Foreign businessmen who want to open a company in Czech Republic have several options when referring to the legal entity under which their business will operate, options which are divided between the joint stock company and the limited liability company, the partnership or the branch office and the subsidiary. You can rely on our team of consultants in company formation in Czech Republic for the registration of any of these legal entities, as our specialists have the required expertise in incorporating these business forms.
Our consultants can advise you on the most suitable company type, based on your investment plans, the available capital, the business sector you want to operate in or the business activities that you want to develop here. If you want to open a company in Czech Republic, our team can also present the obligations you will have once you register a specific type of company.
The limited liability company is generally selected for incorporation by small and medium-sized businesses. It requires at least one individual or legal entity to form an association based on a memorandum or a founder’s deed. Investors can request advice on the main characteristics of thelimited liability company from our team of specialists.
What are the characteristics of the Czech limited liability company?
A registered capital of at least CZK 1 (5 euro cents) is needed for a limited liability company (LLC) in Czech Republic and 30% of the share capital must be paid before the registration with the Commercial Register. In the case of non-monetary contributions, they have to be clearly settled in the statutory papers.
For a company with one stakeholder, the full registered capital must be paid before the company is registered with the Commercial Register. Our team of consultants in company formation in Czech Republiccan assist with more information on the registration of this business form, but it is important to know that the LLC is also represented by the following characteristics:
•the LLC can have a single director and there are no residency requirements available in this case, as the director can have any nationality;
•theLLC must file financial statements following the accounting regulations available in this country every financial year;
•the company is required to perform an external audit only in specific conditions, for example, when the company’s turnover is above EUR 3 million;
•the minimum capital contribution for this legal entity can be paid up in period of five years since the LLC was registered in Czech Republic.
Persons who are interested in starting the procedure of company formation in Czech Republic for a limited liability company have to be aware that the legislation which prescribes the manner in which this company type can be incorporated and the manner in which it can function are prescribed by the Business Corporation Act (90/2012 Coll. Act on Commercial Companies and Cooperatives).
After the incorporation of the company, the legal entity needs to be registered with the local institutions, including with the Commercial Register, which holds the basic information on various aspects of any business operating here. Once the company is functional, it must be noted that the Commercial Register must have specific data on the company, which must be made publicly available.
Some of the aspects that have to be known at a public level through the Commercial Register are the following: the legal entity of the company, its statutory documents, its trading name, the company’s official business address, the date at which the company was incorporated, its objects of activity, the identification number and the registered capital.
What is a Czech joint stock company?
After the limited liability company, the joint stock company is the most preferred business form selected for incorporation in Czech Republic. It is commonly used for large companies. Investors who want to open a company in Czech Republic as a joint stock company must know that this company type can be founded by at least one shareholder who is a legal entity or by multiple shareholders, individuals or legal entities. In the first situation, the company can be set up through a founder’s deed and in the second case, it is set up through a memorandum.
For companies with more than one shareholder, the statutory body is the board of directors with no fewer than three members. The joint stock company must also establish a supervisory board of at least three members. However, in the latter case, the respective three members can’t also be thecompany’s directors.
The minimum share capital required by the Czech law is CZK 2 million (approximately EUR 78,000). In the case in which the joint stock company is registered as a public entity, which can be listed on the stock market, its capital must be of CZK 20 million. As a general rule, due to the fact that the joint stock company is employed for larger businesses, the audit requirements are much stricter than in the case of the LLC.
Thus, the joint stock company must perform an audit if a set of criteria is met, as follows: it has a net turnover over CZK 80 million, the company has more than 50 employees and if the company’s balance sheet is of over CZK 40 million.
The Czech joint stock company is defined by the Commercial Code, Act No. 513/1991 Coll., the legislation which prescribes other types of companies that can be founded in this country. When incorporating a joint stock company, its founders must set up a statutory body and a supervisory body. The company needs to set up the general meeting of the shareholders, which represents the main regulatory body of the joint stock company.
During the general meeting, the company’s shareholders have the right to decide on various matters stipulated under thecompany’s articles of association. For example, during this meeting, the shareholders can decide on increasing or decreasing the company’s capital; the general meeting can be set up as an ordinary general meeting or as an extraordinary general meeting and it is necessary to appoint the meeting of the shareholders at least once a year.
Thejoint stock company can be set up for a wide range of business purposes and it may be registered by at least one shareholder, although there are no limitations concerning the maximum number of shareholders. Our team of consultants in company formation in Czech Republicmay advise on other characteristics of thisbusiness form.
It is also worth knowing that those who open a company in Czech Republicas a joint stock company have the possibility of participating in cross border mergers and acquisitions with this legal entity. The company can be involved in international restructuring, but as long as this happens between companies registered in the member states of the European Union (EU).
The ownership interest of a shareholder of a joint stock company is given by the shares owned in the company. It must be noted that a shareholder has the right of transferring his or her shares to another party and this can be done by signing a share purchase agreement. The procedure itself does not involve the payment of the stamp duty. If you are interested in this process, please address to our specialists in company registration in Czech Republic, who can help you throughout the entire procedure.
What are the main types of partnerships in Czech Republic?
A general partnership can be founded by individuals or legal entities; the partnership must function under a trading name. The partners are all liable for the debts, but only to the extent of their investment or contribution to the company's capital. When registering a partnership, thelegal entity is set up by signing a partnership agreement.
Another type of company that can be set in Czech Republic is the limited partnership. In the case in which the investors will set up a limited partnership, it is necessary to know that the liability of the founders will be limited to their contribution to the company (paid or unpaid contributions). Regardless the type of contribution, it must be recorded with the Commercial Register.
This applies for the limited partners. A limited partnership can be set up with the participation of a general partner as well, but in this case, the respective person will be held liable for the debts of the company with his or her personal assets. A general partner has the right to take management decisions that are of high importance for the company. Thistype of partnership requires a signed agreement.
Below, investors can find out further details on the Czech company types:
How can an investor register a Czech branch office?
A branch office is not a Czech legal entity, as it represents a division of a foreign company and must fully list the business activities in the application for the Commercial Register. The branch office in the Czech Republiccan only enter the commercial activities that are performed by its parent company. An appointed director of the branch office is entitled to act on behalf of the foreign company and he or she must be registered with the Commercial Register.
One of the main advantages for opening a company in the Czech Republic through a branch office is given by the fact that this business form benefits from a simpler registration procedure; at the same time, provided that the investors will decide to close the branch, this entity is prescribed with a straightforward dissolution procedure.
The manner in which the Czech branch is registered here, the way it operates and numerous others are regulated by the Czech Commercial Code and the Trade Licensing Act and our team of specialists in company formation in Czech Republicmay offer in-depth information on these rules of law. When opening this business form, the investors should provide a set of legal documents necessary for incorporation, as follows:
•the certificate of incorporation of the parent company (a copy), as well as the parent company’s statutory documents;
•a copy of the Certificate of Good Standing of the parent company, which has to be issued by the country in which the respective legal entity is registered;
•a person who will represent the branch in Czech Republic (the person does not necessarily need to be a Czech national);
•register with the Czech Trade Register, where the branch office will state its objects of activity that will be developed in this country.
What is the investment climate in Czech Republic?
Any foreign investor who wants to open a company in Czech Republic as one of the legal entities presented in this article must also be interested in the characteristics of the investment climate available in this country. It must be noted from the beginning that Czech Republic offers one of the most attractive markets in its region, and some of the strong points of interest for foreign investors are as follows:
• the corporate tax was constantly reduced since 2005 (when it was charged at a rate of 26%), reaching a rate of only 20% in 2009;
• since 2010, the corporate tax is charged to local and foreign businesses at a rate of 19%;
• in 2019, the largest employer in Czech Republic was the services sector, accounting for 59.99% of all the employment market;
• the industry sector accounted for 37.29% of the employment, and the agriculture sector for only 2.72% of the employment;
• in Czech Republic, the index measuring the shareholders’ power accounts for 9.0, the same as the one of the United States of America and higher than the one available for countries in Easter Europe or Germany (where it is estimated only at 6.0 and 5.0 respectively).
The institution which promotes the development of foreign direct investments in this country, the Government Agency for Foreign Direct Investments mentioned that the country ranks as the first economy in its region (meaning, the Central Europe), as well as in Eastern Europe, on the value of the foreign direct investment stock (which, in 2019 accounted for $170,682 million, an increase from 2018, when it was estimated at $164,225 million).
Investors are invited to contactour specialists in company formation in Czech Republic for more details on starting a business in this country. Our consultants can provide further information on othertypes of legal entities that can be registered in this country and may also assist foreign investors with information concerning the tax regulations available for each Czech business form.
The team from CzechCompanyIncorporation.com is very qualified and benefits from extensive expertise in this area. I would definitely recommend them to any entrepreneur decided to start his own business here.
Mihai Cuc, Partner of Enescu&Cuc; Law Firm www.romanianlawoffice.com