The Czech Commercial Code (1991) recognises the following types of business entities:

Joint-Stock companies

Limited liability companies

General Commercial partnerships

Limited partnerships

Co-operatives

Branch Offices

In addition to the above, foreign companies or persons may establish branch offices in the Czech Republic. The branch office however is not considered as a legal entity but must, along with the above, also be recorded in the Commercial Register. Persons/entities wishing to be recorded in the register must apply to the court.

The commercial code regulates the status and activities of " entrepreneurs" and applies to both legal entities and individuals. An entrepreneur is defined as:

a person/entity recorded in the Commercial Register;

a person/entity engaged in business activity on the basis of a trade certificate or license;

a person/entity engaged in business activities on the basis of an authorisation issued under special legal regulations (e.g. attorneys, doctors, auditors etc);

a natural person engaged in agricultural activities and who is recorded in the appropriate register.

A natural person or entity that has its registered office in the Czech Republic is considered as a Czech "legal" person. Foreign persons/entities are defined as persons/entities (natural or legal) who are domiciled abroad or who have their registered office outside the Czech Republic.

A foreign person/entity is authorised to carry on business in the Czech Republic with effect from the day the person/entity is recorded in the Commercial Register.

A foreign person/entity may participate in the founding of a Czech legal entity. It is also permissible to become a partner or member of an existing entity.

A foreign person may also be the sole founder of a Czech legal entity provided that Czech law permits a sole founder or single owner.

Brief overview of types of entities:

Joint-Stock Company

The company exists independently of its shareholders. The shareholders are not liable for the debts/obligations of the company.

A Board of Directors and Supervisory Board must be elected.

The registered capital and all in-kind contributions must be recorded in the Commercial Register.

Articles of Association must be prepared.

A trade licence must be obtained from the Trade Licensing office.

Details in the Commercial Register include:

Czechs and foreigners serving on the Board of Directors and the Supervisory Board must supply an extract from the criminal register in their home country or where they have lived continuously for the last three months in the previous three years.

A certificate of the Board of Directors signatures.

Evidence that contributions (or the required part) have been paid.

A joint-stock company must have a minimum registered capital of CZK 2 million however if it is established by a public offering of shares the minimum registered capital is CZK 20 million.

A non-distributable reserve fund is required to set up from the first year's net profit up to at least 20% of the net profit up to a maximum of 10% of the nominal value of the reserve fund.

A general meeting of shareholders must be convened at least once a year.

A joint-stock company is subject to a mandatory statutory audit if at least one of the following criteria are met for both the current and previous year:

The net turnover exceeds CZK 80 million

The total assets exceed CZK 40 million

The average number of employees exceeds 50

Limited Liability Company

The company exists independently of its members (shareholders). The shareholders are not liable for the debts/obligations of the company provided they have paid their contributions in full and such information has been recorded in the Commercial Register.

An Executive must be appointed. This is the statutory body of the company and is responsible for its management.

The business must have an Establishment Memorandum or Memorandum of Association and the business name must include "spolecnost s rucenim omezenym" or the abbreviation "spol. s.r.o." or "s.r.o."

A trade licence must be obtained from the Trade Licensing Office.

Details in the Commercial Register include:

A list of shareholders (maximum 50) and their contribution.

The names and addresses of the Supervisory Board (if established).

The amount of registered capital (minimum CZK 200,000).

Each shareholders contribution (minimum CZK 20,000).

Czechs and foreigners serving on the executive must supply an extract from the criminal register in their home country or where they have lived continuously for the last three months in the previous three years.

A non-distributable reserve fund must be created at the company's registration or in the first year in which the company is profitable. The reserve fund contribution must be a minimum of 10% of the net profit up to a maximum of 5% of the value of the registered capital. In subsequent years, a minimum of 5% of net profit must be transferred until the fund reaches a minimum of 10% of the value of the registered capital.

A General Meeting of shareholders must be convened at least once a year.
A limited liability company is subject to a mandatory statutory audit if at least two of the following criteria are met for both the current and previous year:

The net turnover exceeds CZK 80 million

The total assets exceed CZK 40 million

The average number of employees exceeds 50

General Commercial Partnership

A general commercial partnership is formed by two or more natural persons or legal entities.

All partners are entitled to act on behalf of the partnership.

All partners assume unlimited liability for the debts/obligations of the partnership.

The partners' names and addresses or the partnership's registered office must be recorded in the Commercial Register.

A partnership agreement must be drawn up.

The audit requirements are the same as for a limited liability company.

Limited Partnership

A limited partnership is formed by two or more natural persons or legal entities of which at least one general partner must assume unlimited liability and is responsible for the obligations of the partnership.

The limited partners are only responsible for the obligations of the partnership up to the level of un-paid contributions as originally recorded in the Commercial Register.

A partnership agreement must be drawn up.

The entry in the Commercial Register must also include the partners' names and addresses or the partnership's registered office, a statement as to who are the limited and unlimited partners, the amount of paid-in capital by each limited partner and any outstanding amounts at the time of registration.

Only general/unlimited partners are permitted to actively manage the partnership.

The audit requirements are the same as for a limited liability company.

Co-operatives (Druzstvo)

Co-operatives are formed by at least 5 members (or at least 2 legal entities) to undertake business for the economic or social benefit of its members.

The amount of registered capital (minimum CZK 50,000) and the amount of each members' basic investment must be entered in the Commercial Register.

An indivisible fund of at least 10% of the registered capital must be created at the time of incorporation. At least 10% of the profits after tax must be must be transferred annually to the indivisible fund until such time as it reaches a minimum of 50% of the registered capital.

Members are not liable for the debts/obligations of the co-operative.

Foreigners may only be statutory representatives of the co-operative if they have a Czech residency permit.

The audit requirements are the same as for a limited liability company.

Branch Offices

Branch offices of foreign registered entities can conduct business in the Czech Republic provided that they are registered in the Commercial Register.

Entries in the Commercial Register must include details of the foreign parent entity, the branch location/s in the Czech Republic, the scope of its business activities and, the name and address of the branch manager/s.

A trade license must be obtained from Trade Licensing office.

The branch office does not have limited liability.

The audit requirements are the same as for a limited liability company.

All branch offices are required to maintain double entry accounting records prepared in Czech.

For further and more detailed information see the following links:

http://www.pwc.com/cz/eng/ins-sol/spec-int/taxguide/busentity/be_overview.html