Formerly known as Bohemia, the Czech Republic is a landlocked country in Central Europe. Czechia shares borders with the world’s economic leaders such as Germany and Austria, along with resilient economies such as Poland and Slovakia. The strategic geographical location and government’s motivation to rise as a strong economic force make Czechia an attractive location from a business perspective.
The cost of starting a business in Czechia is relatively less than in other European countries, hence for businesses that plan to expand into Europe, Czechia may be one of the most attractive locations to enter the region. For instance, the commercial law of Czechia stipulates that a company must be represented by a unique trade name. To ensure that the trade name is unique you simply need to visit the Ministry of Justice’s office. They will run the chosen name against all previously taken trade names and advise accordingly; the process does not require any fees. Similarly, the bank where minimum share capital is deposited provides confirmation of the same where ever required without charging any fee.
Conditionalities for business in Czechia
It is important to understand the way certain policies pertaining to commercial activities in the country deal with EU, Non-EU, and associated state businesses and individuals. A company already operating in an EU state does not have to fulfill the same conditions as a non-EU business entity.
Similarly, Norway, Liechtenstein, Iceland, and Switzerland are considered associate states, and individuals from these countries enjoy the same rights as Czech citizens. Depending on the type of trade business is involved in – qualified/unqualified trade, professional/vocational trade, etc. – the basic eligibility requirement is that the individual is of legal age, and has unimpeachable character (persons with a criminal record, etc.).
For third-country citizens, it is compulsory to have a residence permit to run a business in Czechia. Those staying in the country on asylum do not need a permit and can indulge in business activities as a citizen while following all other procedures deemed necessary.
Type of business structures permitted by law
A company is defined as a legal person, thus enjoying several rights while obligated to perform certain duties. A company follows a specific business structure that governs all its policies and dealings. The structures permissible under the Czech law are:
| Type of structure | Name in Czech | Minimum paid up capital (approx.) | |
| 1. | Limited Liability Company (LLC) | Společnost s ručením omezeným (SRO) | €1.00 |
| 2. | Joint Stock Company (a.k.a Public Limited Company) (PLC) | akciová společnost (akc.spol) | €80,000 |
| 3. | Limited partnership | komanditní společnost (K.S) | No minimum paid up capital required |
| 4. | General Partnership | Verejna abchodni spolecnost (VOS) | No minimum paid up capital required |
General Partnership (GP)
The simplest legal form of a company that can be incorporated in Czech is a general partnership. Two or more individuals combine their resources to achieve a unified commercial interest. A general partnership can be registered with the Commercial Register or the registration court by paying a fee of around €250.
All partners in the partnership are responsible for the company’s debts and obligations in a personal capacity, that is in case of failure to perform, the aggrieved parties will be compensated by the partners. In other words, the company and the partners are considered one and the same.
Limited Liability Partnership (LLP)
Like the general partnership, an LLC is also formed by two or more partners to promote common commercial goals. It differs from a general partnership in that it has two types of partners; general partners and limited partners. The liability of the limited partners is limited to their share in the business, whereas the general partners assume unlimited liability.
The registration cost of an LLC is the same as GP, i.e., €250 approximately.
Joint Stock Company (PLC)
A public limited company is one whose shares are traded on a stock exchange by the general public. The formation of a public limited company involves a bank guaranty against a minimum paid-up capital, in the case of Czechia the minimum paid-up capital is around €80,000.
To simplify the process, PLC is initiated by approaching a commercial bank to guarantee capital against the paid-up capital. The company uses the bank guarantee to release Initial Public Offering (IPO). The shares offered to the public can be more than the amount pledged to the bank; while the bank receives its dues, the surplus capital is used up by the company.
The registration fee for a PLC is around €100 accompanied by all relevant documents and forms duly filled and notarized.
Limited Liability Company (LLC/Pvt. ltd.)
Also known as a Pvt. Ltd. Company, an LLC is probably the most favored business structure around the world. An LLC is totally unrelated to the actual owners at all times, no liability or obligation ever befalls them. It is a smart way of progressing a business without assuming tons of responsibility. In case of failure to perform, the company is responsible to pay off to the extent it can manage, and nothing beyond.
The registration process and fees of a Pvt. Ltd. are the same as LLP and GP. However, the foundation document of an LLC is the “articles of association” or AoA. Before an LLC can be registered, an AoA needs to be drawn, vetted by a lawyer, notarized by the court, and registered in the company’s register of the country. The process involves various fees such as notarization, translation, stamp duties, etc. approximately adding up to €2,000.
Working hours and wages
Although Czechia is a free market where private individuals can work as many hours as they wish, however, the official work week consists of five days and approximately 40 hours. The minimum wage has risen from €619 to €670 per month in 2022.
Note that the corporate structure in Czechia is very well structured and the folks like to keep things formal. Czechs tend to adhere to procedures and policies strictly and take pride in them. Similarly, the state has several policies to ensure employee welfare, such as retirement funds, disability endowments, medical cover, etc.
Trademark registration
A trademark or TM is a unique company or brand identifier that is protected under the Intellectual Property Act of a country. TM can be a name, number, or an alphanumeric value that is identified with a particular product, service, or commodity.
Czechia has very strict TM infringement policies to ensure businesses do not suffer from rip-off and second-class products or brands afloat in the market. The process for registration of a TM takes approximately 5 to 12 months and may cost up to €200 minimum. The validity of the TM is 10 years after which it can be renewed by paying the renewal fee with currently is about €100.
A TM can be registered for multiple classes of products and services as well, for each additional class, the company needs to pay around €20.
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