What you should know about S.R.O. and trade licence/freelancer/živno
If you want to do business in Czech Republic, you have several possibilities on how to do so. Most common form of doing business in Czech republic is through the registration of the trade licence – common known as to be freelancer or živno/živnost which is in czech language OSVČ (= self employed person) or performance as a business company (e.g.: a limited liability company – called s.r.o.). Each possibility has its own specific conditions, advantages and disadvantages. This blog article would like to introduce these two options.
Trade licence/ Self-employed person / freelancer/ živno
Basic conditions for registration of the free trade licence:
- Certain age
- No criminal history according to the specific law (Trade Act) (not older than 90 days).
There are several types of trades in the Czech Republic. The most widespread and most used are free trades and no professional competence is required to operate them (e.g. marketing, lending of movables, advertising activities, accommodation services, photographic services,…). Another group is licensed trades. To obtain a concession, it is necessary to prove professional competence and in some cases to meet other conditions. Based on this, the state will grant you a business permit (for example, the operation of a travel agency, the operation of funeral services, inland water transport, etc.). Other types are tied and craft trades, for which it is also necessary to fulfill certain obligations and have the necessary abominable qualifications, but unlike licensed ones, they are not subject to state regulation (for example, hairdressing, masonry, jewelry, blacksmithing, etc.). If you are not sure, what do you need, do not hesitate to contact us for consultation about this.
For registration of your trade licence, do not forget to have a registered office. This means that you have to have an address replaced somewhere, this is called residency. From the owner of this place, you need to have a special document called the consent of the registered office.
Trade licence is always for an indefinite period, however, you can suspend, resume or cancel it completely at any time for a definite period. For suspension, cancellation, and resumption, it is only necessary to contact the Trade Licensing Office.
As a self-employed person, you will always be required to file a tax return by 31 March at the latest. The amount you will pay in taxes is very variable according to your individual situation. In some conditions there is an option to register to the so-called “paušál ní daň” which means that you will pay once a month one amount to just one authority (this amount includes tax, social security and insurance fee). If you are not sure about the taxes, find a professional accountant before you start your business because if you fail to pay any fees to the czech authorities, there is a quite large amount of penalty.
It looks almost perfect but the administrative part of the registration is very time consuming. After your trade licence is registered, you need to inform other czech authorities: Tax Office, Czech Social Security Administration, Insurance company within a short amount of time and you need to submit all necessary documents.
If you register your trade licence, be aware of the fact that you are liable for your actions with all your property!
A limited liability company is the most popular type of business company in the Czech Republic for both Czechs and foreigners. The company may establish one or more partners (founders). The company is liable for breach of its obligations with all its assets, the partners are liable up to the unpaid amount of their business share in the nominal capital in the Commercial Register. The director (CEO) is liable only for those debts of the company which arise in breach of his obligation (CEO is in this case liable with all his property). The nominal capital of this legal entity consists of business shares of the founders and may be in an amount of one crown. Each share represents the percentage share of the partner in the company’s business.
To establish the company, you will need the name of the business company (you should first check the name with the notary office to see if the same or interchangeable name isn’t already registered. The company needs a registered office as well as trade licence. For more information see the text above.
First you should have a memorandum in which are incorporated rights and obligations of the partners, CEO, name of the company, amount of nominal capital, trade licence, etc. Memorandum must be written by notary. Afterwards steps are:
- Open an account for the nominal capital and pay the nominal capital
- Register trade licence
- To prove a statement of the criminal record of CEO
- To prove affirmation of CEO
- To obtain the consent of the registered office
- To obtain the copy of an entry of the registered office in the Cadastre/Land Register
- To prove the statement of the administrator of the nominal capital.
After the submission of all documents listed above, the company can be register to the Commercial Register. After the company is already registered, CEO needs to inform relevant czech authorities within a short amount of time and all necessary documents.
After all those mentioned steps above, the Ministry of Interior Like sets up a data box, through which it is necessary by law to communicate with all czech authorities.
Before you start your business, try to consider all possibilities according to your specific situation. It is necessary to think about your potential income, cost, employees,business plan, etc. and all potential business risk. Be aware that each case is very different and should be consulted with experts(lawyers, accountants, tax advisors, etc.). Consultation with experts can save you a lot of stress, money and sleepless nights in the future.
Mgr. Denisa Zobelt, legal trainee
Mgr. Hana Křenková, attorney at law
Advokátní kancelář Křenková, s.r.o.
Pobřežní 78, 186 00
Prague, Czech Republic
ID No.: 08798451
Registered in a business register held at the City Court in Prague, Section C, Insert 325560
Mgr. Hana Křenková is a member of the Czech Bar Association under the evidence number 17227.