Trade License (Živnostenský List) or Company (SRO) ?
Similarities between a trade license and an SRO company
- Both can be used to apply for a Business Visa (not required for EU Citizens),
- In both cases, if you are non-EU, on an employment / student visa and quit your job /study, the purpose of stay changes, and you will have to apply for a Business Visa.
- In both cases, you do not need a Work Permit - since you are not an employee
- Both can sell goods / services internationally,
- Both can have a turnover of millions,
- Both can have employees on temporary basis or on 'real' contracts,
- In both cases, if your turnover in CZ is higher than 1.000.000 CZK in 12 months, or you deal with EU suppliers / clients, you are obligated to register for VAT.
Benefits of a trade license
- easier to set up than an sro - it takes us 5 working days, an sro at least 20 days,
- easier to stop, a trade license can be paused / stopped in 1 day for minimum costs (liquidation of an sro is a long and expensive process - count 50.000 CZK and 3/4 of a year),
- typically lower taxes than being employee or having an sro (more bang for the buck),
- better suitable for 'one-man' activities,
- accounting is easier / cheaper than for an sro.
Benefits of an SRO
- A jednatel does not have to be employed at his / her own company (but for business visa extension one needs to have proof of personal income),
- A jednatel of an SRO can enroll into the public health care, (interesting for non-EU),
- The chance you will get a Business Visa is bigger (for some nationalities),
- An SRO can have more than one director,
- A director does not have to live in CZ (there is no obligation to appoint a local director either),
- An SRO can attract external capital in exchange for shares,
- An SRO is able to pay dividends (interesting for high-income individuals),
- An SRO has a more professional image than 'just a živnostenký list',
DOWNSIDES of an SRO
- For the average one-man band, the SRO is almost always more expensive to start and operate compared to a Trade License,
- For the average one-man band, taking out salary or dividends from an SRO will always be more expensive than a Trade License,
- If a jednatel does not take out salary, it will be more diffcult to extend the business visa,
- Dividend payouts do not help towards extending a business visa,
- SRO accounting generally speaking is more complicated and more expensive than for a Trade License,
- What no lawyer talks about: you do not need a lawyer to open an SRO,
- What no lawyer talks about II: it is difficult / expensive / timeconsuming to get rid of an SRO,
- An SRO has no longer limited liability. *
* This means that with a živnostenský list you are responsible with your entire private capital, but with an SRO your liability is only the amount of shares you've put in. Note that since 2014, directors can be held responsible with their private capital in case of misconduct / purposely poor business behaviour.
Formation / Registration CostsThere is a large difference in setup costs:
Registering a živnostensý list costs about 7.500 CZK whereas forming an SRO quickly costs 30.000 CZK.
If you decide to start an SRO from scratch, you'll also need to deposit basic capital in addition to the founding costs (Since 2014 the requirement of minimum 200.000 CZK has dropped, it can be as low as 1 CZK, but a basical capital of 1 CZK does not look very professional ).
Business Visa ExtensionThe Alien's Act changed significantly in 2011 which has an impact on everybody getting and extending a business visa. Both trade licenses and sro's need to provide much more paperwork proving the business is really functioning and you make enough money to make a living in Czech Republic.
If you do not make money with your business (or cannot provide for your own living costs), you do not fullfill the purpose of stay (which is doing business) and the visa extention may become very problematic.
Alexio sro foundation / trade license registration servicesAlexio offers package of formation / registration services.
We do not only set up businesses, but we help you decide what is best for you and how to set it up.
Further, we will help you with your visa (or residence permit for EU Citizens) and offer accounting and tax services, which is our core business.
We guarantee that if you invest in 1 or 2 hours of consultation, we will be able to answer 99% of your questions and without doubt your start in Czech Republic will be much easier.