Trade License (Živnostenský List) or Company (s.r.o.) ?
Similarities
- Both can be used to apply for a Business Visa (3rd-Country National only),
- In both cases, if you are here as a tourist / employee, the purpose of stay changes, and you will have to apply again for a Business Visa or at least change the reason of stay. (3rd-Country National only)
- In both cases, you do not need a Work Permit - since you are not an employee
- Both can sell goods / services internationally,
- Both can have a turnover of millions,
- Both can have employees on temporary basis or on 'real' contracts,
- In both cases, if your expected turnover is higher than 1.000.000 CZK in 12 months, you are obligated to register for VAT payer.
Benefits of a trade license
- easier to set up and close,
- typically lower taxes than being employee or having an sro,
- no need for basic capital,
- better suitable for 'freelance' activities.
Benefits of an s.r.o.
- A jednatel does not have to be employed at his / her own company,
- A jednatel of an s.r.o. can be his own employee, simplyfing getting health insurance (especially interesting for EU-citizens),
- The chance you will get a Business Visa is bigger (for some nationalities),
- An s.r.o. can have more than one director,
- An s.r.o. can attract external capital in exchange for shares,
- An s.r.o. is able to pay dividends,
- An s.r.o. has a more professional image than 'just a živnostenký list',
- An s.r.o. has limited liability. *
This means that with a živnostenský list you are responsible with your entire private capital,
but with an s.r.o. your liability is only the amount of shares you've put in.
Foundation / Registration Costs
There is a large difference in setup costs:
Registering a živnostensý list costs about 7.500 CZK (for EU Citizens) whereas founding an s.r.o. quickly costs 35.000 CZK. However, for 3rd-Country Nationals, the živnostenský list needs to be re-registered each year (an s.r.o. only once), so after a couple of years the same money has been spent.
If you decide to start an s.r.o. from scratch, you'll also need a minimum of 200.000 CZK as basic capital in addition to the founding costs. If you do not have the basic capital, it is clever to consider registering a trade license, instead of buying a ready-made company.