Business Types in Czech Republic

There are several business types in Czech Republic to choose from, the most common ones are:
  • trade license (= živnostenský list , "živ list", "zivno"), for self-employed, freelancers and alike,
  • an SRO (= czech limited liability company (LLC, LTD), for larger business than self-employed,
  • an AS (=joint stock company), for: holding with multiple s.r.o's, public shares
  • partnership, - not very common for foreigners (and, no real benefits over a trade license)
  • co-operation ("drustvo"), - typical for buildings with multiple owners

Choices for Private Individuals : employee, živnostenský list, SRO

For 95% of the foreigners there are 3 possibilities:

being employee, being freelancer (using a trade license / živnostenský list) or having an SRO

If an employer offers a position as employee, you may also consider working on a trade license. If you would invoice the same amount as the gross salary your net earnings would be most likely higher and it eliminates the need for a work permit. Besides, especially in Prague, it is easier to get a project as freelancer than getting hired as employee.

In case you wish to be a 'free man / woman' and start your own business, the choice is between a trade license and an SRO - for the typical one-man business we recommend the trade license. It is much easier and cheaper to set up (and close!), you'd pay les in Tax / Social / Health charges and if your business really grows, you can always make the transition to an sro at a later point in time.

Some arguments to help you to decide:

Choices for Legal entities, Companies : branchoffice, s.r.o, a.s

For (foreign) companies wishing to open a branch or daughter here there are 2 possibilities:
a branch office (organizční složka) or an SRO

A branchoffice is almost the same as an s.r.o., minus the liability (it lies with the parent).
The formation process is about the same (comparable time spent, comparable costs), especially if the shares of the SRO are owned for 100% by the parent, so Alexio recommends starting an SRO: Taxwise there are more possibilities and should take things a turn for the worse, because of it's own liability, it doesn't affect the parent.

An a.s. requires a starting capital of minimum 2.000.000 CZK, a board of directors a board of supervisors and annual audits. These are usually enough reasons to chose and ordinary SRO (in 99% of the cases it is the right choise) - unless the intention is to give out public shares (rare) or there is a need to form a holding structure.