Formation of Limited Liability Company (s.r.o.) in Czech Republic

Company Name 
The name of the company must be in Latin characters and must end with s.r.o to denote limited liability. 

Articles Of Association 
It is necessary to adopt Articles of Association when founding a s.r.o. The company becomes a legal entity when it is formally entered in the Commercial Register. According to the Czech Commercial Code, the Articles of Association must contain the corporate name, the registered address of the company, the activities in which the Company will engage in, the amount of share capital and the share interest of each shareholder. 

Shareholders 
The number of shareholders in a Company may be anywhere from 1 to 50. A shareholder can be a physical or legal person of any nationality. Details of shareholders such as their name, address and nationality, are part of the public record, however they may avail themselves of a nominee service by appointing a nominee shareholder, which we can provide by virtue of an agreement or a Deed of Trust for a reasonable fee. 

Share Capital 
The registered capital of a company is composed of the contributions made by the shareholders. The minimum contribution of each shareholder to the registered capital is CZK1, however it is recommended to set-up an s.r.o with a minimum of CZK1,000. 
A limited liability company does not issue shares. The ownership interest represents the shareholder’s participation in the company and the rights and duties derived from such participation. The size of the ownership interest is basically determined by the ratio of a particular shareholder’s investment contribution to the company’s registered capital. 

Directors 
A limited liability company does not have a board of directors. Its executive body is made up of one or more executive directors. The law does not restrict their number; but their number must be stipulated in the founder’s deed or the memorandum of association. The executive director is appointed by the general meeting (the supreme body of the company) or by the sole shareholder exercising the powers of the general meeting. Each executive director represents the company independently, unless the founder’s deed or the memorandum of association stipulate otherwise. The founder’s deed or the memorandum of association may stipulate that the executive directors form a collective body which will make the legal position of executive directors closer to that of the board of directors in a joint-stock company.

Registered Office And Company Secretary 
Czech companies must have their registered office in Czech Republic. There is no requirement for a company secretary. 

Meetings 
Company meetings need not be held in Czech Republic. 

Incorporation Time 
The incorporation of a new company takes between 1-2 weeks.

Basic Tax Notes
All companies registered in the Czech Republic are liable to corporate income tax. It is payable on worldwide taxable income and capital gains. The tax base is calculated from the accounting profit/loss shown on the relevant financial statements, prepared according to the Czech accounting legislation. A corporate income tax rate is 19%. A corporate income tax rate of 5% applies to investment funds, unit funds and pension funds. Czech legislation allows taxpayers to change their accounting period from calendar year to fiscal year, and vice versa by simply notifying the Tax Authority. 

Audit And Financial Returns 
Legal regulations regarding accounting and audit in the Czech Republic are in compliance with the legislation of the European Community. All accounting records must be in the Czech language. Companies registered with the Commercial Register are obliged to use double entry bookkeeping. Single-entry accounting will be no longer used. The Act No. 563/1991 Coll., on Accounting, as amended (the “Accounting Act”) requires that consolidated financial statements must be prepared for an accounting unit that is a managing or controlling entity. 

There is no obligation to file an annual return and to pay annual government fees. However, it is necessary to prepare financial statements and file a corporate income tax return every year, within three months after the end of the accounting year. As the accounting year usually corresponds to the calendar year, the deadline for filing the CIT and paying the income tax (19%) is March 31st.