Company formation

What it means

Founding a company is the first legal step in creating a commercial company. For an s.r.o. it means signing the articles of association if there are several shareholders, or a deed of incorporation if there is a single founder. Signatures must be officially certified, or the document signed with a qualified electronic signature.

Founding does not yet bring the company into existence. It comes into existence only on entry in the Commercial Register. Between founding and registration, the founders act in their own name and are jointly and severally liable for obligations arising in that period. Once it exists, the company may take them over if it approves them.

Founding involves setting the business name, registered office, scope of business, contributions, directors, manner of acting and the contributions administrator. Before applying for registration, contributions must be paid up to the statutory extent and trade licences obtained for the chosen activities.

How it works in practice

When setting up a company, we first discuss with clients whether an s.r.o. suits their plans or whether a sole trader licence or another form would be enough. We then prepare the documents, help choose a scope of business that covers the planned activities and file the application through the electronic portal.

Right after incorporation come tax registration if it did not happen automatically, VAT registration where needed, opening a bank account, setting up the electronic mailbox and, if there are employees, registering as an employer with the insurers. We recommend keeping a checklist with deadlines for these steps.

Incorporation costs, such as notary and court fees or trade licence fees, are expensed by the company in its first year. If a founder paid them personally, the company can reimburse them against receipts where the articles provide for it.

What to watch out for

A common mistake is starting to trade in the name of a company that does not yet exist, such as signing customer contracts or issuing invoices. Until registration, the founders are personally liable for these obligations, and invoices from a non-existent company cause VAT and accounting problems.

The property owner’s consent is needed for the registered office. With a virtual office, mail collection must be arranged and the electronic mailbox checked regularly. Uncollected official documents still count as delivered, and the company may miss important deadlines.