Get detailed instructions on how to register a Czech company in this step-by-step guide for entrepreneurs in the Czech Republic.
Step-by-Step - How to Register a Czech Company
There are two common ways to establish a Czech company: registering a trade license, or starting an S.R.O. The s.r.o. (in Czech, “Společnost s Ručením Omezeným”) is a limited liability company (LLC). It is one of the most common commercial business types, and is often advantageous for small to medium size businesses. This is due to the personal liability protections and flexibility that comes from an LLC (s.r.o) business structure.
For example, a Czech s.r.o. might have multiple official shareholders, founders, CEOs, and managing directors. These partners are then only liable for the company’s obligations up to their original contribution to the company. In the Czech Republic, the s.r.o. must also register a minimum amount of capital to start the business.
And while it is possible to establish a company on your own, it can become complicated without help. The establishment of a Czech s.r.o. requires several administrative steps, and submitting necessary documentation to relevant offices. This is also true if looking to start a company on a trade license. However, this guide should help.
Read ahead for our steps on how to register a Czech company, including: important information, guidelines, and advice for entrepreneurs.
How to Register the Czech LLC (s.r.o.)
As you might expect, establishing a Czech LLC (s.r.o.) is more complicated than setting up a trade license. In general, the process requires more steps, and more documentation. It also involves deciding if you want to start a new s.r.o. or buy an existing one.
But let’s say you are ready to turn your business idea into a brand new company, starting from nothing. In this case, the steps to business registration of a Czech s.r.o. would be as follows.
1 - Establish a Unique Company Name
Choosing a unique company name is the first step to registering a business in the Czech Republic. Note: It is important that the name is not similar to any existing Czech companies.
If your company name or notarial documents are too similar, the registration office will reject the application. Even worse, this rejection happens after the last step of the registration process. And needless to say, that amounts to lots of wasted time, money, and energy.
Thus, always check the company name through the commercial register office or a lawyer before starting business registration. Doing this will save you the headache in the end, and in general is standard practice when starting a business.
Also, don’t forget to check that a possible domain name exists for your new company. While this isn’t part of the registration process, it is nevertheless crucial in the digital era.
2 - Submit Notarized Documents
All documents you submit to register your company will need notarization by a Czech notary. The documents required for s.r.o. registration include constitution documents and articles of association. These cover information on shareholders, managing directors, company information, identifying details and any legal agreement between co-founders and shareholders. They also contain information on the company’s starting capital, and all involved partners and their agreements in the business
3 - Register a Company Address
Every company in the Czech Republic must also register its business address. However, note that you do not necessarily need to rent an office space in the earlier stages of your company. Instead, it’s possible to have a so-called virtual business address (in Czech, “sidlo”). This is in fact quite common, and provides a legal business registration address for companies and entrepreneurs. To learn more about this option, check out Pexpats’ Virtual Business Address Package. This package establishes your company address at our offices in Prague 1, and provides full administrative support for your business.
4 - Create a Company Bank Account
Along with a company address, you must also register a company bank account. It must be a local (Czech) bank account, and contain the deposit amount for the starting capital of the company. This amount should be the same as on the notarial documents from above.
Note: the bank account will be registered but will not be activated until the company registration process is complete. This also means the share capital deposit in the account is frozen until the company is officially registered.
However, keep in mind that the company bank account must be under the name of one of the company’s CEOs. This CEO will also need a residency permit to open the local bank account. If for example the CEO does not have residency, company registration will pause in this step. In this case, it will then be necessary for the CEO to obtain residency before the registration process can proceed.
5 - Register the Company Business License
After establishing a company bank account, the business must have a registered trade license (“Živnostenský list”, in Czech). Internationals commonly call this the Zivno for short. The trade license registers a company for certain business activities.
There are currently 83 business activities which do not require any special qualification, certification, or degrees to operate. These activities, a business can specify individually on their trade license registration, or they can register for all 83 activities.
If registering a business license that requires special qualifications, there will be certain conditions you must meet. Take for example opening a hotel or restaurant as a Czech company. In these cases, at least one CEO must prove qualification for running this type of business.
Having a CEO with the appropriate qualifications such as in hotel management or gastronomy will then allow you to hire employees for these activities.
Note: the company trade license will not be active until it has an IČO (business ID number) for your company.
6 - Apply for Business Registration
After collecting all documents and meeting the requirements of previous steps, you can apply for company registration. It is at this point when you submit all documentation to the Czech commercial register office. At the office, an employee will then stamp the first page of your application, and seal it with the date of application registration.
Remember to take a photo of the stamp just in case anything goes wrong with the registration.
On successful registration, you will then receive an official letter from the commercial office. This will provide the company with its IČO, and its company business identification number. Afterwards, each CEO of the company will automatically receive login details for the registered company’s DataBox by post.
Now, you can officially start running your business, and creating your first invoices. And if you don’t know how to create a Czech invoice, no problem! Start with Pexpats’ Online Czech Invoice Generator to create legal invoices easily, accurately, and completely for free.
7 - Finalize the Company Registration
After successfully registering your company, the final steps are as follows.
Register the company for income tax with the Czech Tax Office. The Tax Office will then provide you with a company Tax ID Number (in Czech, “DIČ”). Note: Your Tax ID number is for the local tax authorities. It is different from your company’s IČO, which is the company’s ID in the commercial register.
Activate the company bank account. This completes the process you began in Step 4 of the registration process, and removes the freeze on company capital.
Activate the company trade license. In this step, you will need to take your company registration documents to the Trade Office. The Trade Office will then certify your company to officially start business activities, completing Step 5 of the process.
After completing these steps, your Czech company registration is complete, and you can begin business operations.
How much does it cost to register a Czech company?
The cost to register a Czech company involves the following fees.
Notary authorization and other notarial services: CZK 11,000 - CZK 15 000
Criminal clearance report translation fees: CZK 600 - CZK 1,000
The trade license registration fee: CZK 1,000
The commercial register office registration fee: CZK 6,000
How long does it take to register a Czech company?
In general, the time it requires for each step of registering a Czech company involves:
3 days for preparation of all documents
1 day to obtain notarial documents
3 days to register a company trade license
7 days for commercial register office registration
Keep in mind: Approval from the commercial register office then has a 15-day appeal protection period. The company will only be active after this period. However, it is possible to shorten the 15 days by submitting a formal letter proposing a different limit.
The alternative: Buying a “ready-made” s.r.o.
Now, it is also possible to buy a “ready-made” (pre-existing) company rather than starting a new one, but it’s not advisable. This option often seems cheaper and faster than the alternative, but in reality it isn’t much different and has numerous downsides.
On one hand, buying an existing s.r.o. might be slightly less expensive than starting fresh. In reality, however, it’s never by a significant amount. Further, the legal requirements as well as the time burden remain the same between the two options.
There is still the need to update the company name, ownership and partner information, and the company bank account. It also doesn’t change local bank’s requirement that the CEO of the company have legal residency.
Also, don’t forget the risk of buying a pre-existing company. These SROs have often been around for a long time, and some carry the previous company’s debt. Thus, if you really want peace of mind, always consider starting with a freshly registered business.
How to close a Czech company
If you decide to completely close a Czech business, you will have to liquidate the company. In this case, it is not possible to simply de-register the business. Instead, the company must go through a long and costly liquidation process. This is in fact one of the main reasons why so many “ready-made” SROs are for sale nowadays. It is also a strong risk to consider before you start business registration in the first place.
Thus, consider if there are less expensive (and risky) alternatives that will allow you to do your business. You might even find that freelancing on a Czech trade license is more than enough.
Get professional advice on starting your business
Don’t want to go through the process of starting a business or trade license on your own? Perhaps you only want some consultation on which would be more advantageous for you? Pexpats assists with everything: business registration, virtual company address, trade licenses, residency applications, taxation, and more. Just let us know how Pexpats professional consultants and tax advisors can help you start your Czech business today.