Chapters of the article
Step One: Make it clear which group your business falls into
As a prospective sole trader, you will be primarily concerned with the Trade Licensing Act. This sets out the rules for trade business, but also defines what is not a trade (e.g. doctors, veterinarians or notaries are not trades, nor are securities dealers or real estate rental). These activities are usually regulated by special laws. On the other hand, you will need a trade licence to set up and run a restaurant, a café or a cake shop, a driving school or a private school.
In general, trades are divided into two groups – licensed (for which you must first obtain a licence – e.g. taxi service) and notifiable. Reportable trades include craft trades , tied trades and free trades. For the first two, i.e. craft and bound trades, in addition to the general conditions, there is also a condition of professional competence, while no professional competence is required for free trades.
What does this mean for self-employed persons?
The term Self-employed person is often mentioned in connection with obtaining a trade, i.e. a person who earns income from a business or other independent activity. Sometimes the term freelancer is now also used. However, this is not quite the same as a sole trader, although they often overlap. Self-employed is a broader term that includes just those business people who do not need a trade licence to carry out their profession.
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Step two: secure potential collaborators
As we mentioned above, the law distinguishes three types of reporting trades and sets out different conditions for establishing each of them, which must be met. The easiest route is to operate a sole proprietorship. An example of this is animal husbandry. To engage in it, you don’t need to have special training or certification under the law. All you need to do this is to be self-empowered and of good character.
However, there are also craft trades and related trades for which you need to meet other conditions, in particular professional competence. This varies from trade to trade, and the law may require you to have, for example, an apprenticeship certificate in the trade, a secondary or higher education with a specific focus, or recognition of a professional qualification issued by an authorised body.
If you lack the necessary education or experience, don’t panic. You can also practise your trade as a legal entity and the professional competence will be ensured by a responsible person. For some activities, it is really crucial not to engage in them with people who do not have the appropriate training or experience. You probably wouldn’t be happy if your sciatica was being corrected in a massage parlour by, say, a trained butcher with years of knowledge of animal anatomy. Similarly, a tattoo parlour, hairdressing salon, private nursery or pet shop should only employ people who are qualified to do so.
Step Three: collect the necessary documents and establish the establishment
Prepare a valid ID card and CZK 1,000 for the trip to the office. You can also fill out the form you will need at the office in advance at home. Detailed information can be found on the website of the Ministry of Industry and Trade (single registration form | MPO).
You will operate your trade in your own premises. This may be your permanent residence, but if it is a different location, the trade office will also require proof of the legal reason for using such premises – so take with you a lease agreement or extract from the land registry.
What are the basic requirements for a trade licence?
To apply for a trade licence, you need to be fully competent (full legal capacity is acquired when you reach the age of 18, but even a minor can run a business in some cases – but you need the consent of your legal representatives and the permission of the guardianship court) and of good character (i.e. not to have been convicted in the past for a deliberate criminal offence committed intentionally in connection with the business or the business you are applying for or declaring), which can be proven by an extract from the Criminal Register (the trade licensing office will obtain this itself).
As already mentioned above, for certain activities it is also necessary to provide evidence of professional competence to carry out such a trade; you will then need to provide evidence of, for example, a certificate of education, experience, or authorisation to carry out the activity, and in some cases also the consent of another government authority.
Tip: If you have more irons in the fire and are also considering setting up an LLC, study everything you need to do so.
Step Four: Go to the office and pay everything you need
As we have already mentioned, the cost of setting up a trade or applying for a licence is currently CZK 1,000. You can pay it in person when you register your trade at the Trade Licensing Office or at Czech POINT or by postal order or bank transfer.
When filling in the form, think about what kind of business you will be involved in in the near future. Ideally, you should indicate all of them now. This will prevent you from paying fees in the future when you extend your business licence.
To apply for a trade licence, simply go to any municipal trade licensing office. A directory of trade offices can also be found on the website of the Ministry of Industry and Trade.
If you don’t want to queue at the office, you can start setting up a trade online. Simply fill in the Unified Registration Form and send it to the trade office’s electronic mailroom. However, you must sign the form with a recognised electronic signature or send it from your data box to the trade office’s data box.
Step five: keep an eye on your obligations and start your business
Be aware that after “setting up as a self-employed person” you have various obligations towards the state, in particular the obligation to pay health and social insurance, possibly also sickness insurance and, of course, to pay taxes and file tax returns. You must register with the relevant authorities(Czech Social Security Administration, Health Insurance Office, Tax Office) after obtaining a trade licence. The time limit for this registration is relatively short (8-15 days), but the notification obligation can also be fulfilled by filing the forms issued by the Ministry of Industry and Trade together with the declaration of trade or the application for a concession.
Since when can I operate a trade?
When you set up a trade, you obtain an ID number, i.e. Personal Identification Number, under which you are registered. The Trade Licensing Act knows trades that are only declared and then the right to operate the trade is already established on the day of declaration. If, however, you will be carrying out a trade for which you need a so-called concession, then you must wait until the decision to grant the concession becomes legally effective. You can then prove your trade licence by means of an extract from the trade register.
Tip: 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?