The basics of a limited liability company in the Czech Republic

A limited liability company (in Czech: Společnost s ručením omezeným | s.r.o.) is the most common form of business in the Czech Republic. This company exists independently of its shareholders, and it may be formed either by one person (a natural or legal person) or more persons (the maximum number of persons is not set).

Main Advantages of a limited liability company in the Czech Republic

• Simple company formation
• Minimal contribution requirements – the minimum contribution of each shareholder is in the amount of CZK 1
• Wide scope of business – suitable for the vast majority of business activities and plans, multiple investors can be easily involved
• Easy transferability of shares
• Simple organizational structure
• Limited liability – shareholders are liable only up to the amount of their outstanding contribution to the company’s registered capital as recorded in the Commercial Register
• Tax optimization

Organizational Structure of a limited liability company in the Czech Republic

• Registration of the necessary trade licences (if not completed as a part of the incorporation process)
• Registration of Corporate Income Tax within 15 days from the day the company is registered in the Commercial Register.
• VAT registration if the annual turnover exceeds 2,000,000 CZK. If the annual turnover is below this amount, VAT registration can also be done voluntarily.
• Ultimate Beneficial Owner (UBO) registration – business corporations must register their beneficial owners in the Register of Beneficial Owners without undue delay once the company is duly incorporated. If a company fails to do so, sanctions may be imposed against them.
• Insurance registration – employers must notify the competent office of the Czech Social Security Administration of the date of commencement or termination of an employment relationship within 8 days of it occurring.
• Personal income registration – employers must also register with the local tax office for withholding income tax within 15 days of commencing an employment relationship.
• Opening a bank account – company must open a current bank account after its incorporation.

Does a managing director of a limited liability company in the Czech Republic have to be of Czech nationality?

No, the managing director can be of any nationality.

Can we incorporate the limited liability company in the Czech Republic remotely or is our personal presence required?

All but one of the steps can be arranged remotely by a power of attorney. The only step that requires personal presence is the opening of a current bank account once the company is duly incorporated.

Is personal presence required for opening a current bank account?

Yes, the personal presence of the person who will be authorised to use the bank account (usually the managing director) is necessary. This is due to European legislation which sets strict conditions on KYC and compliance policy.

Who is an Ultimate Beneficial Owner (UBO)?

The beneficial owner is every natural person who directly or indirectly owns more than 25% of participation in the capital or voting rights in the company; or who is entitled to a share of profit exceeding 25%; or who exercises actual control over the company on other grounds. Other grounds may refer to a partnership agreement, for example.

What is the time limit for registering the UBO after the incorporation, and what are the sanctions in case the UBO is not registered or is registered improperly?

The Czech law does not provide a precise time limit for the registration of UBO. However, it states that the registration should be made without undue delay. In practice, this usually means within two weeks after the incorporation.

Companies that fail to register the UBO without undue delay may face the following consequences:

• Profits will not be paid out
• Shareholders will not be allowed to vote in the general meeting
• A fine of up to CZK 500,000 may be imposed
• Bank accounts may be blocked, problems with auditors may arise, and overall loss of credibility may ensue

What is a Data Box?

The Data Box represents a secure and state-guaranteed electronic communication portal, which can be used to communicate with authorities, courts or other entities, including private entities. It is a kind of e-mail box established upon the registration of each company. As part of our service, we can manage your Data Box and keep you informed of messages received and other necessary actions. The Data Box interface is only available in Czech.

What is the corporate income tax for a limited liability company in the Czech Republic?

Corporate income tax is levied at a standard rate of 21%. Find out more about taxation in the Czech Republic in our dedicated tax guideline.

What is a contract on performance of the office of a member of the statutory body, and is a company obliged to conclude it with its managing directors?

The essence of this contract is to regulate the rights and obligations of the company and the members of the statutory body in their mutual relationship. In practice, this contract is usually concluded, but it is not obligatory. If the contract on performance of the office of a member of the statutory body is not concluded, the relationship between the statutory body and the company is governed by the provisions of the Czech Civil Code.