Starting a Business in the Czech Republic: Legal Insights & Options
Expatlegal is a valuable resource for expats in the Czech Republic, offering legal guidance on residence permits, business setup, and more. Learn about trade licenses, types of companies, liability considerations, and key laws. Explore the differences between a trade license and forming a company, as well as the various types of business entities available in the Czech Republic.
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WORKSHOP STARTING BUSINESS IN THE CZECH REPUBLIC www.expatlegal.cz
WHAT IS EXPATLEGAL? o EXPATLEGAL is an information hub run by 3 attorneys created to help expats living and working in the Czech Republic to better understand Czech law. o EXPATLEGAL team can advise you on different legal issues, such as residence and work permits, housing, family life or starting a business. o Attorney s knowledge of Czech law together with immigration law and private international law. www.expatlegal.cz
DOING BUSINESS IN THE CZECH REPUBLIC o Civil Code (act no. 89/2012 Coll.) o Corporations Act (act no. 90/2012 Coll.) o Trade Licensing Act (act no. 455/1991Coll.) o Insolvency Act (act no. 182/2006 Coll.) o Criminal Code (act no. 40/2009 Coll.) www.expatlegal.cz
WHO CAN START A BUSINESS AND HOW? o As a foreigner you are allowed to conduct trade activities in the Czech Republic under the same conditions and to the same extent as Czech entrepreneurs. o 2 ways: o Trade license ( ivno ) x company (found, co-found or buy) www.expatlegal.cz
DIFFERENT TYPES OF COMPANIES o limited liability company ( spole nost s ru en m omezen m or s.r.o. ) o joint-stock company ( akciov spole nost or a.s. ) o limited partnership ( komanditn spole nost or k.s. ) o general commercial partnership ( ve ejn obchodn spole nost or v.o.s. ) Note: Also the European forms of legal entities (European Economic Interest Grouping; European Company; European Cooperative Society) can operate in the Czech Republic. In addition, a foreign business entity may conduct its business in the Czech Republic through a branch office registered in the Czech Republic. www.expatlegal.cz
TRADE LICENSE OR A COMPANY? o What will be the extent of my business? o Will I be alone or do I have a business partner? o Where am I getting resources for starting and expanding my business? (investors, loans?) o What about taxes? (15% vs. 19% + double taxation) o Am I afraid of liability? www.expatlegal.cz
LIABILITY FOR COMPANYS DEBTS o Trade license ( ivno ) full liability! o General commercial partnership (or unlimited liability company) ( v.o.s. ) all partners have full liability o Limited partnership ( k.s. ) - at least one member has limited liability and at least one member has unlimited liability (Attention! A limited partner whose name is included in the trade name shall has unlimited liability) o Limited liability company ( s.r.o. ) - members are jointly and severally liable for the company s debts only up to the amount at which they have not fulfilled their contribution obligation o Joint-stock company ( a.s. ) no liability of shareholders www.expatlegal.cz
INTRODUCTION TO COMPANY LAW o Separate legal entities, its legal personality is aquired by incorporation o All companies in the Czech Republic must be incorporated in the Commercial Register o Commercial Register is available on website justice.cz o All legal acts towards foundation, changes or dissolution of the company must be in writing with verified signatures o Limited liability Company and joint-stock company can be founded only by one member o Company commences to exist legally on the date of registration to Commercial Register and ceases to exist on the date of its erasure from it. www.expatlegal.cz
UNLIMITED LIABILITY COMPANY (V.O.S.) o Minimum 2 persons, liable jointly and severally o Name of at least one Member must be in the name (usually Nov k a spol. ) o Certificate of incorporation (or Memoradum of Association UK) can only be modified if all Members agree, each Member has one vote unless otherwise agreed o Unless otherwise agreed in bylaws all Members must agree on all decisions regarding the Company o Executive body is formed by all Members o It is forbidden to transfer the share of business of the Member o The share of business could be inherited www.expatlegal.cz
LIMITED PARTNERSHIP COMPANY (K.S.) o The least popular form, usually founded by companies with foreign capital o Minimum 2 persons, 2 types of Members o Komanditista (Limited Partner) limited liability (is only liable for the the debts up to the amount of his unpaid contribution to the company) XKomplement (General Partner) unlimited liability o Executive Body is formed by all Komplement o Profit and Loss is divided proportionally to the Company and Komplement i unless agreed otherwise o Komanditista gets the part of the Profit after the taxation of the company s Profit according to his business share www.expatlegal.cz
LIMITED LIABILITY COMPANY (s.r.o.) o Most popular o All members are liable jointly and severally up to the amount of their unpaid contribution o Minimum contribution is 1,-K , either monetary or non monetary contribution is possible o Can also be founded by only one person o Notarial deed is required form for the Memorandum of Association and its modifications o Each Member can transfer his business share to other Member, for the transfer to the third person the consent of the General Meeting may be required o Business share also can be inherited www.expatlegal.cz
LIMITED LIABILITY COMPANY (s.r.o.) Bodies of the Company o General Meeting Supreme body of the Company, an assembly of all Members. GM elects Directors, some resolutions are ordinary (1/2 of the Members present on the General Meeting) some are special (2/3 of all Members for certain decisions such as change or dissolution of the company). Nowadays a lot of decisions are taken in the form of written resolution (per rollam, Members can vote not being present on the General Meeting) o Directors Executive body of the Company, one or more Directors, the MoA states the mode of acting on behalf of the Company. Their role is to manage business. o Supervisory Board (optional) supervise acting of the Directors, no Director can be Member of the Supervisory Board at one time www.expatlegal.cz
LIMITED LIABILITY COMPANY What documents do you need to found s.r.o. and how much is it? o Notarial deed on Memorandum of association (basically 4.000,-CZK excluding VAT) o Confirmation on 30% of contribution paid, the easiest way is to have the confirmation from bank that certain amount has been paid to the company s bank account o Affidavit of the Director and his consent with the registration in Commercial Register, the extract from the Criminal Register o Consent with the seat of the Company o Trade license certificate (1.000,-CZK) o Proposal to incorporation in Commercial Register o The Court fee for incorporation is 6.000,-CZK if done by notary it is 2.700,-CZK (additional 1.300,-CZK excluding VAT mus be paid) o Usual total costs are around 15.000 20.000,-CZK Note: It is also possible to buy ready-made company, some providers offer the formal seat as well
STOCK CORPORATION - JOIN-STOCK COMPANY (a.s.) company whose capital is divided into a number of shares shares are represented by a security called akcie either certificated or book-entered shares registered or bearer shares minimum registered capital is 2.000.000,-CZK (or 80.000,-EUR) Bodies of the company : o o o o o Supreme body - General Meeting Executive body : - 1 tier system Board of Directors - 2 tiers system Board of Directors and Supervisory Board Note: some companies such banks or insurance companies must be joint stock company according to the law www.expatlegal.cz
INSOLVENCY o Insolvency Act 182/2006 Sb. o Definition of the bankruptcy: more creditors (meaning at least 2) Financial obligations more than 30 days overdue Unable to fulfill those obligations (means that the debtor didn t pay more than 3 months) A debtor who is a legal entity or entrepreneur is obligated to file an insolvency petition without undue delay after he learned or should know about the bankruptcy. ( 98 of Insolvency Act), in case the debtor does not file insolvency petition, he is liable for any damage caused to creditors. www.expatlegal.cz
CRIMINAL ASPECTS o Certain crimes can be committed by company and by their executive body as well o Punishment imposed to companies are usually financial or in worst cases liquidation can be ordered o Mostly crimes on taxes and on public procurements www.expatlegal.cz
Thank you for your attention! flidrova@expatlegal.cz karetova@expatlegal.cz becirovic@expatlegal.cz or simply info@expatlegal.cz www.expatlegal.cz
