By Marco De Kock, 25th March 2016
Czech Republic is located in the heart of Europe and offers some many advantages over most other European countries for business start-ups. This includes a strong infrastructure, both a highly educated and skilled workforce, low wage costs (Monthly average is CZK 25,000) and attractive tax rates.
In the Czech Republic, there are 4 main business entities which foreign investors can incorporate.
- Limited Liability Company (S.R.O)
- Joint Stock Company (AS)
- Branch Office
What are the main features of a Limited Liability Company (s.r.o)?
A Limited liability Company (s.r.o.) can be incorporated with a minimum of 1 member and a maximum of 50. It is permitted to have just one person who holds the role of sole owner and executive. An s.r.o. does not have a board of directors. Each of the contributors involved has the right to make decisions independently if the partnership agreement does not state otherwise.
The minimum registered capital to incorporate an s.r.o is CZK 200,000. In the situation where the company has a sole owner, it must be fully paid upfront. With more than one owner forming the company, a minimum of 30% must be paid on company registration. Each member must contribute at least CZK 20,000. The individual amounts must be divisible by 1,000 without a remainder.
What are the main features of a Joint Stock Company Partnership (a.s)?
Shareholders of a joint stock company (a.s) are only liable to the amount of their investment. The company is not bound to a particular founder therefore; the shares may be sold easily.
Joint stock companies must have both a board of directors and a supervisory board. The board of directors is the company’s statutory body. It must have at least 3 members. It decides on all matters that are not reserved to the general meeting or the supervisory board. The supervisory board monitors the activities of the board of directors and the operations of the company. It has to consist of at least 3 members, and the number must be divisible by three. The supervisory members cannot be the same as the directors.
The company has to issue the regulations governing the relationships between the shareholders and the directors of the company (articles of association). Your joint stock company may also require statutory audits. They are mandatory if your balance sheet exceeds CZK 40 million, the net turnover exceeds CZK 80 million, or the number of employees exceeds 50.
As for your minimum registered capital, you have to contribute CZK 2 million for a non-public company and CZK 20 million for a public company, i.e. a company founded through a public offer in shares. A minimum of 30% must be paid on registration for monetary contributions.
What are the main features of a General commercial partnership?
General commercial partnership (v.o.s.) is a business form in which all partners are liable with all their property. The management has to be formed by at least two persons. The advantage of a general partnership is that you do not need the initial investment.
What are the main features of a Branch office?
A branch office (pobočka) is not a Czech legal entity, but a commercial representation of its foreign parent. It is an entity legally dependent on its head office, although it has an independent management and their own accounts. Its establishment and the entry into the Commercial Register is regulated by the Czech laws. The name of your branch office has to be the same as of the foreign company with the suffix “Organisational Unit”. Appointing a director is essential and it also has to list planned activities. Your branch office does not have to pay up any basic capital.
For more information on incorporating a company in Czech Republic please do not hesitate to contact us on +353 (0)1 646 1627 or submit a contact request form.