The liquidation of a company/sole proprietorship in the Czech Republic

Due to the fact that owning a business in the European Union provides one with a variety of opportunities, a lot of foreigners tend to register a company in the Czech Republic. Statistics say that one-third of all Czech companies have been set up by foreigners. However, there are situations where business owners may wish to liquidate their enterprises in the Czech Republic.

This usually happens due to one of the following reasons:

• unsuccessful business development;
• lack of profit;
• a business visa has been denied, despite the existence of a registered company in the Czech Republic.

Foreign sole proprietors face the same issues. Within the workflow, there may occur a situation when it is necessary to cease operations.

Sole proprietor
There are two ways in which a sole proprietor may liquidate their business.

• by delaying its activity; 
• by cancelling activity altogether.

If a foreign sole trader resides in the Czech Republic on the basis of a temporary residence permit, then at the moment when the license is concluded, the visa will automatically expire.
The first option is to delay the proprietorship’s activities with the possibility of renewal in the future.
A sole proprietorship may be delayed indefinitely within the Czech Republic. The Social Fund, which is responsible for tax collection, states that they must be informed of this decision before the 8th day of the following month. Moreover, the tax inspectorate must be notified within a window of 15 days.

In case a foreigner obtains permanent residency, he or she is obliged to advise the Medial Fund no later than 8 days after the activities of the business have been delayed.

All the changes must be declared in the written form or via the online service «Datová schránka» (Czech portal for proprietors – institutions communication).

The second option implies the total stop of business activity. In this case, one must appeal to the Sole Proprietorship Department. In the scope of this procedure, the Social and Medical funds are notified automatically. Still, there is a separate need to inform the Tax inspectorate.
It is worth remembering that the proprietorship must be stopped also in terms of its accounting activities. This requires the adjustment of debts, an analysis of accounts, decision-making regarding the business’ assets, declaration of profits and so on. All these questions can be solved with the assistance of a qualified accountant or, in some cases, a tax consultant. Anyhow, please keep in mind that it is necessary to submit a tax declaration for the last year of the enterprise’s activity.

Company

Czech company activity may not be delayed.
A founder of an enterprise may stop the company’s activities as part of the two following scenarios:
1) Company liquidation;
2) Company re-registration specifying another founder or group of founders.

Both voluntary and involuntary liquidation must be considered.
A company may be forced into involuntary liquidation if a controlling institution has irresistible pretensions that make the further activity of a company impossible. The process of liquidation involves financial, notary and liquidator expenses, covering the penalties and so forth. Managers and founders of such a company are obliged to settle all outstanding accounts.

The preferred route of liquidation is the voluntary one. Closing a company is a complicated process linked with gathering and submitting various documents to the state institutions. The aim of this procedure is to prove the absence of debts to the state authorities.
In this case, a founder manages the process and covers all possible expenses. The proper performance of this procedure guarantees that there will be no court prosecution for the proprietor in the future.

The process of re-registering a company is more cost-effective. It is necessary to find new potential owners of the company either through one’s own efforts or with our assistance. This will save you a considerable amount of time and money.

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