Business Types in Czech Republic

There are several business types in Czech Republic to choose from, the most common ones are:

  • trade license (= živnostenský list , "živ list", "zivno"), for self-employed, freelancers and alike,
  • an SRO (= czech limited liability company (LLC, LTD), for larger business than self-employed,
  • an AS (=joint stock company), for: holding with multiple s.r.o's, public shares
  • partnership, - not very common for foreigners (and, no real benefits over a trade license)
  • co-operation ("drustvo"), - typical for buildings with multiple owners

Choices for Private Individuals : employee, živnostenský list, SRO

For 95% of the foreigners there are 3 possibilities:

being employee, being freelancer (using a trade license / živnostenský list) or having an SRO

If an employer offers a position as employee, you may also consider working on a Trade License. If you would invoice the same amount as the gross salary your net earnings would be most likely higher and it eliminates the need for a work permit. Besides, especially in Prague, it is easier to get a project as freelancer than getting hired as employee.

In case you wish to be a 'free man / woman' and start your own business, the choice is between a Trade License and an SRO - for the typical one-man business we recommend the Trade License. It is much easier and cheaper to set up (and close!), you'd pay les in Tax / Social / Health charges and if your business really grows, you can always make the transition to an sro at a later point in time.

An often-heard argument is that for a Business Visa an SRO is a requirement - this is definitely not the case! In fact, visa renewal with an SRO is more expensive and more compalicated than with a Trade License.

Choices for Legal entities, Companies : branchoffice, s.r.o, a.s

For (foreign) companies wishing to open a branch or daughter here there are 2 possibilities:
a branch office (organizční složka) or an SRO

A branchoffice is almost the same as an s.r.o., minus the liability (it lies with the parent).
The formation process is about the same (comparable time spent, comparable costs), especially if the shares of the SRO are owned for 100% by the parent, so Alexio recommends starting an SRO: Taxwise there are more possibilities and should take things a turn for the worse, because of it's own liability, it doesn't affect the parent.

Many times the foreign company owner wishes to register the foreign company as shareholder - this needs to be considered carefully, in many cases having 2 completely separate entities is preferred.

An a.s. requires a starting capital of minimum 2.000.000 CZK, a board of directors a board of supervisors and annual audits. These are usually enough reasons to chose and ordinary SRO (in 99% of the cases it is the right choice) - unless the intention is to give out public shares (rare) or there is a need to form a holding structure.

Important to understand is that for employing someone in Czech Republic is it not necessary to open an SRO! It is possible to register the foreign company as Employer in CZ (no registration in Commercial Court or Filing of any taxes in CZ is required) - ask us about the possiblities bfroe opening an SRO for just a few employees!