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Business

In this section of Prague for All, you will learn about the characteristics of business and about running a business both as a self-employed individual and as a company. We introduce the different types of business in the Czech Republic and take a closer look at trade business in particular. We focus on the conditions under which foreigners may do business in the Czech Republic. You will also learn where to seek help with starting a business and where to arrange all the necessary formalities. This section also contains links to reliable sources of information on business. Special attention is paid to entrepreneurs’ obligations to pay health insurance, social security contributions, and taxes.

What Counts as Business?

Czech law defines business as a continuous activity carried out by an entrepreneur independently, in their own name and on their own responsibility, with the aim of making a profit.

Business in the Czech Republic usually takes the form of 1) business of natural persons – most often based on a trade licence, or 2) business of legal entities – participation in a company. These two forms are described in more detail in separate chapters.

Let’s take a closer look at the characteristics of business activity:

Continuous activity

An activity is considered continuous if it is carried out repeatedly. For example, occasional or one-off income from helping a friend build a house, mowing lawns, cleaning homes, or providing one-time paid advice does not qualify as business. However, if you plan to pursue the activity on a regular basis, it qualifies as business even if it takes place only a few times a year.

A business run in your spare time or only during certain seasons alongside your employment is also considered a continuous activity.

Independent activity

You are considered an independent self-employed person if you decide on your working hours and place of business, organise your work independently, and cover the costs of your business yourself (e.g. premises, tools, and equipment).

Activity carried out in your own name and on your own responsibility

You act in your own name or in the name of your company and bear full responsibility for the outcome of your actions, especially if you breach your obligations or violate the law. Self-employed persons (natural persons) are liable for all obligations arising from their business with all their assets.

Beware of unfair employer practices – especially the Švarc system!

If your employer forces you to obtain a trade licence and to formally act as a sole trader, even though the work you perform is typical of an employee, this constitutes an illegal circumvention of the law known as the Švarc system – an illegitimate form of cooperation between the employer and the employee!

A typical example is teaching at a language school where you have a fixed workplace, use the school’s equipment, and present yourself as part of the school (e.g. business cards with the school’s name). Such work is not considered independent business activity carried out in one’s own name and responsibility under Czech law. In addition to facing financial penalties, you lose all employee benefits (such as protection against unfair dismissal and entitlement to paid leave) and are not protected by the Labour Code. At the same time, your future pension will most likely be lower than if you were employed.

Gaining profit

You are paid for the work you perform; however, unlike an employee, you do not receive a salary. Instead, you issue invoices to your clients. The intention to generate profit is essential, but it does not matter whether you actually make a profit. For example, selling surplus produce from your garden does not constitute business.

Last update: 4 March 2025