What is the definition of entrepreneurship and who is an entrepreneur?
At first glance, simple concepts are often confusing. Who is an entrepreneur? Legal practice is based on simple rules:
- The activity is continuous (not one-off).
- The goal is profit (even if reinvested).
- You act on your own responsibility and on your own account.
If you meet all three conditions, you become an entrepreneur, regardless of the fact that the clerk has not yet issued you a business license. The Supreme Court confirmed this in a case where a barista sold coffee through social networks “only to friends”. The court assessed that it was a trade business: regular sales, clear pricing, marketing. However, without a license, he was fully liable for damages and fines.
It is not the paper from the office that makes a business, but the fact that it consistently seeks to make a profit. So in practice, once you publish a price list and repeatedly supply a service, you enter the business world with all the responsibilities and rights.
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What are the objects and fields of business?
Every business needs to clearly define what it sells – the law calls it a business. In the case of a self-employed person, it is entered in the trade register, in the case of a limited company, it is also entered in the commercial register. The fields of business are divided into free, artisanal, tied and licensed:
- Free trades – full legal capacity and integrity are sufficient for these; typically these are consultancy or creative activities (e.g. marketing, coaching).
- Craft trades – these require an apprenticeship or experience (e.g. carpentry, plumbing).
- Associated trades – these require you to provide evidence of qualifications (e.g. accountancy, opticianry).
- Licensed trades – these are licensed individually by the state (taxi service, spirits production).
The year 2025 brought a digital catalogue of trades, available on the Trade Register portal. You can apply for a trade after logging in with, for example, a bank identity, paying a fee of CZK 1,000 by card (for a free trade) and having a confirmation in your inbox within an hour.
Sole proprietorship (sole proprietorship): this type of business allows the fastest start, zero capital and tax registration instead of accounting. However, the sole proprietor is liable for debts with all his/her assets, including the family home. It is worthwhile if you are just testing your idea and risk only small sums in case of failure.
Limited liability company (Ltd.): This is the ideal legal form of business for those who want to protect personal assets. You make a deposit of CZK 1 (usually at least CZK 10,000 for credibility) and you are liable up to the amount of the outstanding deposit.
Joint stock company (a. s.) and other forms: This type of business is suitable for larger projects with investors. It requires CZK 2,000,000 share capital, has a mandatory audit and publication of financial statements. A specific variant is then a cooperative. This is suitable for smaller housing or social projects where the members do not bear personal liability.
When to prefer an LLC over a sole proprietorship?
Income.
Risk: Do you run a workshop, have employees or deal with larger clients? An LLC separates corporate risks from your family assets and offers investors a safer structure.
Administration: a sole trader can handle simple tax filing in a few hours a month. The company already requires double-entry bookkeeping, but the reward is more order in the numbers and a more accurate view of cash flow.
Image: Banks, suppliers and corporate customers trust companies more than individuals. The legal form looks professional and can open the door to more favourable loans or framework agreements.
Tip for article
Tip: Do you know how a legal entity differs from a natural person? For example, when entering into contracts, it is crucial whether you are dealing with a legal entity or a natural person. Read more about this in our article.
How to start a business?
Before you take on your first contracts, make sure your former employer hasn’t issued you with a non-compete clause – the Labour Code allows it for up to a year, so it’s often enough to check the date you signed it and ask to cancel it if necessary. Then think about whether to start as a sole trader or to set up an LLC straight away: you can start a business in a day, an LLC offers better asset protection but adds compulsory accounting.
From 2023, every entrepreneur will automatically have a data box, replacing the queues at the offices. Once you’ve logged in, you fill in the Single Registration Form – in a single online application you register for income tax, social security and health insurance. Once the authorities approve your application, secure liability insurance: it is usually compulsory for craftsmen and recommended for consulting professions as protection against unexpected damage.
Before your first order, set up an invoicing system that can handle electronic invoices and keeps an eye on the CZK 2 million turnover limit for mandatory VAT registration. In the first year, monitor your cash flow as closely as if your project’s survival depended on it, because according to a survey by the Chamber of Commerce, four out of ten Czech start-ups fail because of poor money management.
How to run a sustainable business right from the start
The first months of business tend to be full of euphoria, so it pays not to lose sight of the “boring” basics. Keep at least three months of operating and personal expenses in reserve to weather revenue fluctuations without undue stress. Set up automatic tax and insurance prepayments so you don’t pay them at the last minute. Write all contracts in plain English – a good quality text will protect you better than an anonymous template downloaded from the internet. Keep an eye on legislation: for example, the upcoming digital services tax will probably hit e-shops as early as 2026. And don’t forget about branding – a unique company name and a consistent visual style increase customer trust; for specific tips, see our article on how to choose a company name.
Summary
Business is built on three pillars: the right legal form, a clearly defined business object and carefully managed finances. An entrepreneur is anyone who consistently offers services or goods for a fee. A sole proprietorship enables a quick start, an LLC protects assets and builds credibility. The state’s new digital services make it easier to register a trade and set up a company, but they don’t change the liability – you bear the risk. Prepare a financial reserve, keep an eye on the legislation and don’t forget about quality contracts. That way you’ll be running a sustainable business, whether you’re making candles, running an e-shop or innovating drones.
