What Is Entrepreneurship, and How Can You Start a Business in 2026?

Quick Overview:

• Characteristics of entrepreneurship: independence, profitability, self-employment and personal responsibility, consistency, and the intent to generate a profit.
• Self-employment for individuals: The most common route is as a self-employed individual ( OSVČ); for a trade license, an individual must meet the legal requirements and, depending on the type of trade, may need to demonstrate professional qualifications.
• Legal Form: In addition to being a self-employed individual (OSVČ), you can conduct business, for example, through a limited liability company ( s. r. o.) or another business entity.
• Entrepreneurship versus employment: An entrepreneur acts independently and bears the business risk, while an employee performs work in a subordinate capacity according to the employer’s instructions.
• How to Start a Business: Choose your line of business and legal form, verify the necessary permits, complete the registration process, and set up contracts, invoicing, and other obligations before you receive your first orders.

Not sure whether to choose a sole proprietorship or form a limited liability company (s. r. o.) for your business plan? Our attorneys will walk you through the risks of each option and help you establish a company that suits your business.

What is the definition of a business, and who is considered an entrepreneur?

Terms that seem simple at first glance are often confusing. Who is an entrepreneur? The legal definition of a business is primarily based on the Civil Code. An entrepreneur is considered to be anyone who engages in a profit-making activity, provided the legal requirements are met:

1. independently,
2. as a trade or in a similar manner,
3. on their own account and at their own risk,
4. with the intention of doing so on a regular basis ( not just once),
5. for the purpose of making a profit.

It is precisely these characteristics that constitute the fundamental traits of entrepreneurship. This does not mean, however, that you must actually turn a profit every month. What matters is whether you carry out the activity with the intent of making a profit.

Note: Whether a person is considered an entrepreneur is not determined solely by whether they hold a business license or are registered in the commercial register. If you meet all three of the above conditions, you are considered an entrepreneur, even if an official has not yet issued you a business license. For example, in its decision No. 23 Cdo 3631/2023, the Supreme Court emphasized that the actual nature of the activity being carried out may be decisive. Therefore, if you in fact meet the criteria for conducting business, the absence of the necessary license does not in itself mean that the law will not regard you as an entrepreneur in a specific relationship.

After all, it is not a piece of paper from the authorities that makes you an entrepreneur, but the fact that you systematically strive to make a profit. In practice, therefore, as soon as you publish a price list and repeatedly provide a service, you enter the business world with all the associated obligations and rights.

From our legal practice: We often see that new entrepreneurs focus primarily on obtaining a business license itself, but underestimate the importance of contracts, liability for damages, or the separation of personal and business assets. Yet it is precisely these issues that can have a much greater financial impact during the first dispute or a major contract than the actual establishment of the business itself.

What are the conditions for doing business in the Czech Republic?

The conditions for doing business in the Czech Republic vary depending on the type of activity you wish to pursue. With regard to trade licenses, the Trade Licensing Act stipulates full legal capacity and good character as general requirements for natural persons. For skilled trades, regulated trades, and licensed trades, additional requirements may apply, particularly professional qualifications.

However, not every business activity is a trade. Special rules apply, for example, to attorneys, doctors, tax advisors, or certain other regulated professions. Therefore, before starting your business, you need to verify what specific authorization your field requires.

Before starting your business, therefore, check:

• whether you need a trade license or other special authorization,
• whether you meet the professional qualification requirements,
• whether you will operate as an individual or a legal entity,
• what obligations you will have toward your health insurance provider and the Czech Social Security Administration (ČSSZ),
• whether any other industry-specific obligations apply to you.

What are the types of business activities and business sectors?

Every business owner needs to clearly define what they sell —the law refers to this as the business activity. For self-employed individuals, this is recorded in the Trade License Register; for limited liability companies, it is also recorded in the Commercial Register. Business sectors are divided into unrestricted, skilled trade, regulated, and licensed:

• Unrestricted fields —these require only full legal capacity and a clean criminal record; they typically involve consulting or creative activities (such as marketing or coaching).
• Skilled trades – these require an apprenticeship or practical experience (e.g., carpentry, sheet metal work).
• Regulated fields —for these, you must provide proof of qualification (e.g., accounting, optometry).
• Licensed trades —for these, the state grants authorization on a case-by-case basis (taxi service, spirits production).

You canregister your business through the Trade Licensing Office or electronically. The administrative fee for first-time business registration is 1,000 CZK. If the legal requirements are met, the trade licensing office will enter the business in the trade register and issue an extract, usually within 5 business days at the latest.

Legal Business Structures: Which One to Choose and Why?

Self-employment (OSVČ): This business structure allows for the quickest start, requires no initial capital, involves lesspaperwork, and uses tax records instead of full accounting. However, a self-employedindividual is personally liable for their business obligations with all their assets, including their family home. It’s a good option if you’re just testing your idea and risking only small amounts in case of failure.

Limited Liability Company (s. r. o.): This is the ideal legal form of business for those who want to protect their personal assets, as this structure separates the company’s assets from the personal assets of its shareholders. Shareholders are liable for the company’s debts only to the extent specified by law. You can make a capital contribution starting at 1 Kč (usually at least 10,000 Kč for credibility purposes), and your liability is limited to the amount of the unpaid capital contribution recorded in the Commercial Register. However, this does not mean absolute protection of personal assets—for example, a managing director may be personally liable for breaching their duties.

Joint-Stock Company (a. s.) and Other Forms: This type of business is suitable for larger projects involving investors. It requires 2,000,000 CZK in authorized capital and mandates an audit and the publication of financial statements. A specific variation is the cooperative. This is suitable for smaller housing or social projects, where members are not personally liable.

When should you choose a limited liability company (s.r.o.) over a sole proprietorship?

Revenue: Once your annual revenue consistently exceeds 1.5 million CZK, it’s worth considering a limited liability company (s.r.o.) —tax optimization and the ability to pay yourself a share of the profits will save you tens of thousands.

Risk: Do you run a workshop, have employees, or deal with larger clients? A limited liability company (s.r.o.) separates business risks from your family’s assets and offers investors a safer structure.

Administration: A sole proprietor can handle simple tax records in just a few hours a month. A limited liability company requires double-entry bookkeeping, but the reward is greater order in the numbers and a more accurate overview of cash flow.

Image: Banks, suppliers, and corporate customers trust companies more than they trust individuals. A corporate structure conveys professionalism and can open the door to more favorable loans or framework agreements.

Entrepreneurship vs. Employment: What’s the Difference?

The main difference between entrepreneurship and employment lies in the degree of independence and responsibility. An employee works according to the employer’s instructions, on the employer’s behalf, and under the employer’s responsibility. An entrepreneur, on the other hand, organizes their business independently, acts in their own name, bears the business risk, and is personally liable for their obligations.

The difference between self-employment and employment is therefore not just a matter of the contract’s title. If a person is formally registered as a self-employed individual but is actually performing work as an employee, this may constitute an illegal “Švarc system.”

How do you start a business?

1. Choose the industry in which you’ll run your business.
2. Find out what permits you need.
3. Decide whether to operate as a sole proprietor or as a business entity.
4. Register your business or obtain any other necessary permits.
5. Fulfill your reporting obligations to the Czech Social Security Administration ( ČSSZ ) and your health insurance provider.
6. Set up your accounting or tax records, invoicing, and contracts.
7. Check whether you are subject to VAT or other specific tax obligations.

Before taking on your first clients, check whether your former employer included a non-compete clause in your contract— the Labor Code allows such clauses for a maximum of one year, so it’s often enough to check the date of signature and, if necessary, request that it be rescinded. Immediately afterward, consider whether you’ll start as a sole proprietor or go straight to forming a limited liability company (s. r. o.): you can launch a sole proprietorship within a day, while a limited liability company offers better asset protection but adds mandatory accounting requirements.

Starting in 2023, every entrepreneur will automatically have a data box, which will eliminate the need to wait in line at government offices. When you start a sole proprietorship, you can use a single registration form to fulfill certain related obligations toward other agencies, such as the Czech Social Security Administration (ČSSZ) and your health insurance provider. However, starting in 2024, self-employed individuals starting a business will no longer be required to register separately for personal income tax. Depending on your specific situation, you may still have other tax registration or reporting obligations. Depending on your field, you should also consider professional or business liability insurance. For some regulated professions, it is required by law; in many other fields, it serves as voluntary protection against the financial consequences of damage caused to a customer.

Even before your first job, set up an invoicing system that supports electronic invoicing and monitors the revenue threshold for mandatory VAT registration. In 2026, two annual turnover thresholds will be used to determine mandatory VAT registration: 2,000,000 CZK and 2,536,500 CZK. Exceeding a specific threshold determines when a business owner becomes a VAT payer, so it pays to start addressing the situation before reaching the limit. In the first year, monitor your cash flow as carefully as if the survival of your business depended on it. Even a profitable business can run into trouble if customers pay late, while you must continue to pay taxes, suppliers, and employees on an ongoing basis.

How to Run a Sustainable Business from the Start

The first few months of running a business are often filled with euphoria, so it’s important not to lose sight of the “boring” basics. Keep a reserve covering at least three months of operating costs and personal expenses so you can weather fluctuations in revenue without unnecessary stress. Set up automatic payments for tax and insurance prepayments so you don’t have to pay them at the last minute. Draft all contracts in clear, understandable Czech —a well-written document offers better protection than a generic template downloaded from the internet. Also, keep an eye on legislative changes, especially regarding taxes, contributions, and labor law. The limits and obligations for business owners can change from year to year. And don’t forget about brand building —a unique company name and a consistent visual style boost customer trust; you’ll find specific tips in our article on how to choose a company name.

Do you want to start a business but aren’t sure which legal structure is right for you? An improperly chosen structure can later complicate bringing in a partner, transferring the business, and protecting your personal assets. Our attorneys will help you set up your business correctly from the very beginning.

Summary

Entrepreneurship is an independent gainful activity carried out on one’s own account and under one’s own responsibility, with the intention of conducting it systematically for the purpose of making a profit. Therefore, the fundamental characteristics of entrepreneurship include, in particular, independence, consistency, personal responsibility, and the intention to make a profit. The requirements for doing business in the Czech Republic depend on the specific industry—when operating a trade, a natural person must, in particular, meet the requirements of legal capacity and good character, and for certain trades, professional qualifications as well. When deciding how to start a business, consider, in particular, whether to operate as a self-employed individual versus forming a business entity, as well as the level of business risk, administrative burdens, and tax implications. New digital government services simplify both business registration and company formation, but they do not change your liability—you bear the risk. Set aside a financial reserve, stay up to date on legislation, and don’t forget to draw up solid contracts. That way, you’ll run your business sustainably, whether you’re making candles, running an e-shop, or innovating with drones.