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Company formation is a decision that will impact your business for years to come. It is about setting up a structure that allows the company to grow, protects your investment, and ensures that the law empowers you rather than holding you back.
An aspiring entrepreneur who has had a great idea and wants to secure it with a legal structure. A partnership of several established entrepreneurs entering a new business venture. A foreign investor establishing a presence in the Czech Republic. Or a thriving business considering restructuringto protect key assets.
Every company is different and requires an individual approach. That is why it is good to know from the start what boundaries you are working within.
"When a client comes to us asking how to start a company, it seems like a simple question with a straightforward answer at first glance. But it is during that first meeting, as we discuss goals, visions, and aspirations, that the client often realizes that establishing a company is about more than just paperwork and a formal entry in the register,” says Petra Stoklasová by way of introduction.
Nowadays, there are hundreds of thousands of companies, and choosing a name can be a real puzzle. The name must be engaging, it must not be misleading, and above all, it must not be confusingly similar to those that already exist. When choosing a name, we therefore often check various registers as well as Czech and international trademark databases.
“And that applies even if it is a company that currently plans to operate exclusively in the Czech Republic. From our experience, we can say that for successful companies, expansion is never far off. And besides the many corporate obligations associated with expanding a business abroad, it is good to make things easier for yourself, at least when it comes to choosing a name, and also to avoid the risk of someone else registering it,” adds Petra Stoklasová, partner for corporate law.
We are not just talking about a registered office address here – it is also a strategic decision in terms of taxes, accessibility, or image.
For some, a virtual office may be temporarily sufficient, while for others, the exact opposite is true. Again, it depends on the specific situation.
We go through our clients' business planin detail to correctly set up the scope of business and define the fields of activity that correspond to their planned operations.
Your business activity is one of the most important thingsto consider before incorporating your company. Yet, this is where we see the most mistakes—either the scope is too narrow, which hinders company growth, or it is too broad, which looks unprofessional, confusing, and can lead to unnecessary administrative burdens.
Your business activity defines what your company is allowed to do. It is the definition set out in your founding documents and the commercial register that tells the world: "This is what we do. And this is our business."
Your business activity directly impacts:
Some founders want to include dozens of activities in their business scope "just in case." The problem is that it looks unprofessional. When a company lists "food production, construction, financial consulting, and real estate leasing" as its business activities, a business partner will rightfully ask: What is it that you actually do?
Furthermore, every additional activity may mean an obligation to report changes to the Trade Licensing Office or fulfill other administrative requirements – even if you never actually perform that particular activity.
The opposite extreme. A startup clothing e-shop includes only "retail sale of textile products" in its articles of association. A year later, you want to add more inventory or offer clothing alterations – and you discover that you must amend your articles of association and update your entry in the Commercial Register. This costs time, money, and administrative effort.
"Production, trade, and services not specified in Annexes 1 to 3 of the Trade Licensing Act" – this phrasing was common practice for years. However, the Supreme Court has recently ruled clearly that a general definition is not in compliance with the law.
It does not allow for a clear determination of what specific activities the company intends to perform. In extreme cases, if a company fails to take corrective action upon the request of the Register Court, it may even be ordered into compulsory liquidation.
Key activities must be listed specifically and in detailin the business scope, while supporting activities can be included more broadly. Always keep future growth in mind – planned expansion, entering new segments, or adding supplementary services. In regulated sectors (healthcare, finance, construction) we use precise terms required to obtain the relevant permits. The goal is to define the scope of business so that it is legally sound according to current case law – prepared for your growth while remaining clear to business partners and authorities.
A limited liability company offers simpler administration and lower setup costs. A joint-stock company has higher financial requirements (minimum share capital of CZK 2 million), but it is more suitable for larger business ventures, planned investor entry, or the implementation of ESOP programs.
The LLC is the most popular legal form in the Czech Republic – and for good reason. Simpler administration, lower setup costs, and more flexible configuration. The share capital can be symbolic (theoretically from CZK 1, though we practically recommend at least CZK 10,000–100,000). The entire incorporation process is faster and cheaper than for a joint-stock company.
An LLC is ideal for:
A joint-stock company has higher requirements: a minimum share capital of 2 million CZK, a more complex organizational structure (board of directors, supervisory board for larger companies), and higher administrative demands. That is precisely why an a.s. is not suitable for everyone.
An a.s. makes sense especially for:
With every client, we go through four key questions:
If you do not have 2 million CZK for the share capital of a joint-stock company, the choice is clear. But be careful – even though you can establish an LLC (s.r.o.) with 1 CZK, we do not recommend such a solution (see the section on share capital below).
If you expect venture capital, business angels, or strategic partners to enter within 2–3 years, a joint-stock company may be a more suitable structure. Shares are easier to transfer, but even in an LLC, you can have ownership interests represented by certificates (kmenové listy), which operate in a very similar way to shares.
However, many startups successfully begin as an LLC and transform into a joint-stock company later if needed. There is no need to complicate your start with a more complex structure if it is not necessary.
Are you doing business on your own? Will your company have two strong, equal partners, or is one of the partners contributing more to the joint venture, whether in the form of funds, know-how, or real estate? All these aspects need to be reflected in the setup of the company structure.
An LLC with two to five partners is easy to manage. But if you are planning for a large number of people to hold shares in the company (for example, employee stock options for dozens of people), a joint-stock company may be a more practical solution.
In some sectors (banking, insurance, large construction projects), a joint-stock company (a.s.) is expected or even required by regulation.
Depending on the nature of your activities, you must register the relevant trade licensesto "activate" your business and enable your company to provide services or sell its products.
Does not require proof of professional qualifications. You only need to meet the general requirements. This includes, for example, retail, wholesale, brokerage, and consulting.
Requires proof of professional qualifications(education, experience, training) and the appointment of a responsible representative. These are typically fields with higher risks to health or property—real estate brokerage, design work, accounting, massage therapy, or manufacturing.
The strictest regime for areas where there is a special interest in regulation, requiring special state authorization (a license) and proof of high professional qualifications. For example, private security services, funeral services, certain healthcare activities, tourism, etc.
If you are planning to start a company with business partners, you are facing the most critical part of the entire process, which requires due diligence and careful consideration – setting up internal mechanisms and rules.
Company stakes are not always equal. One partner may bring a larger contribution or more know-how, while others join later. There is often one majority partner or shareholder. Sometimes, however, the partners' stakes are comparable or equal, which can lead to various deadlocks in the event of future disagreements.
"When a client plans to be in the company alone at first but expects strategic partners to join in two or three years, we set up the structure with the future in mind. We distribute the stakes in a way that saves work, costs, and time down the road," says attorney Petra Stoklasová.
Partners do not always agree, which is why it is important to set voting quorums and decision-making thresholds for company bodies so that:
The fundamental question is, how many managing directors should a company have? Managing directors and members of the board of directors represent the company externally, can bind it, and dispose of its assets. It is therefore very important to carefully consider issues related to the composition and powers of the statutory body. Both forms can have one or more members of the statutory body – though it is true that a joint-stock company typically has more members (a collective body). In an LLC, the number usually varies.
In family businesses where the founder is also the managing director, the situation is relatively simple. But what if you come up with a business plan and appoint capable managers to the statutory body, who will implement your business in practice?
You certainly want to retain control over the company. Even if you trust them, you need to have control mechanisms and boundaries in place – how far the managing directors can go without your consent and what already requires your intervention.
In practice, we very often deal with setting up external representation for the company while simultaneously establishing internal protective mechanisms:
Joint representation by managing directors: A practical solution for transactions that exceed standard value or scope may be to implement joint representation by multiple directors. Various types of directors (Type A, Type B) can be established with different authorization levels and representation limits. There are many options; they just need to be properly balanced.
General Meeting Approval: Another option is to make certain fundamental legal acts—such as real estate transfers, disposal of trademarks, or loan agreements—subject to prior approval by the General Meeting. This gives you, as shareholders, control over the actions of the statutory body.
When establishing a limited liability company, there is only one limit: a shareholder's contribution to the share capital must not be less than 1 CZK. If a company has a single shareholder, it can therefore have a share capital of just one crown.
We generally do not recommend this option to clients for three reasons:
A practical aspect we address with every client: Can you make a cash deposit, or do you have to open a special bank account?
This question only applies to limited liability companies:
A cash deposit is more practical – it is more flexible, and you don't have to rush to the bank right away. Only once the company is incorporated do you open an account at the bank of your choice, and it no longer needs to be a specialized account for capital deposits.
Another aspect you need to consider: Who will be the contribution administrator? You can either entrust this to your advisor or attorney – we regularly provide this service for our clients – or the administrator can be a director or founder of the company.
Finally, we will summarize the formalized process we follow with our clients so they can focus on developing their business activities while we handle the formalities.
We have found it practical to use a checklist. We go through it point by point with the client, discuss it, and provide advice:
We will prepare all necessary documents and, in cooperation with a notary, draft the founding legal act, which must be executed in the form of a notarial deed.
Our usual approach with clients is that they authorize us to handle all these formal steps on their behalf. They can then focus on the actual birth of the company and developing their business activities.
This means:
We then provide the client with all instructions on how to contribute the share capital. For any company to be established, the partners' contributions must be deposited and the share capital paid up.
Depending on the scope and nature of the business, it is necessary to register trade licenses. We guide our clients through the entire process and advise on whether any special permits or licenses are required.
Once we have:
...we can proceed with the registration in the Commercial Register.
Once the company is registered, it officially comes into existence from a legal standpoint, is assigned a company registration number (IČO), and you are ready to start doing business.
The entire process of establishing a limited liability company usually takes 2–4 weeks from the initial meeting to registration in the Commercial Register. It depends on:
Just as you wouldn't build a house without an architect or pull your own wisdom teeth, it holds true that quality legal advice at the beginning can save you trouble in the future.
Your goals, vision, and concerns. We get to know your business down to the smallest detail. We always listen – to everything – not just what you say, but often what you don't mention. This allows us to easily adapt to the changing circumstances of any business – that is what the lawyers at endors.
What keeps you up at night? Our clients sleep soundly because endors has their back. We see around the corner where complications might be waiting. We navigate you onto the right path, where you can avoid difficulties.
We recommend tax advisors, accountants, notaries, and others who share our values and help you achieve your goals. We help not only companies entering the Czech market find local suppliers, premises, and business connections.
Do you want to establish a company that is ready for growth? Get in touch with us. We will discuss your business plan, set up a tailored structure, and take care of all the formalities.
Email: info@endors.cz
Phone: +420 601 501 630
Yes, you can be the sole founder and shareholder. However, we recommend consulting your situation with an attorney.
Yes, the founding legal act must be drawn up in the form of a notarial deed, but if you are serious about your business, we also recommend working with an attorney. Specifically, one who has experience in corporate law and can prepare the company from the start for growth, expansion, and other legal challenges.
According to Supreme Court case law, general formulations are legally invalid. In extreme cases, liquidation may be ordered.
Yes, but it requires an amendment to the articles of association, a notarial deed, and registration of the change in the Commercial Register.
Partner & Corporate Law Specialist
Petra is the first partner at the firm endors and a key figure in the strategic management of our corporate agenda.
With over 23 years of experience in commercial and contract law specializes in comprehensive consulting for both Czech and international corporations.
Her expertise in mergers and acquisitions (M&A) is complemented by a unique international perspective – her postgraduate studies at the prestigious Panthéon-Assas University in Paris earned her a DEA degree and a deep understanding of the French legal environment. She would be happy to help you establish your company as well.
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