If you’re one of the estimated 600,000 expats living in the Czech Republic, it may have occurred to you at some point to consider starting a business. Maybe you were thinking about a favorite item from home that you’ve never seen here (or had to pay hundreds of dollars to import!) Maybe there is a kind of food you miss that you’ve searched endlessly for at the various pre-Covid Food Festivals in Prague. Or maybe you have a skill to offer that you think might have value in your community… whatever the case may be, if you’ve given it any amount of thought you may have wondered, “can an expat even have a business in the Czech Republic?”
A quick note: The below may not be construed as legal advice. It is merely a collection of some of the steps required to create a business in the Czech Republic. Anyone considering starting a business should seriously consider a consultation with the appropriate legal counsel in order to be assured that all of the required steps are followed properly and according to local law..
Well, the good news is that the answer to that question is “yes.” The bad news, such as it is, is that the process isn’t exactly easy. But, with the right guidance you can quickly find yourself on the way to opening a shop, restaurant, pub or other business and taking your first steps as a legitimate business owner whether you’re in Prague, Ostrava, Brno or any other locale in the country.
How is this possible? It’s possible because the Czech Republic is very open to helping business owners bring in companies that provide a social benefit to their citizens and expats alike, and while Czech legislation is still working on streamlining the process for potential business owners, the reality is that the hurdles are not so steep as to be impossible.
How Do I Do It?
So now you’re thinking, “ok, great. I do have an idea for a cool business and I’d love to start putting the wheels in motion,” right? But where to begin? And how much does it cost?
Just to get this part out of the way, the minimal cost to create a company in the Czech Republic is about 4000 crowns. Obviously the cost of starting a business is not one-size-fits-all, but that’s a basic number. Doesn’t sound too bad, does it?
Now then… the easiest way for you to get started, whether you’re an expat living in the country or a local who has been here your whole life, is to retain counsel to help prepare the myriad documents you’ll need to fill out – as well as helping to assemble (and translate, as necessary) all of the additional documents you’ll need to present and to have someone who can help and offer advice about choosing exactly how you should list your business with the registry.
Documents? What type of documents? Registry? What registry?
Hang on. We’ll get to that. Let’s take a look at the basic steps first.
If you were in the U.S., for example, and wanted to start a business, you’d need to apply for a business license and create a corporation of some kind… S Corp, perhaps. Or maybe an LLC (Limited Liability Corporation) or a C Corp. You could also be a Sole Proprietor. Creating a business in the Czech Republic is pretty similar.
In the Czech Republic, your primary options for incorporating are as follows:
- Limited Liability Company (společnost s ručením omezeným – s.r.o.)
- Stock Corporation/Public Limited Company (akciová společnost – a.s.)
- Limited Partnership Company (komanditní společnost – k.s.)
- Unlimited Liability Company (veřejná obchodní společnost – v.o.s.)
Just to be clear, there are other methods for creating a business here in the Czech Republic, but those four are the most common.
Choosing The Form of Your Company
The first thing you need to do is select the right form for your company from that basic breakdown, meaning you’ll need to consider what the needs of your eventual business will be with respect to your capital, the scope of the business, the number of shareholders (if any), possible entry barriers for future shareholders in the company and, most importantly, your liability… or what may be required in terms of insurance coverage.
Of the four, the two most common are the limited liability company (společnost s ručením omezeným) and public limited company or stock corporation (akciová společnost).
How does one know which one to choose? Well, again, it depends on what your business is, who is involved and what you intend to do with it. Let’s say that you speak with counsel – again, highly recommended – and they advise you to start a Czech LLC.
Ok. In order to create an LLC, you’ll need to prepare and complete the Articles of Incorporation (společenská smlouva) for the company and list your shareholders (if any). This will be the founding document for your company.
In all honesty, the Articles of Incorporation or Letter of Incorporation docs are pretty specific and going into all of the detail here would make your head spin and overload you with information – just another reason to have a qualified person help you handle all of it – but if you want to take a deeper dive into what the docs need to include, go here: https://cz.citymedia.network/prague/b2b/partners/legans/legal-2/setting-up-a-business/
In order to be legally binding and enforceable, the Articles of Incorporation must be notarized. Can you start an LLC if it’s just you all by yourself? You can! Just like back in the U.S. In this instance the founding document would simply be called a Letter of Incorporation (zakladatelská listina).
Prepared your Articles of Incorporation or your Letter of Incorporation? Great! Off to the notary you go. But first you’ll need to have your ID and the ID of any other founding shareholders in your company as well as any executives or corporate agents. Again, if it’s just you, don’t worry about the others. How much is the cost for the notary service? Authentication services from s notary tend to cost about 2000 crowns.
Next, as a foreigner, you’ll need to present a Statement of Criminal Record which proves that you and anyone involved as a corporate officer in your business have not willfully committed a crime related to previous business activity.
Opening A Business Account and Registering Your Company
“Ok! I did it! I read through everything, created my Letter of Incorporation doc and had it all notarized. Am I in business?”
Well, not quite yet. What you’ve done is founded your company. But as far as the local government in your locality, your company technically doesn’t exist yet because it hasn’t been registered. “Right. So how do I register?” An excellent question! Read on…
Before you can register you need to do something really important: You need to open a bank account for your company and deposit your capital. How much depends, again, on the needs of your business… and don’t ask where to find money or investors because that info won’t be included here.
The agreed upon registered capital shall be deposited in a bank account via transfer unless the starting amount for the business is less than 20,000 crowns (as of 1st January 2021). Any amount under 20,000 crowns can be deposited in cash. “But is 20,000 crowns really enough to start a business?” Well, again, that’s up to you. Technically, you can start a business with a single crown in the bank… but if you go that route, don’t expect to be taken seriously by the agencies you’ll come into contact with. In other words, you should seriously consider what type of capital you’ll need before starting this process.
‘Ok! I did it! I did the Articles thing, opened a bank account and deposited a bunch of money. Now am I in business?”
You’re closer. But no, still not quite there. Remember the whole registration thing? Yeah. We still have to do that.
Now that you have your Articles set, you’ve submitted the required paperwork and deposited your capital, you’ll need to obtain a trade license according to the nature of your business.
The Trade License
Obtaining a trade license differs based on the intended purpose of the business as some branches of business are more regulated – restaurants, for example, need to deal with the Health Department – so we can’t go into all of the minutiae or this already long article would be much, much longer. What we will tell you is that you can file your trade license application online or by mail, and the fee for filing a trade license application is 1.000,- CZK.
Now you get to register! You’re almost there! It seems like a lot – and it is – but people are doing this every day all over the world, so hang in there.
The registration of your company must be made within 90 days of the date the company was founded (this is the date that your Articles of Incorporation or Letter of Incorporation were authenticated).
You can file for the registration at the relevant Commercial court, or you can file for registration with a notary.
Hot tip: If you file at the Commercial court where the Commercial Register in your area is located, you’ll get hit with an administrative fee of 6,000 crowns(!) but if you go back to your trusty notary, not only will you get the process done faster, but you’ll only have to shell out 2,700 crowns.
“Great! I did all the stuff. Then I did the other stuff. Now what?”
Now you wait a bit. The relevant Commercial Court charged with Commercial Registration will deliver its ruling and notify you of the successful registration. If you’re the impatient type, you can also check the official webpage of the Commercial Register at www.justice.cz.
“Ping!” That’s the sound of you being alerted that your registration has been processed. Of course the sound may vary depending on your computer and personal sound profile. In all seriousness, when you get the notification of acceptance from the Commercial Register, you now have a company in the Czech Republic and the real work begins! Congratulations!
Now you need to ensure your company’s compliance with the relevant legislation… stuff like taxes. Based on the scope and nature of your business you’ll now need to file for a few more registrations. They are as follows: Income Tax (daň z příjmu), Circulation Tax (silniční daň) – if your company owns and uses a car or cars for business activities, then you’ll need to register any employees with the relevant public authorities and register for VAT – value added tax (DPH – daň z přidané hodnoty).
Lastly, you need to register your company with the Central Registry of the Identity of Beneficial Owners. Try saying that five times fast!
What the heck is a “beneficial owner”? A beneficial owner is a person who has the ability to directly or indirectly exercise decisive influence over your company… namely, you. For this registration you’ll pay your final fee: 1,000 crowns.
Now you’ll be set up with a data box for the company. You must activate the data box within 15 days from the moment you receive the login and activation guidelines. This data box is used mainly for official communication from public authorities as well as submissions of official applications and things like that.
“Ok. I think I got it all. I did all the things. I got my paperwork in order, got it verified by the notary, paid all the fees, registered with the notary and saved some crowns (thanks for that!) and then I submitted it all, got approved and got my data box set up. Am I done yet?”
If you’ve done all of the above, then yes, dear business owner, you are done and can now begin selling… whatever it is you sell. Again, congratulations! And congratulations if you read this far!
The process, as presented here, is deceptively simple and can be quite complicated which is why this article began by recommending speaking with legal counsel and dropped that in a few more times for good measure. Nothing in this article should be construed as either legal advice or as having covered every step of the process.
If you’ve lived here in Czech for any amount of time, you also know that most of the government and city offices you’ll need to speak with don’t necessarily offer services in English, so in closing, allow us to offer the suggestion one last time that you consider meeting for a consultation with our friends at Legans. It costs nothing for a consult and, should you decide to retain their services to walk you through the process, you can rest assured that you’ll be presented with a fair price up front. We can’t recommend them more highly.
So there you have it. If you’re starting down the road of creating a business in the Czech Republic and being your own boss, we wish you luck with it. Cheers to your new adventure.