurance. Without employees, the contribution is often small or does not apply, depending on the industry and the statutes.
A dedicated business account is not mandatory for a Kleingewerbe, but it is highly recommended. It cleanly separates private and business payments, which makes your bookkeeping and tax return much easier. With a Vivid business account you also set aside money for taxes in sub-accounts and keep an eye on your finances in real time.
Finally, you should check your insurance cover. Depending on your activity, public liability or professional indemnity insurance makes sense. Think about your health insurance too: with a part-time activity you usually stay covered through your main job, while with full-time self-employment the contribution changes.
Costs of registering a small business
The costs of registering a small business are low, especially compared with a GmbH or UG. There are no notary or commercial-register fees. Still, you should know both the one-off and the ongoing costs so you can budget well.
One-off registration costs
The fee for the trade registration is usually between €20 and €60, depending on the town and municipality. In Berlin it is about €26, in Munich around €40, in Hamburg roughly €20. For activities requiring a permit, there are additional costs for permits, a certificate of good conduct or proof of expertise. An entry in the commercial register is not required for a Kleingewerbe.
Ongoing costs of a small business
After registration, ongoing costs arise depending on your activity. Most of them can be kept small, but some are mandatory. The following overview shows typical items and rough guide values:
| Cost item | Guide value per year | Mandatory? |
|---|---|---|
| Employers’ liability insurance association | €0 – €200 | Yes, registration mandatory |
| IHK or HWK contribution | €0 – €70 (often exempt) | Membership mandatory |
| Public or professional liability insurance | approx. €100 – €300 | Recommended |
| Bookkeeping or invoicing software | €0 – €200 | Optional |
| Taxes (income tax, possibly trade tax) | depends on profit | Yes, above certain limits |
Registering a side business – costs at a glance
If you want to register a side business (Nebengewerbe), you pay the same registration fee as for a full-time trade, usually €20 to €60. The big advantage: the financial risk is smaller, because you are still covered through your main job. As long as your self-employed activity does not exceed the secondary scope, your health insurance usually stays unchanged. A suitable business account for the self-employed helps you keep the income from your side business separate from the start. The costs of registering a side business therefore stay within tight limits.
A business account for your small business
Separate private and business finances from the start. With the Vivid business account you set aside tax reserves in sub-accounts, send invoices and keep every transaction in view in real time.
Registering a Kleingewerbe as a side business
Many people start their Kleingewerbe on the side at first. That is generally allowed, even if you are employed. What matters is that your self-employed activity does not overshadow your main job. As a rule of thumb, the 20-hour-per-week limit applies: if you stay below it and your income from the trade is lower than your salary, you still count as self-employed on the side for social-insurance purposes.
Many employment contracts state that you must report a secondary activity. Your employer may only prohibit it if it competes with your main work or clearly overloads you. So it is best to inform them in advance. Keep the Working Hours Act in mind too: your job and side business together must not permanently exceed the maximum permitted working time.
In tax terms: you also have to declare a side business in your income tax return. The profits are added to your other income and taxed accordingly. The trade-tax allowance of €24,500 per year protects most small side businesses from trade tax.
Special rules apply to students, people who are unemployed or those on parental leave. Additional income can affect student finance (BAföG), child benefit or social benefits. Your status in student or family health insurance can also change if your earnings get too high. So before you start, check which limits apply to your situation and seek advice from the relevant body if in doubt.
Bookkeeping & taxes for a small business
After registration, day-to-day operations begin. The good news: with a Kleingewerbe the effort stays small. You need no double-entry bookkeeping and no balance sheet. The simple cash-basis accounting (Einnahmenüberschussrechnung, EÜR), where you compare your income and expenses, is enough. This applies as long as your profit stays below €80,000 and your turnover below €800,000 a year.
When writing invoices, the usual mandatory details apply. If you use the small-business rule, you charge no VAT but add a short reference to § 19 UStG. The tax registration questionnaire – the form you complete to register a small business with the tax office – determines how you are taxed. Keep all receipts safe; they are the basis of your tax return.
The taxes that may apply to you are: income tax on your profit, possibly VAT (if you are not a Kleinunternehmer) and trade tax, once your trade income exceeds €24,500. For many small businesses, income tax is the main one that remains relevant. A dedicated business account with a built-in bookkeeping tool and tidy receipt filing make the annual tax return much easier.
Also plan a little time for filing. As a rule, you have to keep receipts, invoices and bank statements for ten years. Anyone who keeps things in order from the start saves a lot of searching later. It helps to record income and expenses monthly and to set aside tax reserves straight away. That way you are well prepared for your first tax return and any back payments.
Conclusion
Registering a small business is one of the fastest and cheapest routes into self-employment. You register your activity at the trade office, settle the tax side with the tax office and can then start straight away. You need no minimum capital, no notary and no commercial register. With the small-business rule you also keep the tax effort low.
Plan the first steps with our checklist, take care of insurance early and separate your finances from the start. A suitable business account for small companies makes sure that bookkeeping and taxes do not become a source of stress later. Then nothing stands in the way of your start.
Frequently asked questions (FAQ)
What does a small business cost me per year?
Registration costs a one-off fee of usually between €20 and €60. During operation, costs for insurance, bookkeeping and taxes are added, depending on your activity. Many small businesses get by on under €300 a year, as long as no expensive permits or high contributions apply.
How much can I earn with a small business?
There is no fixed earnings limit for the Kleingewerbe itself. A limit only applies to the small-business rule: it works as long as your turnover stays below €25,000 in the previous year and €100,000 in the current year. If you earn more, the business continues, but you switch to standard taxation with VAT.
How much can I earn without registering a business?
There is no fixed allowance above which you have to register a business. What matters is the type of activity. An occasional private sale stays free of registration. But as soon as you act regularly and with the intention to make a profit, you need a trade registration, regardless of the level of income.
What should I keep in mind when registering a side business?
Watch the 20-hour-per-week limit so that you stay self-employed on the side for social-insurance purposes. Check your employment contract to see whether you have to report the activity, and inform your employer. For tax, you declare the profit in your income tax return. When registering a small business, what to keep in mind mainly means: keep your main job, taxes and insurance in view.
What is the difference between a Kleingewerbe and a Nebengewerbe?
A Kleingewerbe describes the legal size of your business. Nebengewerbe only means that you carry out the activity on the side, alongside a main job or studies. A Kleingewerbe can be run full-time or on the side. So the two terms do not exclude each other.
What does a small business cost per month?
There are no fixed monthly costs for a Kleingewerbe. If you spread the ongoing costs over the month, you usually land in the low double-digit range. This includes a share of insurance, any software and reserves for taxes. The amount depends heavily on your activity.
Can you register a small business while receiving a reduced-earning-capacity pension?
Yes, registering a small business is also possible while receiving a reduced-earning-capacity pension (Erwerbsminderungsrente). However, additional-income limits and rules on working hours apply, which can affect your pension. With a full reduced-earning-capacity pension, only a small number of hours is allowed. It is best to clarify the current limits in advance with the German Pension Insurance (Deutsche Rentenversicherung).
Note: The content of this blog is for general information only and does not constitute legal, financial, investment or tax advice. It is not a recommendation or a basis for financial decisions. All information refers to the status as of June 2026. Before taking any action based on the information provided, you should always seek advice from qualified professionals who can take your individual circumstances into account.
