Main Steps in Establishing a Business Company in the CR

In order for foreign citizens (equally as Czechs) to conduct business in the CR, they must, first of all, receive a trade license and be listed in the Commercial Register. The company has to register the Responsible Person (Jednatel), who must be either a Czech national or a person with a long term residence permit who has an adequate knowledge of Czech language.

The trade license certificate must be requested from corresponding trade office at the relevant regional, district or local authority.

The following data of natural person are to be enclosed with the application for a trade license certificate:

the name and surname, permanent domicile, ID number, evidence that neither a court nor any other administrative body has forbidden the person to undertake the given business activity, and an excerpt from the Penal Register, and documents providing professional skills of a person. In addition, it is necessary to enter the trade name, subject and place of the activity, company identification number (ICO), place and address of the business operations, and the date of termination for these operations (only if such operations are temporary).

The following data of legal person are to be attached to the application for a trade license certificate:

the trade name, seat, legal form, name and domicile of the person/persons of the statutory body, the manner in which the entity will be represented in negotiations, and applicant´s personal data. It should also submit the excerpts from the Penal Register for their representatives. In addition, it is necessary to enter the identification number of entity (ICO), subject of its activity, place of its business activities, and time of the termination of them (only in the case there are temporary activities).

An application for the incorporation into the Commercial Register (www.justice.cz) must contain the following data:

company business name, seat for corporate bodies, and domicile for natural persons, place of company operations, subject of activities, legal form of entity, etc. The process of registration is carried out through application to the local commercial court . Only after an incorporation into the Commercial Register can an applicant launch his business activities.

According to the Commercial Code, the following forms of legal entities may be established in the CR:

• General commercial partnership (veřejná obchodní společnost - v.o.s.)

  it is a company, in which at least two persons are trading under the joint trade name, and are liable for the obligations of the company both jointly and collaterally up to the amount of their individual contributions. This kind of company is liable for its obligation with all its property (assets). The partners are liable for the obligations with all of the property they are holding (equally and collaterally to their capital contribution)

• Limited partnership (komanditní společnost - k.s.)

  it is a company, in which one or more partners are liable for company obligation up to the amount of their unpaid contributions entered in the Commercial Register.

• Limited liability company (společnost s ručením omezeným - s.r.o.)

  This is the most common form of company for small and medium-sized businesses and subsidiaries of foreign parent companies. Partners in a limited liability company are liable for company debts and obligations only up to the amount of capital they agreed to contribute to the company.
  Minimum capital is CZK 200,000; if non-monetary investments are included, the articles of incorporation must state the object of such investments and the method of valuation. The s.r.o. does not have a separate board of directors, and decision-making powers may be delegated to one or more designated persons by the owners.

• Joint stock company (akciová společnost - a.s.)

  A joint stock company is established by a founding contract and the issue of shares. The founding contract must include company statutes. Unless the statutes declare otherwise, the shares may be freely traded without registration in the Commercial Register, making the joint-stock company an advantageous choice of company form if the shares are expected to be publicly traded. Minimum capital stock is CZK 2,000,000, or CZK 20,000,000 if the company is founded through a public offering of shares. At least 30% of the amount to be subscribed for in cash must be paid upon incorporation.
  A joint stock company must have both a board of directors, elected by a general meeting of shareholders, and a supervisory board. The board of directors is the company's statutory body. A foreign person entered in the Commercial Register as authorised to act on behalf of the company must have a residence permit. Shareholders in a joint-stock company are only liable up to the amount of their investment.

• Co-operative (družstvo)

  It is an association opened to an unspecified number of members in order to undertake business activities or for the economic or social benefit of its members. It is liable for the obligation with all its assets.

• Branch office - commercial representations of foreign corporate and natural entities

  A branch office of a foreign company is not a Czech legal entity, but functions as the representative of a foreign company and incurs obligations on the foreign company's behalf. Branch offices must fully list their planned activities in their application for entry in the Commercial Register, as they are only allowed to engage in the listed activities. A director, who may be either a Czech natural person or a foreigner with a valid Czech residency permit, must be appointed to head the branch office.
  The law according to which the branch's parent entity was founded also applies to the branch's internal dealings.
  A branch is considered to be a foreign exchange non-resident under the Foreign Exchange Act, and therefore may not acquire real estate in the Czech Republic. However, the branch may lease property.

• Joint-venture

  JV may be established as any of the above-described forms of business organizations.