How to cancel a trade?

Unfortunately, not every business is successful or promising. If yours isn’t bringing you the joy, money or anything else you originally expected, you may be considering shutting it down. What does it take legally, temporally and financially to dissolve a business license?

ukončení živnosti
7 minutes of reading

Chapters of the article

Do not terminate just interrupt

Mr Stanislav, who was also interested in the possibility of cancelling his trade licence, contacted us on social media. His business was doing quite well, but his girlfriend got pregnant and he got an interesting job offer as an employee at the same time and wanted to play it safe in such a situation. We advised him in this case not to close the business but only to discontinue it. He only had to report the interruption to the Trade Licensing Office, and there was no need to explain or prove anything.

In this way, you can interrupt your trade for any length of time and if you decide to return to the business at some point in the future, you can renew your trade again and continue your business. If there is even a slight possibility that you will return to the business at some point, even if in a different form, this is definitely a better option, as it avoids the CZK 1,000 fee for setting up the business again.

Do you have a question related to the termination of a trade?

Contact one of our specialists in this field. Your questions will be answered within 48 hours.

When you decide to close your business

If you are adamant that your business has been a dead end and you will never rebuild it in the future, then a real and final closure of the business is offered. However, along with the trip to the trade office, think about other important steps.

Deal with your employees

Most sole traders work for themselves, so the livelihood of other people is not tied to them (except for their own family). However, if you are one of the minority who employ other people, you need to think about terminating them as well. While termination of a trade is one of the reasons under the Labour Code when you can give notice, it also comes with other obligations such as two months’ notice and payment of severance pay of up to three times the average salary (depending on how long the employee has worked for you). In this situation, the employment relationship can also be terminated by a termination agreement, but the employee must agree to it.

Tip: We can help you lay off employees. Validly, permanently and unquestionably. We can solve everything with us in just two days, conveniently and online.

Sort out your liabilities and debts

If you still have outstanding debts or liabilities, it is certainly advisable to invoice or pay everything before you close the business. However, if you were to close the business and fail to pay an invoice, you are unlikely to avoid paying it anyway, as the amount owed would probably be recovered from you even after the business has closed.

Termination at the Trade Licensing Office

The termination of a trade must first of all be notified to the central registration point (CRM) (trade offices, Czech POINTs). For this purpose, a special form called a change sheet is filled in, which is also used in cases where, for example, the name, address or other important data related to the business changes. You can fill in the change sheet directly at the trade office or Czech POINT. You will list here all the trades you want to close. If you reported more than one trade at the beginning of your business, then you must terminate each trade individually. The declaration can be made by:

  • In person at the central registration point – Application for termination of a trade licence can be made at any trade office throughout the country, as the local jurisdiction has been revoked. The trade register entry will be made by the trade office to which the application was first delivered;
  • Online (with an electronic signature or to a data box);
  • Alternatively, send the completed and signed form to the relevant trade office by post.

Hint: We’ve covered how-to guides and tips for using a data mailbox in our next blog post.

You can cancel the trade on the date of completion, or you can choose a later date. However, it is not possible to terminate the trade retrospectively, i.e. for example in August choose that the termination occurred on 1 July. If you do not fill in any date and leave this box blank, the trade will be terminated on the date the decision to terminate it becomes final (this is the 16th day after the decision is issued or delivered to you). From the date of receipt of the decision, you have 15 days in which to lodge an appeal. However, you can also waive your right to appeal and thus shorten the time limit considerably.

After the termination of the trade, information about your business will remain available and visible in the public trade register for 4 years. After this period, it will be moved to the non-public part of the register.

Tip: You can also notify other institutions, such as the Tax Office, the health insurance office or the district social security office, of the dissolution of your business via a change certificate. This will save you a lot of time and work.

Please note that you are still obliged to pay social security and health insurance contributions, as well as to keep accounting or tax records, during the waiting period in which the Trade Licensing Office assesses your application. The waiting period is up to 30 days, during which you are still considered an entrepreneur.

Bypass other authorities

Unless you have taken our well-intentioned advice and notified the other authorities of the end of your business via the change sheet, you must now inform all these places individually. They have different notification deadlines, so plan your visits so that you can get everything done in good time. It really doesn’t pay to hesitate unnecessarily and make last-minute detours.

  • Notify the health insurer within 8 days of closing your business.
  • Notify the tax office by the 15th day after you close your business.
  • Submit the notification to the district social security office no later than the 8th day of the month following the month in which the business was closed.

If you fail to meet the deadlines and thus breach your notification obligation, you may be fined up to CZK 10,000. The good news is that you don’t have to pay anything to close your business. The authorities will provide all services free of charge.

Tip: If you are considering running a business while working, read our article on how to do it.

Don’t forget about next year’s tax return

Don’t forget to file your tax returns and reports with the district social security office and the health insurance office on time and correctly in March of the following year, even if you are already a full-time employee, for example. In this case, your employer will not process the taxes for you and it is up to you or your tax adviser or accountant.

You can also cancel your trade ex officio

In exceptional cases, the authorities may also be responsible for the dissolution of your trade. This happens, for example, if the trader violates the Trade Licensing Act or the Czech Social Security Administration shows large arrears of social insurance.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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