If you are planning to set up a company, there are many types of companies to choose from. These differ mainly in the need for an initial deposit and the guarantee of personal assets. In this article, we will look at the different types of business corporations and focus in particular on a subset of partnerships.
A business corporation includes all business corporations and cooperatives. Business corporations are further subdivided into partnerships (comprising a general partnership and a limited partnership), limited liability companies (comprising a limited liability company and a public limited company), European companies and European Economic Interest Groupings. Cooperatives then include either classic cooperatives, which can take many forms, and the European Cooperative Society.
The difference between a firm and a corporation: the term business corporation is often confused with the term firm. However, there is a significant difference between the two. Unlike a business corporation, a firm is not a legal entity, but merely the name under which the entrepreneur conducts its business and under which it is registered in the commercial register. Thus, every business corporation has a firm (name), but not every firm is a business corporation.
Commercial companies and cooperatives differ in several fundamental ways:
Business corporations are primarily focused on generating profits for their owners. Income is distributed according to the shareholdings of the partners or shareholders.
Cooperatives, on the other hand, are oriented towards meeting the needs of their members and communities. Although they may be in business, their profits are usually used to further the development of the cooperative or distributed according to the rules set out in the statutes.
A commercial company can be set up by two or more persons (or one person in the case of an Ltd. or an A.S.) and is created by registration in the commercial register.
A cooperative must have at least three founders who are also the first members of the cooperative. Like a company, it must be registered in the commercial register.
We will be happy to help you. We have extensive experience with registrations in the Commercial Register. Everything is done simply, online, tailored to what you need and at a predetermined price. We can handle most cases within two working days.
Commercial companies can be owned and managed by natural or legal persons. Assets and income are distributed among the owners according to their shareholdings.
A cooperative is owned by members who share not only ownership but also decision-making powers. The democratic principle of ‘one member, one vote’ is typical , regardless of the amount of the contribution.
For companies, the level of liability depends on the type of company. For example, in a public company, the members are liable for all their assets. In contrast, a limited liability company and a public limited company have limited liability – the partners or shareholders are not liable for the company’s obligations beyond their contribution.
Co-operatives as a whole are liable with their assets, while individual members are not personally liable for its obligations.
Now let’s take a closer look at the different types of cooperatives and business corporations:
Most of us probably think of an apartment building and neighborhood meetings when we think of a cooperative, but it is a much broader term than a traditional housing cooperative. A cooperative is a community of an unenclosed number of persons whose main purpose is to provide for the needs of its members.
A cooperative must be formed by at least three members. It is formed by a constituent meeting where the statutes – the basic document governing the internal functioning of the cooperative – are approved and officially established by registration in the commercial register.
Are you setting up a housing cooperative? We will draw up or check the statutes and make sure they comply with the law.
Both natural and legal persons can be members of the cooperative. For natural persons, the condition is the completion of compulsory schooling and reaching the age of 15. Founding members acquire membership automatically on the date of formation of the cooperative, while others may become members at any time during the cooperative’s existence by submitting a written application and having it approved by the cooperative.
The cooperative has three basic bodies:
More about cooperatives and their status under Czech law will be presented in our next article.
A cooperative can take different forms depending on its focus. The most typical types of cooperatives you may come across include:
A European Cooperative Society is a transnational form of cooperative society that allows business and cooperation between members from different countries of the European Union. It can be formed by merging existing cooperatives, by converting a cooperative or as a newly established company.
Commercial companies are legal entities that are primarily used to conduct business and generate profits for their owners (members or shareholders).
Commercial companies include partnerships (public limited companies and limited partnerships), limited liability companies (limited liability partnerships and public limited companies), European companies and European Economic Interest Groupings.
Let’s look at the different types of companies in more detail:
Partnerships are characterised by the personal participation of the partners in the business and management of the company. The shareholders do not have a deposit obligation but are liable for the company’s obligations with all their assets.
A public company (v.o.s.) consists of at least two partners who run the business together and are liable for the company’s obligations with all their personal assets.
Basic characteristics of a public limited company:
A limited partnership (limited liability company) combines elements of both partnerships and limited liability companies. There are two types of shareholders, who differ in their level of responsibility and right to manage the company:
Basic characteristics of limited liability companies:
Limited partnerships are based on the capital contribution of the partners and their liability is limited to the amount of their contribution. This means that the shareholders are not liable for the debts of the company with their personal assets.
A limited liability company (s.r.o.) is a capital company in which the partners are liable for the company’s obligations only up to the amount of the outstanding contribution. This means that the partners are not liable with their personal assets. It is the most common type of company in the Czech Republic.
Basic characteristics of an LLC:
Are you planning to set up an LLC? We will guide you through the process of setting up a company and offer you all the services you need for your business.
A joint stock company (a.s.) differs from other forms of business in that it is divided into shares. The shareholders(shareholders) are not liable for the obligations of the company, they only risk the loss of the value of their shares. A public limited company can be private or public – public limited companies can trade their shares on the stock exchange.
Basic characteristics of a.s.:
Find out how to set up and guarantee a public limited company in our next article.
A European company is a multinational form of public limited company that allows business in all member states of the European Union and the European Economic Area under a single legal framework.
The basic characteristics of a European Company are:
A European Economic Interest Grouping (EEIG) is a specific legal form allowing companies or sole traders from different EU countries to work together on joint projects without losing their legal autonomy.
The main objective of an EEIG is not to generate profit, but to promote and facilitate cross-border cooperation between its members. If an EEIG generates a profit, this profit is distributed among the members and taxed in their home countries.
Basic characteristics of an EEIG:
Business corporations include partnerships and cooperatives. Business corporations are divided into partnerships (v.o.s., k.s.) and limited liability companies (s.r.o., a.s.), while there are also European forms such as the European Company (SE) and the European Economic Interest Grouping (EEIG). Cooperatives include classic cooperatives and the European Cooperative Society.
Commercial companies are profit-oriented, while cooperatives meet the needs of members. Partnerships haveunlimited liability of the members, while limited companies are liable only up to the amount of the contribution.
In a general partnership , all partners are liable with their entire assets, while in a limited partnership , general partners are liable with their entire assets and limited partners are only limitedly liable. A limited liability company is the most common form of business with limited liability for the outstanding deposit, while a joint stock company is divided into shares and may be publicly traded.
We will enter the Commercial Register or arrange any changes for you. With us, you can be sure that the registration will go smoothly and on the first try. We act quickly, professionally and at upfront prices. You can only pay after the service has been 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.
In person and online. Just choose the appropriate service or opt for an independent consultation when you are unsure.
