Czech Business registration: OSVČ or s.r.o.

If you're planning to start a business in the Czech Republic, one of the first big decisions is choosing between becoming self-employed (OSVČ) or establishing a limited liability company (s.r.o.). While they may seem similar at first glance, the differences can affect your taxes, liabilities, and how your business is perceived. Choosing the right setup from the start can save you time, money, and trouble later.

1. Self-Employment (OSVČ)

With a trade license (živnost), you operate as a self-employed individual. This means you're personally liable for any damages or debts with your entire personal property.

It's ideal if you want to start as a freelancer and meet the legal requirements. Need help registering? Follow this link: Trade License (Freelance Status – Živnostenský list)

2. Czech Limited Liability Company (s.r.o.)

An s.r.o. is a legal entity separate from you personally. It can be established by one person or up to 50 partners. A basic capital deposit is required—but the minimum is just 1 CZK.

The setup involves two steps:

1. Signing a founding agreement and depositing part of the capital

2. Registering the company in the commercial register

The company must also have a registered address. While it can be your home, this might look less credible to clients. You can fix this easily by renting an office or using a virtual address.

1. Management

For freelancers in areas like graphic design or financial accounting, forming a company usually isn’t necessary. If your business relies on your personal name and skills, an OSVČ setup makes more sense.

But if you’re targeting corporate clients or high-profile partners, having a company (s.r.o.) can help build trust. And if your business grows, an s.r.o. can become a valuable asset, especially if you plan to sell it in the future.

2. Liability

OSVČ: You’re fully liable for your personal property. The only way to limit your risk is by getting liability insurance.

3. Taxes

OSVČ: Pay 15 % tax on 40% of your gross income s.r.o. : Pays 21% corporate tax and 15% personal tax on dividends

4. Insurance

OSVČ: Must pay health and social insurance.

s.r.o.: Offers more flexibility. While skipping social security contributions could affect your future pension, it gives you the option to optimize payments—something not possible as an OSVČ.

Choose OSVČ if you:

• Want direct, personal contact with your clients

• Need a fast and inexpensive way to start

• Expect your income to stay below the solidarity tax threshold

• Want to take advantage of the Czech flat tax system (simple payments, no tax report)

Choose s.r.o. If you:

• Want better control over taxes and insurance

• You are working with business partners

• Need to look more professional to your clients

• Plan to grow your company’s name and reputation