How to open a company in the Czech Republic? Discover the key steps

Establishing a company in the Czech Republic offers several advantages, such as its strategic location, as the Czech Republic is in the centre of Europe, which allows easy access to European markets. Another advantage is the strong and stable economic situation with a growing GDP.

Choose a legal structure 

To set up a business in the Czech Republic, it is necessary to choose appropriate legal structure. There are many business structures to choose from, however, traders starting their business in the Czech Republic most often choose the following: 

• a limited liability company (s.r.o.) 
• a branch
• joint-stock company (a.s.)

What is a limited liability company? 

One of the most common forms of business in the Czech Republic is the limited liability company, the operation of which is regulated by Act No. 90/2012 Coll., on Business Corporations. It is an independent entity which, after registration in the Commercial Register, acquires legal personality.

The limited liability company is a common choice in the Czech Republic due to its minimal financial requirements, limited risk for the shareholders and it is suitable for various types of business activities. A limited liability company can be established by one or more natural or legal persons regardless of nationality or place of incorporation.

The main bodies of a limited liability company are: 

• general meeting – the supreme body, consisting of all shareholders, decides on the basic issues of the company;
• management board - the executive body of the company, which is authorized to act on its behalf, one or more managing directors may be appointed;   
• supervisory board (subject to certain conditions) - the body supervising the activities of the executive directors, controls the accounting documentation, once a year submits a report on its activities to the General Meeting.

The purpose of establishing a company may be arbitrary, but it must be in accordance with the law. This type of company is most often chosen by small and medium-sized enterprises. The minimum share capital of a limited liability company is CZK 1.

How to set up a limited liability company in the Czech Republic? 

Establishing a limited liability company in the Czech Republic involves the following steps:

1. Preparation of the articles of incorporation - it contains the name of the company, the registered office, the subject of business, the amount of the share capital, the shares of the shareholders and other details. The document must be notarised.
2. Establishment of a bank account - a bank account in the name of the company and the deposit of the share capital (at least CZK 1).
3. Obtaining a trade license - visiting the trade office and requesting a trade license for the company's planned activities.
4. Registration with the regional court - filing a petition for registration in the Commercial Register includes submission of incorporation documents, proof of deposit of share capital and other required documents. After successful registration, a personal identification number (ID number) is obtained.
5. Registration with the tax authorities - within 30 days of registration in the Commercial Register, register for corporate income tax and VAT.
6. Registration with other authorities - register with the health insurance and social security administration for employees.

Each step may require specific documents and procedures, so it is advisable to consult a lawyer or company formation specialist to make the process as smooth as possible.

Branch of a foreign company in the Czech Repulic 

Opening a business activity in the form of a branch of a foreign company is a solution that some foreign traders choose. No obligation to establish a separate economic entity saves money and time and promotes control of activities in the country of choice.  

What is a branch of a foreign company? 

A branch acts for and on behalf of the parent company, therefore any acquired right or incurred liability directly affects the foreign parent company. As a general rule, the branch’s activity is limited. This means that a branch must carry out the same type of economic activity as its foreign parent company and the scope of its activities must not go beyond what is defined in the articles of incorporation of the parent company.  A branch also has no separate bodies such as management board or  meeting of shareholders. 

A branch does not have separate assets either – it uses the capital of the parent company, but may be obliged to present current documentation allowing to assess its financial situation, for example, when a branch takes part in a tender. 

How to register a branch of a foreign company in the Czech Republic? 

Several steps and documents are required to register a foreign company in the Czech Republic. Here is the general procedure:

1. Filling in the application - filling in the application for registration of the company at the trade licensing office (for sole traders) or at the registry court (for joint stock companies, limited liability companies, etc.).
2. Establishing a place of business - you need to have a lease or property ownership agreement.
3. Representation - appointing a representative of the company for the purposes of Czech law if you do not have a permanent seat.
4. Company documents - translation and verification of specified company documents into Czech language.
5. Tax registration - registration with the tax office for value added tax and other taxes as required.
6. Employee registration - registration with the health insurance company and social security administration.

What is the joint-stock company?

A more complex legal form, which is particularly suitable for larger companies, and whose share capital consists of securities (shares) held by the owners (shareholders). Significantly higher capital is required for setting up this type of company, which usually ranges from CZK 2 million upwards and in some cases can be tens of millions. On the other hand, shareholders are not liable for the company's debts.

The advantage of a joint stock company is the possibility of raising capital by issuing shares and the limited liability for shareholders. A public limited company is suitable for larger companies with ambitions to raise funds from the public or large investors.

The main bodies of a public limited company typically are:

• General Meeting - the supreme body, approves basic decisions.
• Board of Directors - manages the company, elected by the general meeting.
• Supervisory Board - supervisory body oversees the activities of the Board of Directors.

How to set up a joint stock company in the Czech Republic?

Setting up a joint stock company has very similar steps to setting up a limited liability company:

1. Preparation of incorporation documents.
2. Obtaining a trade license.
3. Establishing a bank account and depositing the share capital (minimum CZK 2,000,000).
4. Registration in the Commercial Register.
5. Registration with the tax authorities.
6. Registration with other authorities.

Other types of companies in the Czech Republic

Public company (v.o.s.) - a company consisting of at least two partners who are liable for the company's obligations without limitation and jointly and severally. There is no minimum share capital.

Limited partnership (k.s.) - a combination of a public company and a limited liability company. There are two types of partners: general partners (unlimited liability) and limited partners (limited liability up to the amount of the outstanding deposit).

Each type of company has its advantages and disadvantages which need to be considered according to the specific needs and objectives of the business.

Registration of the company in the Central Register of Beneficial Owners 

An important step in setting up a company in the Czech Republic is the registration in the Central Register of Beneficial Owners. The register collects and processes beneficial ownership information of entities and its main purpose is to counteract money laundering and terrorist financing. 

Companies must ensure that details are entered in the register of beneficial owners without delay if they have not been automatically entered as part of the incorporation process. As regards the information already provided, the update in the register should be submitted without undue delay.  

Open a bank account in the Czech Republic 

Opening a bank account is mandatory for all types of companies. To open a bank account in the Czech Republic, it is necessary to fill in documents that contain information such as data about the company and its beneficial owner, reasons for opening a bank account in a particular bank branch and country, or the amount of income. In most banks, it is possible to open a bank account remotely, without the obligation to appear in person.

An account opening process may vary from one financial institution to another due to individual internal procedures. One thing is sure, regardless of the bank in which you decide to open an account, the company must be registered in the National Commercial Register.