Sole Trader v SRO

Written by Boban Stamenkovic
of www.etherconsulting.cz

Advantages

·        Administration – There is less of an administrative burden involved in operating as a sole trader compared to a company. There is no need to hold an Annual General Meeting or to file accounts with the commercial register, and you may avoid running a book-keeping system, as there is only need to keep evidence of income and expenses.

·        Professional fees – The professional fees for handling accounting and tax compliance issues are generally lower compared to that of a company.

·        Tax allowable expenses – You are able to deduct more expenses for tax purposes as the tax rules are not as strict. For example, travel expenses from home to place of business and back home are basically allowable for tax purposes (if home is your official seat) whereas operating as a company such expenses are disallowable for tax.

·        Save on Employer´s Social & Health Insurance Payments – If you work for the company, you would have to pay yourself a salary which would be subject to 35% employer´s social and health insurance contributions which is avoided operating as a sole trader.

·        Privacy – Operating as a sole trader offers great privacy as there is no requirement to make the accounts public.

Disadvantages

LIMITED LIABILTIY COMPANY (s.r.o.)

Advantages

·        Separate Legal Entity – A company is a separate legal entity and therefore offers protection to your personal assets. Since the company is independent of its shareholders, your liability in the company (as the owner of the company) would be restricted to the amount of share capital invested – this being a minimum of CZK 200,000.

·        Lower profits tax – The tax rate payable on profits (26% for 2005 to reduce to 24% for 2006) is lower than the top personal income tax rate of 32% (for income exceeding around CZK 331,200).

·        Lower personal tax – On the distribution of profits there is withholding tax of 15% (but this can be reduced if there is a double tax treaty. Consequently the owner of the company can reduce his overall tax liabilities by taking money out of the company by way of dividends as opposed to paying wages.

Disadvantages

ETHER Consulting s.r.o. is an
independent company that was established with the sole objective of providing a
one-stop service aimed at small and medium sized companies as well as
individuals interested in either establishing a business presence or acquiring
real estate in the Czech Republic. We can also assist foreign
direct investment clients in the search for local business partners as well
as provide other services relevant in any acquisition or joint-venture deal
depending on your financing requirements.

For further
information, please refer to our web site onwww.etherconsulting.cz or contact Mr Boban Stamenkovic on
+420 222 314 101, or send an email tostamenkovic@etherconsulting.cz. We would be only too pleased to
hear from you.