background image
1.1.1. Main Forms of Doing Business

Czech law provides for multiple business forms for investors, including:

  • Limited Liability Company
  • Joint Stock Company
  • Partnerships
  • Co-operative
  • Branch Office

Limited Liability Company

A Czech Limited Liability Company (LLC) is a company whose registered capital is made up of investments by company members.

Key aspects of an LLC include:

  • May be formed by a single member, and up to 50
  • Members can be natural persons or legal entities
  • Natural person members are limited to being members of at most 3 limited liability companies
  • When an LLC is formed by a sole shareholder, they may not be the sole shareholder of another LLC
  • Minimum registered capital is CZK 200,000, with a minimum ownership interest of CZK 20,000 per member
  • Liability of the members is limited to their contribution to the company
  • The company is managed by an executive, and may also have a supervisory board

Joint Stock Company

A joint stock company in the Czech Republic is similar to an LLC, but ownerships is represented by shares.

Key aspects of a Joint Stock Company include:

  • May be formed by a single shareholder, if the shareholder is a legal entity; otherwise the minimum number of shareholders is 2, natural persons or legal entities
  • Liability of the shareholders is limited to their share ownership
  • Minimum registered capital is CZK 2 million, although this is increased to CZK 20 million if share capital is via the offer of shares to the public
  • At least 30% of the capital amount must be subscribed for in cash and paid upon incorporation
  • The company is managed by a board of directors and a supervisory board
  • Each board must have at least 3 members, none of which can serve on both boards
  • If the company has a sole shareholder, the 3 member board of directors requirement does not apply

Partnerships

Czech law allows for the formation of two types of partnerships; the general commercial partnership and the limited partnership.

Key aspects of a General Commercial Partnership include:

  • Formed by at least 2 partners
  • Partners may be natural persons or legal entities
  • A partnership agreement must be drawn up
  • All partners are fully liability for obligations of the partnership
  • All partners may engage in the management of the partnership
  • Details of the partners is filed with the Commercial Register, including names, addresses, and amount of capital paid by each partner

Key aspects of a Limited Partnership include:

  • Formed by at least 1 general partner and 1 limited partner
  • Partners may be natural persons or legal entities
  • A partnership agreement must be drawn up
  • General partners are fully liable for the partnership, while limited partners' liability is limited to their contribution to the partnership
  • General partners may engage in management of the partnership, while limited partners may not
  • Details of the partners is filed with the Commercial Register, including names, addresses, extent of liability, and amount of capital paid by each partner

Co-operative

Co-operatives may be formed to undertake business for the economic or social benefit of its members.

Key aspects of a Co-operative includes:

  • Formed by a minimum of 5 members if natural persons, or 2 legal entities
  • Minimum  registered capital is CZK 50,000 per member
  • An indivisible fund of at least 10% of the registered capital must be created at the time of incorporation, in which at least 10% of the profits after tax must be must be transferred annually until it reaches a minimum of 50% of the registered capital
  • Members are not liable for the debts/obligations of the co-operative

Branch Office

A branch may be formed by a foreign company in order to conduct business in the Czech Republic.

Key aspects of a Branch include:

  • A branch is not considered a separate legal entity from the foreign parent and has no limited liability
  • May engage in business activities only within the limits set by the parent company
  • Branches must obtain a trade license to conduct business
  • The parent of a branch must appoint a director of the branch office
  • Details of branch and the foreign parent must be recorded in the Commercial Register