To launch a business, it is necessary to register a legal entity (trade corporation), having decided a legal business form beforehand.
The foundation and activities of trading corporations in the Czech Republic are governed primarily by Act No. 90/2012 Coll. "On Trade Corporations", which entered into force on 01.01.2014, as well as by the Civil Code of the Czech Republic.
LIMITED LIABILITY COMPANY
The most common legal business form is a limited liability company (bears the appellation společnost s ručením omezeným).
Foundation of a limited liability company:
- A company can be founded by one or more partners (individuals or legal entities).
- The memorandum of association is executed in a form of notarial deed.
- The minimum requirement for the registered capital is CZK 1 per partner.
- The registered capital can be contributed within 5 years from the date of registration of the company or from the date of acceptance of the obligation to pay contributions.
- Each partner may have one or more membership interests in the registered capital.
- The membership interest of a partner can exist in the form of a special type of security - “kmenový list” / common certificate.
- Each partner of LLC is jointly and exclusively responsible for the obligations of LLC in the amount up to the unpaid registered capital contributions.
- After full payment of contributions, the liability of limited partners for the obligations of the company ceases.
- The supreme collegial authority of LLC is the general meeting, which makes decisions on important corporate issues, the list of which is specified in the Act on Trade Corporations. The range of these issues can be expanded by the memorandum of association. The general meeting is to be held at least once a year. A simple majority of votes is required to make a decision, unless otherwise specified in the Act on Trade Corporations or the memorandum of association.
- The executive body is one or more directors. Each director may act independently, unless otherwise specified in the memorandum of association. The directors are elected and removed by the general meeting. The directors are responsible for the overall management of the company. The remuneration to the directors is to be approved by the general meeting.
Accounting reporting and audit:
- LLC is obliged to keep accounting records from the date of registration.
- An audit must be carried out if there is at least one of the following reasons:
- the value of the company's assets exceeds CZK 40,000,000;
- the company's annual turnover exceeds CZK 80,000,000;
- the number of employees exceeds 50 people.
- An LLC is subject to mandatory audit, regardless of whether it fulfills the above conditions if it is “of public interest” (for example, an issuer of securities).
JOINT STOCK COMPANY ( JSC)
- The company may establish one or more founders/legal entities or individuals/.
- The Foundation document is issued in the form of a notarized entry.
- Minimum amount of the charter capital is 2,000,000 CZK.
- A joint stock company may have a monist (management body and statutory Director) or a dualistic (Board of Directors and Supervisory Board) Corporate structure. Under the monist structure, the JSC statutory body is the statutory Director, who is responsible for company's business management. Management Board determines basic principles of the company's management and monitors its implementation. The Management Board usually consists of 3 members. The Management Board resolves issues that are not assigned to the competence of the General meeting by law. In a dualistic structure, the statutory body of a JSC is the Board of Directors, usually consisting of 3 Directors. Each Director may act independently on behalf of the JSC, unless otherwise provided by the constituent agreement. Directors are elected and recalled by the General meeting, but the Charter may provide that the Supervisory Board has the right to appoint and recall Directors. The Board of Directors performs functions related to the management of the JSC's business activities. The Supervisory Board oversees the activities of the Board of Directors. In addition, the Supervisory Board monitors the financial statements of the JSC and informs the General meeting of the results of its activities. The Supervisory Board consists of 3 members who are elected by the General meeting.
FOREIGN COMPANY BRANCH Foreign company
is a legal entity whose address is located outside the Czech Republic. A foreign company has the right to carry out its activities on the territory of the Czech Republic through a branch. A foreign company branch is not a legal entity in the Czech Republic, but only represents a foreign company and fulfills obligations on behalf of a foreign company. The branch must fully explain its planned activities, obtain a business licence, and register with the Czech Republic Commercial register and Tax authorities. A Manager must be appointed to manage the branch.
The laws on the basis of which the foreign company was established shall apply to the internal operations of the branch. The estimated initial costs associated with the branch could be added to the foreign company expenses in its country of residence.
EUROPEAN COMPANY (Societas Europaea- abbr. SE)
is a transnational joint stock company, established in accordance with the European Union law. The ability to establish such companies appeared in 2004 on the basis of the EU Council Regulation of October 8, 2001. No. 2157/2007. A European company can be established throughout the European Union. The place of business (and its Management Board) must be located on one of the EU States territory. The advantage of a European Company is the opportunity of changing the company's place of business to the territory of another member state without the need of disestablishment or corporate restructuring. The minimum amount of authorized capital is 120,000 Euros.
A private entrepreneur is someone who: o independently carries out business activities on the basis of an entrepreneurial permit, o reached the age of 15 and graduated from high school. Rights and obligations of a private entrepreneur:
- acts on its own behalf,
- bears responsibility to the extent of all of its property,
- obliged to pay healthcare insurance and Pension Fund contribution,
- obliged to register with the tax authorities and submit tax reports within the time limits established by law,
- has the right to suspend or terminate its activities at any time by notifying the entrepreneurial government, tax authorities, health insurance and pension funds.