What is a Trade License (Živnostenský List)?
Limitations - what it is not
- A Trade License is not a company. A company is an independent legal entity with one or more directors / shareholders. But it is a business. An important difference.
- A Trade License is bound to 1 (one) person. A couple can not have 1 Trade License
- With a Trade License you are 100% liable as a person (this is also more or less the case with SROs)
- A Trade License can not be transferred to another person (but it is easy to open one for them)
- You are expected to be resident in Czech Republic in order to have a Trade License (expected, there are ways to stretch this)
Possibilities - what you can do with it
- With a Trade License you can have customers abroad, use foreign currencies and even foreign bank accounts
- a Trade License is much easier, cheaper and faster to set up than an SRO (a Czech Limited Company)
- With a Trade License, you'll pay a lot less taxes than employees, than with an SRO or (usually) even with a foreign Ltd
- More than 95% of our clients really do not need an SRO for the type of business they do
- It is possible to have a Trade License and simultaneously be employee, have an SRO or a business abroad
- Using the 60/40 method or pausalni dan method, accounting requirements are kept to a minimum
- With a Trade License you can use a business name other than your name - you don't even need to register it anywhere
- A Trade License can be paused or stopped relatively easily. Getting rid of an SRO is a lot more complicated / expensive
- In many cases, the Trade License is quite attractive compared 'HongKong-type' solutions
- With a Trade License, EU citizens (and a few other nationalities) can enroll into Public Health Care
- You can pay other freelancers / self-employed persons, you can even have official employees (not recommended, though)
- A Trade License is somewhat comparable to a US LLC with one member (the sole proprietor)
Trade License or another Business Type - What to ChooseIf you are new to Czech Republic and / or entrepreneurship - don't complicate your life with an SRO or some company registration abroad. In case you have your finger on the order button already, don't click yet. Let us first explain why you probably don't need one.
Keep it simple. When you really will be making millions (hopefully in near future), we can always look for ways to optimize and maybe add an SRO or company abroad - but start as self-employed person with a Živnostenský List ('Živno' for short). You will not regret it.
Not convinced yet about not getting an SRO? See What is a Czech SRO Company
We have an built a simulation model which will show very clearly how much Income Tax, Social Security and Public Health Care you will pay for all different business types. Don't take our word for it! Book a consultation and see with your own eyes what is best for you!
Continue to: Registration Steps of a Trade License