Do you want to start a business in the Czech Republic as a foreigner?

Business in the Czech Republic attracts many foreigners due to the country's strategic location and access to the European market. If you are planning to do business in the Czech Republic, you need to decide whether a trade license will be sufficient or whether it is better to set up a company (most often s.r.o. which is in fact Ltd.). This article will advise you which option is right for you.

When is a trade license enough?

Do you want to start a business as a self-employed person? A trade licence is ideal for smaller businesses where you are acting for yourself. For example, selling products or providing services (tutoring).

Conditions for obtaining a trade licence for foreigners:

• EU citizens - basically if nothing specific is applied, age over 18 years and no criminal record.
• Non-EU citizens - residence permit for business purposes.

Advantages and disadvantages of a trade license

Setting up a trade license is one of the quickest and easiest ways to start a business. Moreover, for foreigners from the European Economic Area (EEA), the whole process is even easier as they do not need to provide proof of residence.

However, there are also disadvantages to being a sole trader. The biggest one is that as a self-employed person you are liable for your business with all your assets. Another disadvantage is that foreigners residing outside the European Economic Area need to obtain proof of residence, such as a visa, decision or residence permit, to set up a trade license.

When is it better to start a company?

If you are planning a larger scale business and want to employ people, a more suitable option is to set up a limited liability company (s.r.o./Ltd.).

Setting up an Ltd. in the Czech Republic as a foreigner:

• You will need to choose the name of the company, describe the business activity, decide who will director and shareholder (one or more is possible).
• Also, you will need a registered office for the company, this can also be virtual.
• The minimum registered capital for establishing an Ltd. is only 1 CZK.

Advantages of setting up a company:

The main advantage of setting up a s.r.o./Ltd. is limited liability - you are liable only up to the amount of the registered capital, this protects your personal assets. Moreover, making business activities and future disposal with the business might be more flexible with company than as holder of trade license.