It’s not easy to open a business in the Czech Republic : Office House

Prague Post, Adviser - January 2007

Tomas Chrobak, OFFICE HOUSE s.r.o.

It’s not easy to open a business in the Czech Republic. All the bureaucratic red tape can take nearly a month to complete, making the country the 74^th hardest place on Earth to start a company, according to a recent report by the World Bank.

And if you aren’t a resident, the process can turn into even more of a hassle.

If a foreigner wants to establish a Czech company for the purpose of starting a business or to simply buy property, there is one problem he must face right from the start. While he may have no intention of setting up a physical presence in the Czech Republic – renting office space, hiring employees, etc. – the local authorities (especially the tax office) will essentially force him. Otherwise, they will make his life harder as they consider a business without a proper office as something strange and suspicious.

Czech law, as it reads now, basically states that if you set up a company in the country, its registered office must be located at a place where the company’s management resides and where the company may be contacted by the general public. Although this system is clearly archaic and inconsistent with the prevailing European Union legislation, there is, unfortunately, no indication that such an requirement will be abolished anytime soon.

But what if a businessman from, say, Vienna or London wants to establish a company in Prague but does not want to rent or buy office premises there since his company’s daily activities do not require such an investment? What if he just plans to come to Prague once a month and hold business meetings in cafés, hotel lobbies or rented meeting rooms? Does he have any options?

There is a small loophole. Czech authorities find it acceptable if the registered office of a business is located in a place serving as a “contact point” where company mail can be delivered and messages left for its representatives. Such a contact point may, for instance, be located in a business center managed by a specialized virtual office provider. Several Czech companies have already started to offer such office outsourcing services, which may include short-term meeting room rental services.

It should be noted there are certain conditions placed on a business center that is managed by a virtual office provider. These include the following:
- A company using the virtual office as its registered office must have a legal title - a rental agreement or written consent of the owner – to use the premises.
- The company’s registered office must be open to the general public and state authorities.
- The registered office of the company must visibly display its company name and company number (IC) in plain view.
- Incoming mail addressed to the company must be duly received.

Well-established virtual office providers usually own the premises where their business center is located. Otherwise, there is a risk the provider will stop providing the services unexpectedly as a result of the landlord’s decision.

According to the current legislation, the legal title of the office must be given to the Trade Authority and Commercial Registry when the company applies for its licenses. Documents that must be presented to the these authorities include:
- Papers from the Land Registry, no older than three months, showing the owner of the premises.
- Written confirmation from the owner of the building that he or she has no objection against using the premises as the registered office. This confirmation is not needed if it is already specified in the rental agreement.

NOTES ABOUT THE AUTHOR

This month’s guest advisor is Tomas Chrobak, director of OFFICE HOUSE s.r.o., a virtual office service provider that manages 13 business centers in the Czech Republic and Slovakia. Chrobak also heads Spolecnosti Online (Companies Online), a seven-year-old service firm that shortcuts the process of getting a new company established and registered in the Czech Republic.

Frantisek Bouc