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Limited Liability Company in the Czech Republic: Incorporation and obligations

February 5, 2024
This article is also available in
Ukrainian

Limited liability company in the Czech Republic (in Czech: Společnost s ručením omezeným | s.r.o.) is the most common form of business. 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).

Download our 2024 guide on limited liability company in the Czech Republic, or read more below

What is a limited liability company or LLC?

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

Supreme Body

General meeting; or

Sole shareholder who exercises the powers of the general meeting
Statutory Body One or more managing directors
Supervisory Board (optional) Optional body which supervises the managing directors, various documents, and accounts

Incorporation procedure of a limited liability company in the Czech Republic

The incorporation procedure of a limited liability company in the Czech Republic consists of the following steps:

Adopting the Memorandum of Association / Foundation Deed by the Notary Public

Arranging consent to the provision of the company’s registered office address

Registering the necessary trade licences of the limited liability company in the Czech Republic

  • Either before or after the registration of the company in the Commercial Register

Opening a bank account for contribution payments

  • This applies if the contribution is more than CZK 20,000; otherwise, the contribution can be paid to the contribution administrator

Registration of the company in the Commercial Register of the competent District Court

The incorporation time of a limited liability company in the Czech Republic is approximately 1 week after receiving the incorporation documentation.

How we can help you with our limited liability company in the Czech Republic

We will prepare all the necessary documents and advise you on the formalities (e.g., notarisation, legalisation).

We will incorporate the company and proceed with all the steps under the powers of attorney granted to us.

Once the limited liability company in the Czech Republic is duly incorporated, we will guide you through all the necessary steps and registrations and help you with them.

What documents are required from you?

  • A written consent on the provision of the registered office address (we can arrange this for you)
  • Documents relating to the appointment of the statutory body
    • Criminal background extracts of the appointed managing directors (for non-Czech citizens)
    • Personal data of the appointed managing directors
  • Extracts from the Commercial Register of shareholders and/or managing directors, if they are legal persons

Overview of obligations after incorporation 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.

Frequently asked questions about the limited liability company in the Czech Republic

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.

Other forms of business*

*This list is not exhaustive

Joint-Stock Company (Akciová společnost | a.s.)

A joint-stock company is another form of business whose share capital consists of shares which are represented by securities. The company may be established by a sole shareholder. It may be formed by a private agreement to subscribe to all shares, or by a public offering.

Features of a Joint-Stock company:

  • High share capital requirements – CZK 2,000,000 or EUR 80,000
  • More complex and costly administration
  • Shareholders are not liable for the company’s debts or obligations
  • Suitable form of business for a large number of shareholders

Branch

A branch (in Czech: odštěpný závod) is a part of a company located in a different country from the parent or founding company. It is an economically and functionally independent part of the parent company, which is registered in the Commercial Register. It has its own registration number, registered office and its own accounts.

Features of a Branch:

  • Short establishment period and no liquidation requirements
  • No share capital
  • Easy administration
  • It does not have legal personality (e.g., all agreements must be concluded through the parent company).
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