What is the deposit and share capital for an LLC?

Quick overview:

• The share capital of an LLC can be as low as CZK 1, but such a low amount is rarely appropriate.
• For a regular business, it is more practical to set the capital according to the actual start-up costs so that the company does not appear untrustworthy and does not have to deal with financing immediately after incorporation.
• The cash contribution is usually paid to the custodian at incorporation, while the non-cash contribution must be valued and described in the memorandum of association.

Before you determine the share capital, consider mainly:

– how much money the company will need in the first few months,
– whether you will apply for a loan or negotiate with an investor,
– how many shareholders the company will have,
– whether it will be a cash contribution only or a contribution in kind,
– whether it’s worth it to raise more capital now, or to raise it later in an administratively demanding way.

Are you setting up an LLC and don’t want to deal with a badly set-up deposit, an unsuitable articles of association or an unnecessary capital increase later? As part of our LLC formation service, we will prepare a customized company for you, including the correct setup of deposits, share capital and shareholders’ shares.

For several years now, the Civil Code has allowed us to set up a limited liability company at a relatively low cost. Of course, there are always fees to be expected for the notarial registration of the company, the issuance of the trade license, the court fee associated with the registration in the commercial register, and possibly lawyer’s expenses. However, all this should not exceed twenty thousand crowns. The company itself can then be established for as little as one crown (compared to the previous 200,000 crowns).

This has made the establishment of a company much easier and more accessible to the general public, but it is not always worth choosing the cheapest way. Why is it not ideal to choose the crown as the share capital?

Your company doesn’t exist in a vacuum, but it will need customers, business partners and perhaps investors or a bank loan to operate. All of the above will be a bit more complicated if the share capital is one crown. This may make the company look untrustworthy and unpromising. An additional increase in share capital is possible, but it is an unnecessary and demanding administrative procedure.

In practice, we can see that the biggest problem does not arise at the actual establishment of the limited liability company, but only at the moment when a company with minimal capital is dealing with a bank, a landlord or a larger business partner. These often evaluate not only the registration in the commercial register itself, but also whether the company is economically viable.

This is something of a paradox. In practice, the share capital does not have to be kept somewhere in the company’s account and thus does not represent a guarantee of the fulfilment of obligations. It is essentially a bookkeeping item, while the real assets may vary by hundreds of thousands.

When determining the amount of share capital, therefore, the first thing to think about is how much the company needs to get going before it starts to show any profit. This can vary dramatically from company to company, depending, for example, on how much rent it pays, how many employees or associates it needs to operate, and the costs of any production or promotion. The number of shareholders and the general structure of the company is also important.

Example from practice: a client was setting up an LLC for an e-shop and originally wanted a share capital of CZK 1. After taking into account the costs of stock, advertising, accounting services and the first months of operation, it turned out that the company would need tens of thousands of crowns right at the beginning. Therefore, we recommended to set the capital and deposits in such a way that they correspond to the real financing of the start-up and at the same time do not appear to be formally created only “by eye”.

From the above, it follows that if someone actually opted for a share capital of one crown or a few hundred crowns, their company would be underfunded and would probably not even have the basic money to operate. Soon after its incorporation, it could find itself bankrupt.

So what amount of share capital should be chosen?

There is no universal ideal amount. The share capital should correspond to what the company actually has to finance in the first few months. If you are setting up a simple, low-cost consultancy or online service, a lower capital of thousands to tens of thousands of crowns may be sufficient. For a company that will be paying rent, staff, stock, production or technical equipment right away, it’s reasonable to consider a higher amount.

From a practical point of view, it is not worth choosing CZK 1 just because the law allows it. Such a company may raise questions among business partners as to whether it has sufficient facilities. At the same time, the share capital itself is not a guarantee that the company will have money in its account – it is an accounting figure registered in the Commercial Register. It is therefore important to reconcile the capital, the actual financing and the memorandum of association.

Not sure whether £1, £10,000, £50,000 or more capital is appropriate for your business? Contact us – depending on the type of business, number of shareholders and projected costs, we’ll recommend a setup that makes sense legally and commercially.

What is the difference between a deposit and share capital?

By contribution we mean the value of the object of the shareholder’s contribution to the share capital, which is expressed in money. The aggregate of all contributions then constitutes the company’s share capital, the amount of which is entered in the Commercial Register.

The amount of each shareholder’s contribution is determined by the articles of association. It also determines the amount of the contribution per share, which may be set differently for each share.

The objects of a shareholder’s contribution may be

• money in cash or in bank accounts (cash deposit),
• movable property or immovable property (non-monetary contribution). These are then valued by an expert’s report. They may include, for example, a car, a building or production equipment.

Monetary contribution to the company

When establishing a company, a cash deposit must be made into a special bank account set up for this purpose by the deposit manager, who may be a notary public. The funds are then blocked there until you receive confirmation of the company’s registration in the commercial register. From that moment on, the newly formed company owns them.

If you are setting up a limited liability company with a maximum share capital of CZK 20,000 or less, you do not even need to set up a special bank account. It is enough to pay the deposits by depositing them with the deposit manager.

It is also important to note that it is not necessary to collect 100% of all deposits to form a company. For a limited liability company, the law stipulates the necessity to repay at least 30% of each cash deposit at the latest on the date of registration in the commercial register and, if applicable, the entire deposit premium (if such obligation arises from the articles of association). The remaining 70% can be repaid within a maximum of 5 years (or even earlier if the articles of association so provide). As a result, the withdrawal of deposits is very flexible.

A specific situation is the contribution of a business by a natural person. This consists in the transfer of a trade business to the share capital of an LLC.

Non-cash contribution to the company

If you do not want or cannot contribute cash to the company, you can also make a contribution in kind. This can be any item that can be valued in cash, even if the item itself is not essential or necessary for the operation of the company. You can imagine that it could be your cottage in the Bohemian Forest or your grandfather’s collection of gold coins. However, it should be taken into account that the company can sell such an item and use the money for its activities.

The only condition is that the item has a certain value expressed in money and that the item is valued by an expert and an expert’s report is prepared.

In the case of non-cash contributions, a common mistake is to describe the property too generally in the memorandum of association or to underestimate the valuation by an expert. This can complicate notarial registration and subsequent entry in the commercial register.

However, the amount on which the shareholder’s contribution is set off may not be the same as the amount on which the object was valued by the expert. If the contribution is calculated at a lower value than the value at which the object was valued, this is the aforementioned deposit premium.

Non-monetary contributions must be taken into account when drawing up the memorandum of association, as it must subsequently contain a description, valuation, information about the expert and other details provided for by law. Thus, the non-cash contribution is de facto introduced into the company before its formation and is accepted directly by the deposit manager itself.

If it is a movable asset, then it must be physically handed over against a handover protocol, if the nature of the asset allows it.

The contribution of immovable property to a company is not a problem either, but a specific rule applies – for the contribution of immovable property to an LLC, a written declaration of contribution of the immovable property is submitted.

For a contribution in kind, it pays to prepare the documents carefully at the outset. We can help you to check whether the chosen property is suitable as a contribution and advise you on what the memorandum of association must contain and how to avoid problems when registering it in the commercial register.

The withdrawal of the deposit does not have to take place immediately when the company is established. However, the amount to which the deposits are paid may affect another important matter, namely the liability of the shareholders. According to the law, they are jointly and severally liable with their private property to the extent that they have not fulfilled their deposit obligation. This is assessed according to the status registered in the commercial register at the time when they were called upon by the creditor to perform. The liability of the members of an LLC arises automatically by operation of law and is joint and several. Therefore, any shareholder may be called upon to perform, regardless of whether or not he has already paid his deposit.

What happens if a shareholder fails to meet the deposit obligation?

If a shareholder fails to pay the deposit by the due date:

• • he/she is obliged to pay default interest in the amount agreed in the articles of association; if the articles of association do not provide otherwise, the Corporations Act provides for double the statutory default interest. This is based on the CNB repo rate applicable on the first day of the relevant calendar half-year and therefore the specific percentage may change over time.
  • Alternatively, he may face expulsion from the company.

Change of share capital

It is possible to change the share capital in the course of business, but you can never avoid the administrative process. For this reason too, increases and decreases do not occur very often.

The change must be decided by the general meeting and the entry of the share capital in the commercial register must be amended. This is done by means of a notarial deed. A change in the share capital takes the form of:

• additional contributions by the owners to the company when the share capital is increased,
• transfer of profits to the share capital for the purpose of increasing the share capital,
• the withdrawal of contributions when the share capital is reduced.

Summary

The share capital of an LLC can be set as low as CZK 1 in 2026, but for most companies the lowest possible amount is not practically appropriate. It is better to determine the amount of capital and contributions according to the real costs of starting the business, the number of shareholders, the planned financing and how the company is to operate externally. The contribution can be cash or non-cash; the non-cash contribution must be valued and properly described in the memorandum of association. As a rule, at least 30 % of the cash contribution and the entire deposit premium, if any, must be repaid before the registration of the Ltd. in the commercial register; the remainder must be repaid within a period specified in the articles of association, up to a maximum of 5 years. The shareholders are liable for the company’s debts up to the amount of the outstanding deposits entered in the commercial register and may incur default interest and the risk of expulsion from the company in the event of default in the payment of the deposit.