Choosing the right type of company requires knowledge of the Czech business forms. The singularities and similarities of the different types of companies are described further on.
Limited liability company
Limited liability companies (společnost s ručením omezeným - s.r.o.) can be formed of one to fifty members. One person can be both the sole owner and executive.
The s.r.o. does not have a board of directors. Each of the contributors has the right to make decisions independently if the partnership agreement does not state otherwise.
The minimum registered capital is CZK 200,000. In case of a sole owner, it must be fully paid. With more partners forming the company, a minimum of 30% must be paid on registration. Each member must contribute at least CZK 20,000. The individual amounts must be divisible by 1,000 without a remainder.
Joint stock company
Shareholders of a joint stock company (akciová společnost - a.s.) are only liable up to the amount of their investment. The company is not bound to a particular founder, therefore the shares may be sold easily.
Joint stock companies must have both a board of directors and a supervisory board. The board of directors is the company's statutory body. It must have at least 3 members. It decides on all matters that are not reserved to the general meeting or the supervisory board. The supervisory board monitors the activities of the board of directors and the operations of the company. It has to consist of at least 3 members, and the number must be divisible by three. The supervisory members cannot be the same as the directors.
The company has to issue the regulations governing the relationships between the shareholders and the directors of the company (articles of association). Your joint stock company may also require statutory audits. They are mandatory if your balance sheet exceeds CZK 40 million, the net turnover exceeds CZK 80 million, or the number of employees exceeds 50.
As for your minimum registered capital, you have to contribute CZK 2 million for a non-public company and CZK 20 million for a public company, i.e. a company founded through a public offer in shares. A minimum of 30% must be paid on registration for monetary contributions.
You should also know that the shares can be either bearer shares or registered shares. Shares which are not registered in the Commercial Register are freely transferable. Registered shares may be restricted by articles of association.
General commercial partnership
General commercial partnership (veřejná obchodní společnost - v.o.s.) is a business form in which all partners are liable with all their property. The management has to be formed by at least two persons. The advantage of a general partnership is that you do not need the initial investment.
Branch office
A branch office (pobočka) is not a Czech legal entity, but a commercial representation of its foreign parent. It is an entity legally dependent on its head office, although it has an independent management and their own accounts. Its establishment and the entry into the Commercial Register is regulated by the Czech laws.
The name of your branch office has to be the same as of the foreign company with the suffix “Organisational Unit”. Appointing a director is essential and it also has to list planned activities. Your branch office does not have to pay up any basic capital.
According to the amendment to the Foreign Exchange Act from 2002, a foreign branch is now allowed to purchase real estate.