There are four basic business entities in the Czech Republic. These are Limited Liability Company (s.r.o.), Joint Stock Company (a.s.), General Commercial Partnership (v.o.s) and Limited Partnership (k.s.). There are another two European business entities which you can establish, however, these two are not very popular.
The most popular type of business entities is Limited Liability Company (in Czech called s.r.o. – this is an obligatory suffix to the name of the entity). Before we head into the process of setting up limited liability company let’s first talk about the advantages of conducting business as a legal person instead of a natural person. First, your liability is of course limited. However, that is not such a big case in the Czech Republic because the Czech legal system does not know punitive damages (such as the US legal system) so it is extremely improbable that a businessman or businesswoman would have to pay many millions as a result of personal liability. For most people the most important factor is taxes. Corporate tax is higher than the income tax of individuals (19% vs. 15%) however corporations naturally do not have to pay social and health insurance. Both insurances are obligatory for individuals.
Step by step procedure:
First, you need to gather these documents:
- criminal record of all persons who will be involved in a company at the time of incorporation
- documents proving that there are no unpaid taxes
- sworn statement and specimens’ signatures of to-be-members of a statutory body
- information about company’s head office – you can attach an extract of the cadastre if you are the owner of the property or attach consent with the placement of company’s head office signed by the owner of the property
Then you will have to make an appointment with any notary and he or she will draft the company’s statutes. If you choose just basic statutes without any modifications it will be a little bit cheaper. However, if you would like to modify the processes inside of the company you will need to pay more.
After that, you will be able to open a bank account in the name of the company. This bank account is important because that is the place where you will deposit the capital. Capital can be even 1 CZK but that is generally not recommended. The reasons are that is does not look trustworthy and it is then complicated to split the ownership share. After depositing capital, you will receive a written statement from the bank.
The next step is to register the company at the Office of Trade and Crafts. There the company will receive a business permit.
The last step is to hand over all the above-mentioned documents to the notary and pay the fee.
The last thing to keep in mind is to register the company at the Financial Administration within 30 days after the setup.
I will be happy to answer any question you might have and possibly help you with setting up the company. Feel free to contact me anytime. Looking forward to hearing from you. Daniel
