How to Set Up a Limited Liability Company (s.r.o.)

Sections of the Article

• How to Start Your Own Business
• Articles of Incorporation
• Forming a Limited Liability Company (s.r.o.) with a Single Shareholder
• Visit the government offices
• Cost of Establishing a Limited Liability Company
• Shareholder Contributions and Liability in a Limited Liability Company
• How long does it take to form a limited liability company?

Quick Overview

You establish a limited liability company by drawing up a notarial deed (articles of association or memorandum of association), paying the statutory capital contributions, and registering the company in the Commercial Register. An S.r.o. is legally established only on the date of its entry in the registry—only from that moment on can it conduct business independently.

Practical Procedure:

• Drafting a notarial deed

• Paying at least 30% of each monetary contribution and at least 50% of the registered capital

• filing a business license application (may be done simultaneously with registration)

• entry into the Commercial Register (by a court or notary)

• Tax registration

If the necessary documents are ready, the entire process can be completed within a few days, often entirely online. If you want to have your company registered without unnecessary delays, we can prepare and handle the entire process of establishing a limited liability company (s.r.o.) for you on a turnkey basis.

Forming a limited liability company is a significant legal step in your business. A key advantage is the limited liability mentioned in the name itself, which provides greater protection for your personal assets in the event of poor business decisions. Another advantage is the relatively easy process of transferring ownership rights. On the other hand, you must expect more complex accounting requirements and the inability to access the company’s profits whenever you need them.

The Business Corporations Act

The use oftheterm“company”can sometimes be a bit misleading. In legal circles, it refers strictly and exclusively to the business name under which an entrepreneur is registered in the commercial register. This time , however , we’ll set aside strictly legal terminology and use this term in its more general sense—that is, to mean a business or company. If you’re convinced that starting a business is the right path for you and you’re interested in how to go about it, walk through the entire process with us.

The Business Corporations Act governs the legal status of business corporations and the relationships between shareholders, statutory bodies, and other persons operating withina limited liability company. This Act constitutes a special legal framework that builds upon the general rules contained in the Civil Code.

Articles of Association or Founding Charter?

If there are multiple founders , the legal form required is a partnership agreement, which must be drawn up as a notarial deed ( if it’s a basic version, it will also be significantly less expensive. In addition, the notary can then register the company directly in the commercial register).

It is necessary to agree in advance on an appropriate and original name and registered office for the company (it is essential to have a lease agreement or the owner’s consent if you do not own the property where the registered office is located), align your mutual expectations regarding the company’s operations, and prepare affidavits and specimen signatures of the future managing directors.

The articles of association must specify the names and addresses (registered offices) of all shareholders, the company’s registered office and trade name, the scope of business, and the respectiveownership interests (an ownership interest is generally determined based on the ratio of the shareholder’s contribution to the total registered capital, but the articles of association may specify a different method). Regarding the registered office, we recommend specifying only the entire municipality, e.g., “Prague.” This way, you will not have to amend the articles of association every time you move within the municipality, and the address will be updated only in the Commercial Register.

The articles of association also specify the company’s governing bodies. These include the general meeting, through which individual members participate in the management of the company, and the managing directors, who constitute the statutory body. An executive must meet the conditions of good character and must not be subject to any legal impediments to performing their duties under the Business Corporations Act. The company may also have other governing bodies, such as a supervisory board, if so provided for in the articles of association.

Properly drafting the articles of association is crucial—in practice, we often resolve disputes precisely because of poorly defined ownership shares. Therefore, do not underestimate the importance of legal consultation.

Based on the articles of association we have reviewed to date, we can conclude that shareholders often fail to establish rules for leaving the company in advance and only deal with the resulting complications once the situation has already escalated.

Forming a Limited Liability Company (s.r.o.) with a Single Member

If a company is established by a single person, a so-called “articles of incorporation” are drawn up instead of a partnership agreement. These contain the same essential elements as a partnership agreement but are issued by the sole founder.

A legal entity may also serve as the sole shareholder in multiple single-member limited liability companies; the law no longer limits their number.

In a single-member limited liability company, the sole member exercises all the powers of the general meeting and makes fundamental decisions in writing.

Otherwise, however, the same rules apply as for multi-member limited liability companies, including with regard to the possibility of having multiple managing directors or the method of registration in the Commercial Register.

As of July 2023, the conditions for serving as a member of a business corporation’s governing body are defined directly in the Business Corporations Act (Section 46 et seq.). A non-public registry of persons barred from holding such positions has also been established, accessible to notaries and courts.

The Ministry of Justice has helped simplify the process of establishing a limited liability company by publishing a universal electronic template for articles of incorporation, which includes all the mandatory elements of the legal act establishing a limited liability company, supplemented by a brief explanatory note.

This simplification will make it easier for you to draft the articles of incorporation; however, it is advisable to consult with an attorney regarding the final version, who will add the necessary provisions specific to your type of business.

Go to the government offices

After incorporating the company, you’ll need to take the notarial deed to a bank. There , you’ll open a bank account into which the initial capital will be deposited. To open this account, you’ll need to submit a written and notarized articles of association.

The company must also be registered with the Trade Licensing Office and obtain a business license. To do this, you must visit any Trade Licensing Office, pay the administrative fee, and provide proof of legal title to the future registered office. The articles of association must also be submitted here. To register a regulated or craft trade, as well as to obtain a license for a concession-based trade, a responsible representative must be appointed.

Currently, however, there is no longer a need to wait for the trade licensing office’s decision, as you can simultaneously apply to register the legal entity in the public registry and apply for a business license. Both processes can take place simultaneously, which should speed up the entire process and allow you to start doing business sooner.

This change was introduced by a law amending certain statutes regarding the use of digital tools and procedures in corporate law and the operation of public registries. The law also reduces other administrative burdens on company founders. For example, it will no longer be necessary to submit certain information twice—both when registering the company in the Commercial Register and when filing a business license application with the trade licensing office (typically, the legal basis for using the premises where the company will have its registered office).

A company would not be established unless it were registered in the Commercial Register. This can be accomplished through the registry court or through a notary who prepared all the necessary documents. The notary is authorized to access the register remotely.

Following registration in the Commercial Register, the company should be registered with the tax office for the applicable taxes. Tax registration may also be completed through the trade licensing office, if necessary.

The company’s obligations do not end with its formation. Within 15 days of registration in the Commercial Register, a limited liability company (s.r.o.) must register for corporate income tax, and from the first day of its existence, it is required to maintain double-entry bookkeeping. Start-up companies therefore typically arrange for accounting services immediately after registration—either internally or through an external accounting firm.

If you are pursuing a specific type of business, such as establishing an employment agency, you need to be familiar not only with the general requirements but also with the specifics of that field. In this specific case, in addition to a responsible representative, you would also need a permit from the Czech Labor Office to act as an employment agency (the Labor Office will simultaneously request a favorable opinion from the Czech Ministry of the Interior), as well as a deposit of 500,000 CZK into the Czech Labor Office’s account and insolvency insurance, also known as a guarantee insurance policy in the event of insolvency (the last two points apply to you if you plan to employ your clients and assign them to individual employers).

Tip: It’s a good idea to also include your spouse’s consent to your business venture. Both this consent and the affidavits can be easily verified by a notary, whom you’ll need to contact anyway.

How much does it cost to form a limited liability company (s.r.o.)?

Of course, most people are also interested in the cost of establishing a limited liability company (s.r.o.). The good news is that after establishing the company, you’ll still have enough money left to actually get your business up and running. If you handle everything yourself, your costs shouldn’t exceed 15,000, or at most 20,000, Czech crowns. You can keep costs lower if you take the simplest route, fulfill only the legal requirements, and make your capital contribution in cash.

The costs of establishing an s.r.o. depend on the specifics of each step and the required documentation. Establishing a company involves notary fees for registrations, administrative fees, and any costs for legal advice, as governed by the Civil Code and the Business Corporations Act. Starting in 2024, the fee for registering an s.r.o. is also payable to the notary—it currently amounts to 2,000 CZK.

The costs include:

• the notary’s fee for drafting the founding document/certificate,
• the fee for registering the document in the public registry (by a notary or a court),
• administrative/court fee for registering the s.r.o.,
• signature verification, extracts from registers (e.g., criminal record),
• and, if applicable, costs for legal advice.

Shareholders’ Contributions and Liability in a Limited Liability Company (s.r.o.)

Today, you can establish a limited liability company (s.r.o.) with a minimum registered capital of just 1 koruna. This symbolic requirement will remain in place through 2025 and significantly simplifies the process of starting a business. Previously, the law required a minimum of 200,000 CZK—today, you determine the amount of the registered capital yourself based on your business’s needs.

Each shareholder commits to a contribution, the amount of which is specified in the founding document (the articles of incorporation for a single founder, or the partnership agreement for multiple founders). The minimum contribution per shareholder is also 1 CZK.

Payment of Contributions

• Before the company is established, at least 30% of each cash contribution and, at the same time, at least 50% of the registered capital must be paid up, unless the articles of association specify a higher percentage.
• For non-monetary contributions (e.g., a car, equipment, or a receivable), the entire amount must be paid in full before the company is established.
• The remainder of the cash contribution may be paid within 5 years, unless the articles of association specify a shorter period.

Liability for the Company’s Obligations

A limited liability company is liable for its obligations with all of its assets—that is, not only the funds in its account but also movable and immovable property. The shareholders are liable only up to the amount of their unpaid capital contributions as recorded in the Commercial Register—and they are jointly and severally liable until such contributions are paid in full.

Practical example:

If a limited liability company (s.r.o.) has a registered capital of 900,000 CZK and one of the three shareholders has paid their entire contribution of 300,000 CZK, while the other two have each paid only 180,000 CZK, CZK 420,000 remains unpaid. The shareholders are jointly and severally liable up to the amount of the unpaid capital contributions as recorded in the Commercial Register; the liability continues until the payment of the capital contribution is recorded in the register.
Once a capital contribution is fully paid and this fact is recorded in the Commercial Register, the partner ceases to be liable for the company’s obligations.

Time Required to Establish a Limited Liability Company (s.r.o.)

Earlier estimates from the World Bank’s Doing Business study, which indicated that it took an average of 24.5 days to establish a limited liability company (s.r.o.) in the Czech Republic, no longer reflect reality. Today, establishing a limited liability company can take just a few days if you have all the necessary documents ready and use the fast, direct registration process with a notary.

In practice, however, delays can still occur —for example, due to errors in the documents, waiting times at the bank when opening a business account, or delays on the part of the registry court (unless the registration is handled directly by a notary).

If you want to do it yourself, you can manage it with a little patience. But if you don’t want to risk delays or unnecessary mistakes, we’d be happy to guide you through the entire process —from drafting the founding documents to registration in the Commercial Register.

Checklist: How to Form an s.r.o.

• Notarial Deed

• Payment of Capital Contributions

• Business License

• Registration in the Commercial Register

• Tax Registration

Summary

When establishing a limited liability company (s.r.o.), it is important to keep several steps and requirements in mind. The first step is to draft a memorandum of association or articles of incorporation, which must be notarized. If there is only one founder, a memorandum of association is sufficient; if there are multiple founders, articles of association are required. Next, you must select a registered office for the company and provide proof of legal title to the property. After the documents have been drafted and notarized, you must open a bank account for the initial capital contribution, which can be as little as 1 koruna. The cost of establishing an s.r.o. is around 10,000 Kč if you handle the process yourself. The company is liable for its obligations with all of its assets, which means limited liability for the shareholders.