Starting a Business in the Czech Republic
When launching your business in the Czech Republic, there are two structures you will typically choose from: a limited liability company (s.r.o.) or a trade license (živnost). This blog covers some of the advantages and disadvantages of each option as well as the requirements for obtaining a trade license. Let’s dive in together!
Advantages and Disadvantages of a Limited Liability Company (s.r.o.) in the Czech Republic
The first option is setting up a limited liability company, or s.r.o. This structure is widely used for small to medium-sized companies and offers two major advantages when starting a business. First, it allows the business to have multiple shareholders. This is ideal for a partnership and or multiple people interested in co-owning a company with shared responsibilities. Second, you can set up and manage the company without having a visa in the Czech Republic.
However, there are three major drawbacks to this approach. First, it is difficult to set up and cancel the limited liability company. Second, the tax obligations are generally higher. Third, setup and closure costs are substantial.
Advantages and Disadvantages of a Trade Licence in the Czech Republic
The second option is obtaining a trade licence. This is the simplest way to start a business in the Czech Republic and has a few advantages over an s.r.o. In comparison, a trade license is much cheaper to set up and has lower tax requirements. Additionally, a trade license can be set up much quicker. With the correct documents, you can get the trade license in three business days.
Having said that, there are limitations to a trade license. In order to hold an active trade license, the person must have a visa or residence permit in the Czech Republic. The exception being people who hold EU citizenship. Additionally, this business cannot be shared with others and your business name cannot be chosen. What that means is the name of the business is always your name.
It does not mean you can not brand it as you like – you can still have a website olliespancakes.com or ITservicesPrague.com with your logo and everything. Just the official business name on your invoice and or any other official documents will be your name. Selling your business might also get a bit more complicated with just trade license (since you can not really sell yourself 🙂 ).
What do you Need to get a Trade License in the Czech Republic
Aside from the advantages and disadvantages of a trade license, obtaining the trade license requires time, attention, some knowledge of the Czech language and procedures, and specific documents. And honestly a bit of luck as well.
There have been foreigners who managed to get the trade license themselves with no problems at all – they spoke a bit of Czech, they encountered nice officers at the trade license office, people were helpful to them.
There have also been cases where people had to go back to the trade license office many times because there was always “something” missing or incorrect in the documentation. There have also been people who found themselves in serious amount of debt because they thought the social security and health care registrations would happen automatically so they had not paid the monthly fees for months and then had to backpay everything including late payment fees.
At Move To Prague we will be happy to take care of your trade license completely on your behalf so you get it as smoothly as possible, with no complications and following all the legal procedures. All without the need of you going anywhere – you sign a Power of Attorney for us and we’ll deal with all the authorities on your behalf. Speak with us about the trade license here.
Documents Needed to get the Trade License in the Czech Republic
First, a person must have a passport.
Second, a valid visa or residence permit is required for non-EU citizens.
Third, a business address is necessary. In the case a landlord does not allow a tenant to run their business from their place of living, then a virtual business address can be used. This basically means you rent a mailbox which will serve as the company’s official business address. We provide this service as part of our trade license assistance.
Fourth, a person must choose a trade or trades. There are two types of trades: unqualified and qualified trades. For unqualified trades, proof of education or qualification is not required. These can automatically be added to the trade license. For qualified trades, proof of education, qualification, and or experience in that field is required. And although it might sound easy to fulfill these requirements (i.e. education or experience in a particular filed) it can get pretty complicated if your degree and or experience is not from the Czech Republic since apostilles, nostrifications and other verifications might be required. If you can choose some of the unqualified trades, it is certainly recommended.
Fifth, a payment of 1 000 CZK for the trade license must be made.
Sixth, depending on where a person is coming from and purpose of stay in the Czech Republic, a criminal check is needed. A criminal check is not required for EU citizens, permanent residents in the Czech Republic, or students who live here under code 23.
Seventh, registration with the tax office to get your tax number is needed.
Eighth, registration with the social security office is called for. Once you get registered, you will need to start paying the monthly contributions.
Ninth, all EU, American, Turkish and Japanese citizens must register with the public health care system and begin paying the monthly fees for that as well.
Tenth, every trade license holder gets a Data Box assigned to communicate with authorities electronically. This can also be potentially pretty daunting process since the login details are usually sent to your home address, whatever that means for the Ministry of the Interior (can be the address you have used for your visa or residence permit, can be your foreign home address).
From July 2025, every trade license holder must also get registered with the Czech TV and Czech Radio to (not) pay the monthly TV and Radio fees.
Trade License vs s.r.o. Overview
Despite the fact that these are two different approaches to setting up a business in the Czech Republic, there is no significant difference between what someone can do as a limited liability company or as a trade license holder. You can brand your business, you can hire employees or contractors if needed. The primary differences are seen in the amount of time to set up the business, taxes, and process of each path.
If you have any questions and or would appreciate help with setting up your trade license, contact us or fill in any of the forms on this page and we’ll be happy to speak with you 🙂
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