How to set up a limited liability company in the Czech Republic

A limited liability company is the most common type of commercial company in the Czech Republic. It’s a good choice for small and medium-sized businesses seeking personal liability protection and flexibility. In simple cases, establishing and incorporating a limited liability company – known in Czech as a společnost s ručením omezeným or s.r.o. – can be done in a couple of days. But the process can be a bit complicated if you go it on your own, as is it requires numerous steps and documentation.

These step-by-step guidelines tell you everything you need to know about how to successfully set up a limited liability company in the Czech Republic and how to make the most common corporate changes.

The first step is to meet with a notary to draw up a memorandum of association (or a deed of foundation in the case of a single-member company) in the form of a notarial deed. A company is established by a memorandum of association that is signed by all of its founders, or future shareholders.

This memorandum must include the basic company information required by law, in particular the corporate name, registered seat, scope of business, amount of share capital, identification of shareholders, type of shares, and amount of contributions and the number of executives. The notary fee does not usually exceed CZK 10,000 plus VAT.

TIP: It's important to be careful when choosing your company's name. The name of the company must not create any confusion with an already existing corporate name neither should it give a misleading impression. To check if a name is already being used visit www.justice.cz, which provides access to the electronic Commercial Register. If the company’s name contains the name of a natural person, you need to obtain consent to use his or her name.

One advantage of the limited liability company is that you don't have to invest a large sum of money into the company’s share capital. The minimum amount of the contribution is CZK 1 for each shareholder. Shareholders must appoint a contribution administrator in their memorandum of association (see above) who receives and administers the contributions, which may be in cash or in kind. The contribution then administrator opens a designated account for the purpose of depositing the monetary contributions.

NOTE: Since Jan. 1, 2021, it hasn't been mandatory to open a special account to deposit monetary contributions if the amount of share capital does not exceed CZK 20,000. Contributions in kind must be valued by an expert. Before submitting the application for entering the company into the Commercial Register, all contributions in kind must be fully paid and at least 30 percent of each monetary contribution must be paid, unless the memorandum determines more. This is proven by a statement of the contribution administrator and a bank certificate.

More likely than not, a company will require a specific license to operate its business or other activity. The next step is to obtain the appropriate trade license. You must submit the application, along with the required documents, to the Trade License Office, which will issue an extract from the Trade Licensing Register (výpis z živnostenského rejstříku) within a few days. The administrative fee is typically around CZK 1,000. Depending on the type of business activity, your company may need a special license or permit.

Additional documents are needed to register the company. It’s necessary to hold a fair title for the use of the premises where the company’s registered office is situated. The fair title is usually proven with the consent from the owner of the premises via an officially verified signature.

The persons being registered in the Commercial Register, such as the executive, must grant written consent to their registration with an officially verified signature. In addition, the members of the company’s bodies must also declare that they meet the conditions set forth by law to perform the function.

It may be necessary to submit a power of attorney, an extract from the public register, or equivalent document issued by the relevant foreign authority or an extract from the criminal record or equivalent document issued by the relevant foreign authority. Documents in foreign languages must have a legally certified translation. For certain types of foreign documents, a special form of higher authentication is required.

Once you have prepared all the necessary documentation you can finally submit the application for entry of the company into the Commercial Register kept by a relevant court. It's more convenient to register the company directly through the notary since the fee, in this case, amounts only to CZK 2,700, otherwise the fee is CZK 6,000.

NOTE: Once the company is registered don’t forget to register for taxes at the Czech Financial Authority and fulfill other statutory obligations.

The transfer of company shares is performed by a written agreement with officially verified signatures. Before signing the agreement, you must check if the memorandum of association makes this transfer conditional on the consent of a specific body, such as the general meeting. If consent is required, then you have to obtain it first.

A share may be represented by a common certificate. In that case, the shares are transferred by an endorsement. However, it is strongly recommended to sign a written agreement as well.

The change in the company’s shareholders must be recorded in the Commercial Register. The company has to submit the application with relevant documents. The administrative fee is in the amount of CZK 2,000.

The general meeting (or the sole shareholder) is entitled to revoke and appoint the executive. The change of a person of the executive will be recorded in the Commercial Register. The company has to submit the application attached with the minutes of the general meeting (or the decision of the sole shareholder) with its annexes and with the appointed executive’s declaration that they agree with their registration in the Commercial Register and comply with the legal requirements, and other relevant documents, if necessary. The administrative fee amounts to CZK 2,000.

To change a company’s name, you have to convene a general meeting and ensure the services of a notary. The general meeting resolves in the form of a notarial deed on the amendment of the memorandum of association regarding the name of the company. In a single-member company the sole shareholder also adopts this decision in a form of a notarial deed. The notary fee usually does not exceed CZK 10,000 plus VAT.

The company has to submit the application to the Commercial Register together with the minutes of the general meeting (or the decision of the sole shareholder) with its annexes. It is more convenient to register the change directly through the notary since the fee, in this case, amounts only to CZK 1,000, otherwise the fee is CZK 2,000.

In the memorandum of association, it is possible to state an entire city or a specific address as the registered seat. If the company wishes to change the registered seat defined in the memorandum of association, the process is similar to the case of changing the company’s name. If the change does not affect the memorandum of association, the decision of the executive/s shall be sufficient.

Don't overlook the fact that the company must hold a fair title for using the premises at which the company’s registered office is situated. The fair title is usually proven by consent of the owner to the location of the seat provided with an officially verified signature or an extract from the Cadaster of Real Estate if the company is the owner.

The company must submit the application to the Commercial Register together with relevant documents such as the decision of the executive and title for the using of the premises. The administrative fee is CZK 2,000.