All nouns are capitalized, e.g. Bruder, Mutter, Sofa.

Adjectives of nationality are not capitalized, but nouns are, e.g. eine deutsche Frau (a German woman), Sie ist Deutsche (She is a German).

‘To write with a capital/small letter’ is expressed by the verbs groß- and kleinschreiben, 
e.g. Er kann Deutsch; hier wird ‘Deutsch’ großgeschrieben.
He speaks German; here ‘Deutsch’ is written with a capital letter.

Beethoven ist ein bekannter deutscher Komponist; hier wird ‘deutsch’ kleingeschrieben. 
Beethoven is a well-known German composer; here ‘deutsch’ is written with a small letter.

Because, for historical reasons, modern German uses the word for ‘they’ as the polite form of address, to distinguish between ‘they/them/to them/their’ and ‘you/to you/your’ the latter are all written with a capital letter, i.e. Sie/Ihnen/Ihr.