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  • Writer's pictureBarbora Karetová

Starting a Business in the Czech Republic: Quick Guide

Updated: Sep 26, 2023

If you’re an expat considering starting a business in the Czech Republic, there are plenty of business structures to choose from. The Czech Republic offers a welcoming environment for entrepreneurs, but it’s essential to understand the legal requirements and options available to you.

Before diving into business, ensure you have the right to work in the Czech Republic. EU citizens typically have an advantage, as they can work freely without a specific permit. Non-EU citizens, on the other hand, often require a relevant visa or residence permit.

Natural Person vs. Legal Entity

As a natural person, you can engage in business activities without forming a separate legal entity. This simplifies the administrative process and reduces initial costs, making it suitable for freelancers, sole proprietors, and small-scale businesses. However, you are personally liable for any debts or legal issues that may arise.

On the other hand, establishing a legal entity, such as a limited liability company (LLC) or a joint-stock company (JSC), provides a level of separation between your personal and business assets. This shields your personal finances from business-related liabilities but requires more extensive documentation and adherence to legal formalities.

Trade License (called “živno” very often)

If you plan to offer services or trade skills as a natural person, you should register as a self-employed tradesman (živnostník). This option is relatively straightforward and suitable for freelancers, consultants, and small-scale entrepreneurs. To apply, you must submit an application to your local Trade Licensing Office (Živnostenský úřad). Costs for obtaining a trade license amount to 1,000 CZK.

Limited Liability Company (LLC)

To establish a more substantial presence in the Czech Republic, you might consider forming a legal entity.

The most popular choice for small and medium-sized businesses in the Czech Republic is limited liability company (společnost s ručením omezeným – s.r.o.). It offers limited liability protection to its owners, making it suitable for small to medium-sized enterprises. To establish an LLC, you’ll need at least one shareholder and a registered office in the Czech Republic. The minimum share capital requirement is 1 CZK, and the formation process involves drafting articles of association and registration with the Commercial Register.

Joint-Stock Company (JSC)

A JSC (akciová společnost – a.s.) is ideal for larger enterprises. It requires a minimum share capital of 2 million CZK or 80 000 EUR, making it a suitable choice for established businesses with substantial financial resources. The formation process is more complex than that of an LLC and includes creating articles of association and appointing a supervisory board. Liability of shareholders is limited to the value of their shares.

In conclusion, the Czech Republic offers a favorable environment for expat entrepreneurs, with various options for starting a business. Selecting the right legal entity structure depends on your business size, goals, and financial capacity. Remember that compliance with Czech law is crucial for a successful business. Consider consulting with legal advisor who can help you navigate the specifics of your chosen business structure and industry.

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