Has your business grown and no longer suits you in its current form? Are you thinking of setting up a limited company but find it administratively and financially too complicated? You may be surprised to learn that it is far from it and there are some advantages over a sole proprietorship. We’ve summarised the process, costs and conditions of setting up a limited company for you.
Setting up a limited company is an important legal step in your business. A major advantage is the limited liability mentioned in the name, which provides more protection for your personal assets in case of business missteps. The relatively easy ability to transfer ownership rights can also be a plus. On the other hand, it is necessary to take into account the greater difficulty in keeping the books and the impossibility of disposing of the company’s profits whenever needed.
Tip: We have discussed the advantages and disadvantages of sole proprietorship versus a corporation in a separate article.
The use of the term “company” can sometimes be a little misleading. In legal circles, it refers purely and simply to the business name under which a business is registered in the commercial register. This time, however, we will leave the purely legal terminology behind and use the term in its more general meaning, i.e. as a company or a corporation. If you are convinced that setting up a company is the right way for you and you are wondering how to do it, go through the whole procedure with us.
The Companies Act regulates the legal status of companies and the relationships between the members, statutory bodies and other persons acting within a limited liability company. This Act constitutes a special legal regulation which follows the general rules contained in the Civil Code.
If you want to start your business as soon as possible, entrust us with the establishment of your LLC and we will create a customized company for you. Everything will go smoothly and in the shortest possible time.
I simply want to set up an LLC.
More founders then require a legal form of a memorandum of association, which necessarily requires a notarial deed (if it is a basic version, it will also be significantly cheaper. In addition, the notary can then register the company directly in the register).
It is already necessary to have an agreement on the apt and original name and the registered office of the company (it is necessary to have a lease agreement or the owner’s consent if you are not the owner of the property where the registered office is located), to reconcile mutual ideas about the functioning of the company, to put together affidavits and signature samples of the future managing directors.
The memorandum of association must state the names and residences (registered offices) of all the partners, the registered office and business name, the objects of the business, the mutual shares(the business share is usually determined by the proportion of its contribution to that share attributable to the amount of the share capital, but the memorandum may provide for another procedure). With regard to the registered office, we recommend that only the entire municipality be indicated, e.g. “Prague”. You will then not have to change the articles of association every time you move within the municipality and the address will only change in the commercial register.
The articles of association also specify the company’s organs. These are the general meeting, through which the individual members participate in the management of the company, and the managing directors, who are the statutory body. The managing directors of a limited liability company must have a clean criminal record. The company may have other bodies, such as a supervisory board, if the articles of association so provide.
If only one person establishes the company, a so-called memorandum of association is drawn up instead of a memorandum of association. It contains the same elements as the articles of association but is issued by the sole founder. A legal person may be the sole shareholder in up to three other single-member LLCs. In a single-member company, all the powers of the general meeting are exercised by the shareholder alone, who decides on major decisions in writing. Otherwise, the same rules apply as in the case of multi-member LLCs, including the possibility of having more than one managing director or the method of registration in the Commercial Register.
As of July 2023, the conditions for exercising the function of a member of a body of a commercial corporation are defined directly in the Commercial Corporations Act (Section 46 et seq.). There is also a non-public register of persons excluded from holding office, accessible to notaries and courts.
The Ministry of Justice has contributed to facilitating the formation of a limited liability company by publishing a universal electronic model of the articles of association, which contains all the mandatory elements of the legal act of incorporation of a limited liability company, supplemented by a brief explanatory commentary. This simplification will make it easier for you to create a memorandum of association, but it is advisable to consult a solicitor on the final form of the memorandum, who will add the necessary details relating specifically to your type of business.
Tip: Until the autumn of 2021, it was necessary to visit a notary at least twice when setting up a limited liability company, both for the notarial registration of the articles of incorporation or the articles of association and subsequently for the notary to verify that all obligations have been fulfilled (e.g. payment of deposits) and to issue a certificate for registration in the register. Now a personal visit to the notary is no longer necessary, it is sufficient to verify the identity via bank identity or ID card with chip. You can contact the notary by video call and everything can be done remotely.
Once the company is established, you need to go to the bank with the notarial deed. Here you will open a bank account into which the share capital will be deposited. To set it up, you need to submit a drawn up and certified memorandum of association.
The company must also be registered with the trade office and obtain a trade license. To do this, it is necessary to go to any trade office, pay an administrative fee and provide proof of the legal title to use the future registered office. Here, too, a memorandum of association is submitted. A responsible representative must be appointed to register a trade or craft, as well as to obtain a licence for a licensed trade.
Nowadays, however, there is no longer any need to wait for the verdict of the trade licensing authority, as you can apply for registration of a legal entity in the public register and apply for a trade licence at the same time. In fact, both processes can take place simultaneously, which should speed up the whole process and allow you to start your business sooner.
This change was brought about by the Act amending certain laws in connection with the use of digital tools and procedures in company law and the operation of public registers. At the same time, it also reduces additional administrative burdens for company founders. For example, it will no longer be necessary to document certain data duplicated both when registering a company in the Commercial Register and when declaring a trade to the Trade Licensing Office (typically the legal reason for the use of the premises where the company will have its registered office).
The company would not be formed unless it was registered in the commercial register. This can be done through the registry court or with the notary who prepares all the documents. The latter may make remote access to the register.
The registration in the commercial register should be followed by the registration of the company with the tax office for the relevant taxes. Alternatively, tax registration can also be done via the trade licensing office.
If you are seeking a specific form of business, such as setting up an employment agency, you need to know the specifics of the industry in addition to the general requirements. In this particular case, in addition to a responsible representative, you would also need a permit from the Labour Office of the Czech Republic to provide employment (the latter will also request a consent opinion from the Ministry of the Interior of the Czech Republic), a deposit of CZK 500,000 to the account of the Labour Office of the Czech Republic and bankruptcy insurance or bankruptcy guarantee insurance (the last two points apply to you if you plan to employ your clients and assign them to individual employers).
Tip: It is also practical to add your spouse’s consent to your business. However, this and the affidavits can be easily verified by a notary, whom you must contact anyway.
Most people are of course also interested in the cost of setting up an LLC. The good news is that after setting up an LLC, you still have enough money to start the business. If you can manage everything on your own, your costs should not exceed CZK 10,000. You can achieve a lower amount provided you take the easy route, do only what the law requires of you and make the deposit in cash.
The cost of setting up an LLC depends on the specification of the individual steps and documentation. The establishment of a company is associated with notary fees for incorporation, administrative fees and possible costs for legal advice, which are regulated by the NCC and the Commercial Code. Since 2024, the fee for registration of an LLC is also paid at the notary – currently it is CZK 2,000.
The share capital required to start an LLC is just 1 crown. This is undoubtedly a sum that simplifies the whole process considerably. A few years ago, you needed a minimum of 200,000 CZK as a basic deposit.
The contribution of one shareholder should also be at least 1 crown. The time by which the entire deposit must be made is set by the articles of association, and 30% of the amount must be paid at the time of incorporation for a cash deposit and 100% for a non-cash deposit. The remaining amount is to be paid within 5 years of the company’s incorporation at the latest.
A limited liability company is liable for its obligations with its entire assets. This means not only the money in the account, but also other movable and immovable property. The partners are jointly and severally liable for the company’s obligations up to the amount of the outstanding contribution. After full repayment and registration of this fact in the Commercial Register, the liability ceases. Thus, if the share capital is CZK 900,000, one shareholder has paid his entire deposit of CZK 300,000 and the other two shareholders have paid only CZK 180,000, they are liable up to CZK 420,000, which can be recovered from any of them.
When determining the share capital and other conditions of incorporation, it is necessary to comply with the rules set out in the Civil Code and the Civil Code of the Republic of Poland, which apply to the amount of the contribution and the liability of the partners in the establishment of the LLC.
Tip: Are you considering setting up a company and don’t know what form to choose? Apart from the financial and administrative complexity, the liability of the individual partners or the company in general can be an important aspect of the decision. Therefore, read on to find out how an LLC and its partners are liable for debts.
This is where the experts’ opinions diverge somewhat. Ideally, it is possible to set up an LLC within a few days, but in practice there may be a delay at an office. According to the World Bank’s Doing Business 2020 study, which compares business procedures in 190 countries, it takes 24.5 days to set up a company in the Czech Republic. To speed up the process, it is possible to use the services of experts who know the whole process intimately and know what and how to time it correctly.
Incorporating an LLC is really nothing you shouldn’t handle. However, if you are still worried about making a mistake, we will guide you through the whole process of setting up an LLC and provide you with all the service you need.
How to terminate a shareholder’s participation in a limited liability company? Find out in the next article.
When forming a limited liability company (LLC), it is important to keep several steps and conditions in mind. The first step is to draw up a memorandum of association or articles of association, which must be notarised. If there is only one founder, a memorandum of association is sufficient, but if there are multiple founders, a memorandum of association is required. Furthermore, the registered office of the company must be selected and the legal title of the company must be documented. After the documents are drawn up and verified, a bank account must be set up for the deposit of the share capital, which can be as little as 1 crown. The cost of setting up an LLC is around 10,000 CZK if you arrange the process yourself. The company is liable for its obligations with all its assets, which means limited liability of the shareholders.
We will safely guide you through the entire process of setting up an LLC and provide all related services. We will handle everything quickly and professionally so that you can enjoy your own company as soon as possible. For a pre-determined price and throughout the country. You can pay only after the service is provided.
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.
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