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Sole trader or limited company (s.r.o.)? What to choose when starting a business in Czechia

Liability, set-up, taxes and bookkeeping of a trade licence and an s.r.o. compared under current law. Which form suits whom, including foreigners.

Want to renovate flats, translate, write code or sell in Czechia? First decide whether you will trade as a natural person under a trade licence (OSVČ) or set up a limited liability company (s.r.o.). Both are legal. They differ mainly in liability, costs and paperwork.

Trade licence: a quick start

A natural person with full legal capacity and a clean record may run a trade (Act No. 455/1991 Coll., Section 6(1)). For a notifiable trade, the licence arises on the day you notify the Trade Licensing Office (Act No. 455/1991 Coll., Section 10(1)). If you have no permanent residence in Czechia, you trade on the same terms as a Czech (Act No. 455/1991 Coll., Section 5(2)). Foreign-language documents must, however, come with a translation by a court interpreter and a certified signature (Act No. 455/1991 Coll., Section 5(3)). This requirement does not apply to EU citizens (Act No. 455/1991 Coll., Section 5(4)).

As a natural person you are liable for business debts with all your assets. Personal income tax is 15 %, and 23 % on the part of the tax base above 36 times the average wage (Act No. 586/1992 Coll., Section 16(1)). Instead of actual expenses you may claim flat-rate expenses: 60 % of income for most trades, up to CZK 1,200,000, and 80 % for craft trades, up to CZK 1,600,000 (Act No. 586/1992 Coll., Section 7(7)). A small business usually keeps only tax records of income, expenses, assets and debts (daňová evidence; Act No. 586/1992 Coll., Section 7b(1)).

S.r.o.: separate assets, more formalities

Members are liable for the company's debts only up to their unpaid contributions as entered in the Commercial Register (Act No. 90/2012 Coll., Section 132(1)). The minimum contribution is CZK 1 (Act No. 90/2012 Coll., Section 142(1)). The memorandum or deed of foundation must take the form of a public deed, so it is drawn up by a notary (Act No. 90/2012 Coll., Section 8). The company obtains its trade licence only after entry in the Commercial Register (Act No. 455/1991 Coll., Section 10(1)).

An s.r.o.'s profit is taxed at 21 % (Act No. 586/1992 Coll., Section 21(1)). When you pay the profit out to yourself as a profit share (dividend), a further 15 % tax is withheld (Act No. 586/1992 Coll., Section 36(2), point (b)). A company with its registered office in Czechia always keeps full accounts (Act No. 563/1991 Coll., Section 1(2), point (a)).

At a glance

• Liability: a sole trader with all personal assets, s.r.o. members up to their unpaid contributions.
• Set-up: a trade by notifying the Trade Licensing Office, an s.r.o. at a notary and by entry in the Commercial Register.
• Tax: sole trader 15 % (23 % above the limit) with optional flat-rate expenses, s.r.o. 21 % on profit plus 15 % when a profit share is paid out.
• Records: a sole trader usually keeps tax records, an s.r.o. always keeps full accounts.

Which suits whom

A trade licence suits you when you start alone, with smaller income and little risk of damage. Consider an s.r.o. when you work with a partner, take on large contracts or face higher risk: liability is limited, but budget for a notary and an accountant. Insurance contributions and residence rules for foreigners also matter, so look at your own situation before you register.

Work out a sole trader's contributions for 2026:

• Self-employed (OSVČ) calculator: contributions and flat-rate tax

This article is general information, not legal advice for a specific case. Updated 30 Oct 2026 in line with the laws in force. — 777 PRODUCTION s.r.o.