In the Czech Republic there are multiple options for establishing a business entity. In Commercial Code legal forns are categorised as:
- General commercial partnership (veřejná obchodní společnost – v.o.s.)
- Limited partnership (komanditní společnost – k.s.)
- Limited liability company (společnost s ručením omezeným – s.r.o.)
- Joint stock company (akciová společnost – a.s.), Co-operative (družstvo)
- Branch office – commercial representations of foreign corporate and natural entities
They are all varied depending on the amount of capital, partners, and legal obligations the company plans to operate with.
The equivalent of a limited liability company (LLC) is called s.r.o. (společnost s ručením omezeným) and is the most common company type established in the Czech Republic. Like in many countries, partners in an SRO are liable for the company’s obligations only up to the capital they originally contributed to the company. For the creation of such a company is required to start with a minimum registered capital of CZK 1, as well as to have a minimum of 1 stockholder and 1 director.
As in many countries Czech SRO has many beneficial sides for small and medium enterprises with a limited budget, offering flexibility and simplicity. Foreigners establishing an SRO in the Czech Republic are met with a straightforward process of documentation, but also not obligated to a permanent residency in the country.
What is the process
The main documentation steps usually include:
- Choosing a unique name that includes “s.r.o.” or “spol. s r.o.”
- Register an office, physical or virtual
- Draft a Founding Deed that is determined based on the number of founders in the company
- Contribute share capital, starting from CZK 1
- Appoint Executive Director and provide his criminal records
- Provide evidence of professional qualifications for the responsible person
Even though the legal requirement for capital is CZK 1, a bigger capital would guarantee a company a smoother start and increase trustworthiness. With all the notarized documents stated above, the full establishment of SRO will be finalised after registration with the Commercial Register, obtaining a trade license, and registration for taxes.
Key Advantages
One of the considerate reasons is access to the markets of Central and Eastern European countries. Germany, Poland, and Slovakia are becoming more available in terms of logistics. Because the Czech Republic is an EU member, the company benefits from the intra-community VAT system. Under this system, when one EU business sells to another EU business (both VAT-registered, in different EU countries), the sale is zero-rated with 0% VAT on the invoice charged by the seller. The buyer accounts for VAT in their own country via the reverse-charge mechanism.
Tax obligations
Corporate Tax – The corporate tax rate is currently 21%. Using company funds for personal expenses results in double taxation (first at the corporate level, then as personal income tax for the shareholder). An s.r.o. must maintain double-entry bookkeeping, unlike sole proprietors who may use simple tax records.
Estimated Costs
- Notary fees: CZK 5,000 – 10,000
- Court registration: CZK 2,000
- Virtual office (optional): from CZK 3,000/year
- Legal/tax advisory: varies depending on complexity
Hidden stones
Although the Czech Republic offers a welcoming business environment, entrepreneurs often face hidden challenges such as strict company name approvals, the need for a registered Czech address, obtaining and translating criminal record documents, proving qualifications for certain trade licenses, difficulties opening bank accounts as non-residents, and navigating bureaucracy largely conducted only in Czech.
With proper consultation, Axevera helps growing enterprises find the right strategy and convert goals into achievements.
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