Starting an s.r.o. Company in Czech Republic
Starting an s.r.o. is not done on an afternoon and requires thorough planning and calculation,Please read the information carefully and write us an email if you would like to know more, no question is 'silly'.
Founding a new company (s.r.o.)
Forming a new s.r.o. company will take about 10 workingdays, see our offer In order to register the following documents are needed:- a valid passport the owner(s) and shareholder(s),
- proof of the owner's / shareholder's residence address,
- a rental contract or other proof of the business seat (sídlo),
- an extract of the criminal record abroad with apostille *,
- proof of no outstanding debts in CZ **,
- proof that the basic capital has been deposited ***
* not necessary for EU Citizens, registered longer than 3 months at a CZ address.
** only necessary if you did business before in CZ.
*** the bank will provide this paper
All foreign documents will have to be translated into Czech. Alexio offers translation services.
Basic Capital of 200.000 CZK for an s.r.o.
Every s.r.o. needs to have a basic capital ('zakladni kapital') of minimum 200.000 CZK,as an owner / shareholder you have direct responsibility of providing it.
An often-heard comment is: 'But I don't have 200.000 CZK!' - Well, how then are you going to invest in your company, pay goods, salaries, social / health / taxes, marketing, travel?
After founding the company, the capital is available for business or you can take it our again. The whole idea is to prevent companies from 'starting on empty', because otherwise many of them do not have finances to survive the startup.
If you do not have enough money to start an s.r.o. company,
we recommend registering a personal trade license (živnostenský list).
Trade licenses
Each company needs to have at least one trade license. This license allows you to conduct business activities in that specific area. We highly recommend to choose more than one trade license at the company start, because if at a later point in time you would like to add an activity, you need to re-register at the trade license register. This costs time and money.Ownership / Division of Shares
S.r.o's can have multiple owners (division of shares) and multiple directors.Experience shown that often 'one owner is too little, and two is too much'.
It's tough to run a company on your own, but two captains on one ship could be even worse.
Our advice: With two directors (jednatels), try to avoid division of shares 50/50, for any real decision a minimum of 51% is needed. If there is no absolute need for dividing shares (or the risk), sign a contract for dividing the company profit instead, or make one director and the other shareholder only.
Shares can always be divided in a later stage if you are not sure about how to devide them at company start-up, although it will require changes to -or possibly even completely re-writing- the company founding documents.
Applying for a Business Visa
3rd-Country Nationals who want to have a trade license or an s.r.o. company, do not need a Work Permit or Visa on the basis of employment. Instead of those two, they need a Visa for Business purposes.VAT Registration
If your expected turnover in 12 consecutive months is over 1.000.000 CZK, you are obligated to register for VAT. This means that every quarter you will have to file VAT reports and all your invoices need to include VAT. If your turnover will be very large, for example 10.000.000 CZK, then monthly VAT reporting is necessary.If your turnover is small, you can choose to voluntarily register for VAT, either at the start or when you -after a couple of months- expect to hit the 1 M CZK. Some foreign companies only want to trade with your business if you have a valid VAT ID.
Bear in mind that VAT can not be claimed back on expenses before the VAT registration date, except for company startup costs. (restrictions apply)
VAT / Sales tax in Europe / outside Europa
On sales of good and/or services outside Czech Republic to a company in an EU-country, no VAT is charged. On sales outside the EU to a company and to an individual (inside or outside EU) generally speaking VAT must be charged, although there are VAT-except categories.Generally speaking, if goods are exported outside EU and require export documents, then those goods are VAT-except. Notice that every country has different rules, and it is really best to consult an export-declarant for the first couple of shipments.
EU countries do not use the system of sales taxes.
Hiring Personnel
Personnel is expensive. The total costs for the company are about twice the nett salary on the employee's bankaccount. And, after a 3 month trial-period it is not so easy to fire someone.The first three months of a startup are often so hectic that it is difficult to evaluate a person's performace. Write temporary agreements if possible, either as employee, or with a special agreement (prácovní dohoda) for which the worker doesn't need a trade license.
We can help you write temporary agreements and employment contracts.
Another classic is way too high salaries at the start.
example : The salesmanager wants 50.000 CZK / month. Total Costs for the company 100.000 / month.
Sales margin on the products is 33%. Sales need to be 400.000 CZK / month just to pay his salary.
Realistic for a startup? Much better is a basic salary + a percentage of the sales / profit.
Accounting and Free Business Training
s.r.o. bookkeeping is always double-entry, because it is a legal entity registered at the Commercial Court. This makes it very difficult for somebody who is not an accountant to do the accounting and tax returns.Alexio recommends for all s.r.o's (also non-VAT) to send in papers for bookkeeping at least quarterly, this allows us to detect and correct problems in an early stage, unless it is an s.r.o. without much activity such as a 'realestate s.r.o' with one or a few properties.
For all foreigners it is useful to have at least a basic understanding of how to do business and how to comply to the authorities in Czech Republic. For this reason we give each of our accounting clients free business training, free templates and free phone / email support. See also
Warnings and Recommendations for buying an s.r.o. Company
There is a lot that can go wrong when buying of founding an s.r.o. company,below two pages are meant as a guide to prevent you from most pitfalls: