Setting up a business can be a daunting task

Registering a new company should take 20 days, which places the Czech Republic in the lower half of countries in terms of ease.

Business Essentials
Raymond Johnston | 28.11.2010

The Czech Republic isn’t the easiest place to do business, especially for foreigners.  The bureaucratic system was inherited from the Austro-Hungarian Empire and, despite some efforts at reform, it can be relatively complicated to do simple things.

The Czech Republic ranked 130th out of 183 economies for ease of starting a company, according to the Doing Business 2011 report compiled by the World Bank. That is a drop from 113th place in the previous report. The World Bank counted nine procedures that should take 20 days to complete, but complications with the paperwork, especially if translations of foreign documents are required, could stretch it out much longer.

A limited liability company is called a společnost s ručnemím omezeným, or  s.r.o., in Czech.  The registration procedures are outlined in sections 105 to 153e of the Czech Commercial Code as well as part of the Trade Licensing Act. All documents need to be in Czech and notarized. It is possible to register a company on your own, but a number of law firms and other companies offer help in negotiating the somewhat arcane system. All documents need to be in Czech and notarized. A minimum starting capital of Kč 200,000 is required as is a business address.

A minimum starting capital of Kč 200,000 is required as well as a business address.  In addition to the starting capital, there are fees for generating extracts from state agencies and fees for notarizing signatures. The owner of the property has to provide you with a notarized certificate stating that a business can operate at the address.  Depending on the type of business, the address can be anything from a business park to a virtual office.

The directors of the company also have to prove that they have no outstanding tax debts and have clean criminal records. Foreigners may be asked to provide certified statements from their home countries. For US citizens, a statement from the embassy saying that the US government does not provide criminal extracts may be required.

You must submit an application to the Trade License Office to do business in a certain field. Depending on the field, the office may require you to have an experienced person who is Czech or a permanent resident on staff. The office may also require state certificates or additional licenses in other fields.

The next step is to apply for registration at the Commercial Register (Obchodní rejstřík), with all of the notarized documents, including a notarized statement from your bank that you have deposited the required amount of share capital and that you have an account that can accept payments. Non-EU citizens also have to prove that they have a visa address and sufficient funds in a personal bank account.

After the company is registered in the Commercial Register, the managers have to register with the Social Security Administration and with a health insurer.  They also have to register with the revenue authority within 30 days.

It is no surprise that author Franz Kafka came from Prague and worked as a clerk for a bureaucratic firm. While registering a company sounds straightforward on its face, many people who have gone through the process report a Kafkaesque experience of having to return to the same office multiple times to complete what sounded like a simple task.

The government-run portal www.businessinfo.czhas additional information including links to registries, but much of it is in Czech only. Another useful linkis run by the European Commission. 

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