The German tax system is said to be complicated, but if you keep your business simple, it's usually not that much of a problem. The tax that will most interest you is the income tax (as a natural person). There's a difference between the tax rate and the effective tax you pay. You can see this at this image (pink = effective): http://upload.wikimedia.org/wikipedia/de/a/ac/EStTarif.PNG If you run your business as a freelancer, you will most often have no trouble with the tax stuff.

If you want to incorporate we just got a reformed company law that gives us the "Unternehmergesellschaft." It's like a LLC oder Ltd., you can start it with 1 EUR and it's made esp. for startups. You have to accumulate 25% of your profits until you reach 25,000 EUR and become a "real" limited liability comp. (here GmbH). Foreigners can incorporate, too. Taxation is the "Koerperschaftssteuer" (corporation tax) which is flat 15%, then you have the local "Gewerbesteuer" (business tax) which (in Berlin) costs you also around 15%. Dividends are taxed flat with 25%. If you don't have good advisors you pay a bit more taxes with a company than as a natural person alone, but you have the limited liability, you can more easily hand out shares to investors, have more possibilities with financing, a.s.o.

Some more info there: http://en.wikipedia.org/wiki/Taxation_in_Germany