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Company Registration In The Czech Republic

Company Registration In The Czech Republic

In this article, our colleague from Gurcan Partners Czech Republic Office, Att. Matěj Grödl will mention Company Registration in the Czech Republic. Which steps must be taken? What are the differences in the process for foreigners? 

In the vibrant landscape of 2023, the Czech Republic proudly stands as a beacon of economic development in Eastern-Central Europe. Over the past 15 years, the nation has consistently proven its prowess in attracting substantial foreign direct investment, solidifying its reputation as an enticing prospect for the global business community.

Beyond mere statistics, the Czech Republic has become synonymous with opportunity, drawing not only investors but also a diverse array of residents seeking an elevated quality of life and a plethora of economic prospects. Notably, the country has welcomed around half a million foreigners who have chosen to make the Czech Republic their home, a testament to the enduring allure and appeal of this dynamic nation.

So far we have assisted over 400 companies.

At the heart of this economic tapestry lies a key element—the process of company registration in the Czech Republic. The ease and accessibility of establishing a business entity in this thriving environment serve as a catalyst for both local and international entrepreneurs. This avenue enables businesses to seamlessly integrate into the Czech economic ecosystem, unlocking the vast potential that the country offers.

Moreover, against the backdrop of economic stability, the Czech Republic boasts a remarkably low inflation rate, standing at a modest 3.4% as of the latest data in 2023. This financial stability not only fosters predictability but also magnifies the overall attractiveness of the Czech Republic for both investors and residents.

In summary, as the Czech Republic’s journey of economic success and international appeal continues to unfold, the significance of company registration in the Czech Republic cannot be overstated. It serves as the gateway for businesses to partake in the nation’s flourishing economic landscape, reinforcing the country’s position as a standout player in the Eastern-Central European arena. The continued influx of foreign direct investment, combined with a growing expatriate community, underscores the pivotal role that company registration plays in navigating and thriving within the dynamic economic terrain of the Czech Republic.

(Source: The Czech Statistical Office)

 

Why is it good to make a company registration in the Czech Republic?

  • One of the Most Strategic Geographical Locations (4 Borders with Germany, Poland, Austria, and Slovakia)
  • Excellent Infrastructure (Rail and Transportation Infrastructure)
  • Skilled and Good Educated Work Force
  • Low Labor Cost (Minimum Wage is 574 Euro in March 2020)

Gurcan Partners stands ready to provide comprehensive support throughout every stage of company registration in the Czech Republic. Please feel free to contact us via email info [@] gurcanpartners.com

 

What are the Tax Rates in The Czech Republic?

Tax policy in the Czech Republic is similar to other EU countries. But professional services, goods, accountancy, solicitors, virtual office, etc. are very keenly priced. We will be more than happy to take care of your accountancy needs or help you with any services that you require.

The VAT rate is 21%, corporate tax is 19%, and individuals income tax 15% in the Czech Republic

Among other processes, businesses must liaise with the Czechpoint Offices, the Trade Licensing Office, and the Regional Commercial Court.

The two most common legal entities in the Czech Republic are:

  • Limited Liability Company (in Czech: „Společnost s ručením omezeným“ or shortly „s.r.o.“)
  • Joint-Stock Company (in Czech: „Akciová společnost“ or shortly „a.s.”).

The biggest difference between these two types of companies is mainly in the form of their governance, scope of responsibilities of the shareholders, and in the amount of the minimum registered capital needed for their incorporation.

Let’s take a closer look at the main benefits and drawbacks of doing business with each of these two types of companies in the Czech Republic – including their incorporation costs. Please get in touch with us.

Check our article on Taxation in the Czech Republic.

Gurcan Consultancy is dedicated to helping you navigate the accounting and taxation processes specific to company registration in the Czech Republic. Please feel free to contact us via email info [@] gurcanpartners.com

 

Limited Liability Company Registration in The Czech Republic

One of the major advantages of a limited liability company in comparison to a joint-stock company is primarily the cost of its incorporation. Considering the costs of the incorporation process and preparation of all the necessary documents, which in case of both of these two types of companies move within the range of hundreds (in case of a limited liability company) or lower thousands (in case of a joint-stock company) of Euros, the most substantial difference will lie mainly in the minimum statutory amount of the registered capital.

Even though for a limited liability company, the law prescribes a minimum amount of registered capital of approximately 0.05 EUR, in the case of a joint-stock company it is 80.000 EUR, which is a significant difference between the two.

In effect, this means that establishing and incorporating a limited liability company can be relatively cheap compared to a joint-stock company, which already requires a considerable amount of registered capital for its incorporation. 

Shareholders of a limited liability company are jointly and severally liable for the company’s debts up to the number of their unpaid deposits, at the time when they were asked for performance by a creditor.

Therefore, if the shareholders’ deposits are not fully paid up, they all remain guarantors for the company’s liabilities jointly and severally.

Even if only one shareholder does not pay up the deposit in full, all of the shareholders provide a guarantee for the company’s debts up to the unpaid amount. Shareholders of a joint-stock company, on the other hand, are not liable for the company’s obligations at all, which is undoubtedly a huge advantage.

As for the joint-stock company, the law also provides for two possible options with regards to the model of its governance – either a so-called dualistic or monistic model of corporate governance – which is usually designated upon the incorporation of the company.

The costs of setting up a limited liability company have sharply declined over the past few years, mainly as a result of an amendment of the Court Fees Act, which has introduced the possibility to register a limited liability company in the Register of Companies also by a notary, without having to pay the regular incorporation fee of approximately 250 EUR, provided that the company’s Articles of Association encompass only mandatory requirements prescribed by the law.

This has significantly contributed to the reduction of the total cost of incorporation of a limited liability company in the Czech Republic, even though the aforementioned statutory condition placed on the Articles of Association can sometimes be quite limiting – especially in case the founders wish to prepare the Articles of Association tailored to their own specific needs.

Our team will design all obligatory documents according to your preferences during company registration in the Czech Republic. Please feel free to contact us via email info [@] gurcanpartners.com

 

What is the Cost of Incorporation in the Czech Republic?

When delving into company registration in the Czech Republic, it’s crucial to anticipate various expenses tied to incorporating a limited liability company. These include costs for drawing up a notarial deed of the Articles of Association, the notary’s fee for direct registration in the Commercial Register (or the court’s fee if notary conditions aren’t met), and an administration fee for a trade license. These statutory fees and expenses typically amount to around 200 EUR, though often exceeding this minimum.

It’s essential to note that this sum excludes additional fees related to activities like signature verification, obtaining a criminal record excerpt (when necessary), tax and social security registrations, as well as attorney’s remuneration for facilitating the company setup. When engaging in the process of company registration in the Czech Republic, considering these comprehensive expenses is vital for informed decision-making.

Company Registration in the Czech Republic
Company Registration in the Czech Republic

 

What is the Cost of Joint Stock Company Registration in the Czech Republic?

When considering company registration in the Czech Republic, it’s crucial to weigh the costs and benefits of different structures, particularly joint-stock and limited liability companies. The incorporation costs for a joint-stock company range from 1,500 to 2,000 EUR, reflecting a higher upfront investment. However, the flexibility in management options—monistic or dualistic—provides a tailor-made governance structure, enhancing professionalism.

A key advantage of joint-stock companies is their elevated business prestige and stronger negotiating position, making them suitable for larger enterprises. Additionally, the ease and speed of share transferability in joint-stock companies surpass that of limited liability companies, providing flexibility in ownership structures.

Importantly, shareholders in joint-stock companies bear no guarantees for the company’s debts, offering enhanced financial protection. This distinction reinforces the appeal of joint-stock companies, making them an attractive option during company registration in the Czech Republic.

In summary, the decision between joint-stock and limited liability structures hinges on careful consideration of costs, governance options, business prestige, share transferability, and liability. Navigating the intricacies of company registration in the Czech Republic requires aligning these factors with the specific needs and goals of the business.

At Gurcan Partners, we specialize in guiding you through the intricacies of company registration in the Czech Republic, offering expert assistance to ensure that your decisions are well-informed and strategic. If you have any inquiries or need further guidance, please feel free to contact us via email info [@] gurcanpartners.com

 

Explore our additional articles on the Czech Republic:
Company Formation In The Czech Republic
Mergers And Acquisition In Czech Republic
Doing Business In The Czech Republic
Free Trade Zones In The Czech Republic
Taxation In The Czech Republic
Invest In Czech Republic
FAQs On Setting Up a Business In the Czech Republic

 

CONCLUSION

The distinctions between a joint-stock company and a limited liability company in the Czech Republic are clearly significant, particularly in terms of incorporation costs and the required minimum statutory registered capital.

In the realm of larger enterprises, a joint-stock company emerges as the more fitting choice, given the paramount importance of the legal entity’s prestige and credibility. The demand for highly professional management is evident, and the higher incorporation costs do not pose a significant obstacle for entities operating at such a scale. Conversely, for small and medium enterprises, a limited liability company stands out as a more advantageous option.

Now, when delving into the specifics of company registration in the Czech Republic, understanding these differences becomes paramount. The process of company registration for a joint-stock company involves considerations of higher costs and the need for substantial registered capital, aligning with the demands and expectations of larger-scale businesses. On the flip side, the registration of a limited liability company entails a more cost-effective approach, making it a practical and favorable choice for small and medium enterprises looking to make a company registration in the Czech Republic.

In essence, the nuances between joint-stock and limited liability companies underscore the importance of tailoring the choice of legal entity to the specific needs and scale of the business. Navigating the intricacies of company registration in the Czech Republic involves a careful evaluation of these factors to ensure a seamless and advantageous incorporation process for businesses of varying sizes and ambitions.

 

Feel free to reach out to us through the following contact information:

E-MAIL: info [@] gurcanpartners.com

Gurcan Partners Czech Republic Office
TELEPHONE: +420 2 347 17 540