Limited liability company

What it means

The limited liability company is Slovakia’s most common business form. Registered capital is at least EUR 5,000 and it can have one to fifty members.

A member is liable only up to any unpaid contribution. A director, however, answers for running the company properly and in certain situations with personal assets.

Unlike a sole trader, an s. r. o. is a separate legal person. Profit belongs to the company, is taxed there, and reaches the shareholder only as a dividend, salary or other remuneration under a contract. The company’s assets and the shareholder’s are separate, and that cuts both ways: it protects the shareholder, but also limits what they may do with the company’s money.

How it works in practice

Incorporation runs electronically: the articles, consent to the registered office, the capital administrator’s declaration and the registration application. Tax and, where needed, VAT registration follow.

The company keeps double-entry books, prepares financial statements and files them with the register. These duties apply even in a year with no activity at all.

Once the company is registered we set up the books from the date it came into existence: opening the accounting books, the paid-up contribution, the formation costs and the first documents, which the shareholder has often paid personally. At the same time we go through with the client whether to register for VAT at once or only when turnover requires it, and who will send in documents each month.

What to watch out for

Limited liability does not mean risk-free business in every circumstance. Failing to keep books, filing late for bankruptcy or personally guaranteeing loans moves the liability onto directors and members.

Money in the s. r. o.’s account does not belong to the shareholder, even a sole one. Withdrawals with no legal basis, that is without a profit distribution decision, a salary or a loan agreement, still have to be booked somewhere. In an audit they may end up as a loan that must bear interest, or as a payment on which extra tax is due.