Foreign legal entities are allowed to conduct trade activities, including acquisition of real estate, under the same conditions and to the same extent as Czech entrepreneurs. They may become founders or cofounders of a company, or may join an existing Czech company.

Foreign companies may operate in the Czech Republic, either by establishing a branch office registered in the Czech Republic or by establishing a Czech company. There are four different legal forms of companies; the most common are limited liability companies (s.r.o.) and joint-stock companies (a.s.). The business name of the company shall be unique.

A branch office of a foreign company is not a Czech legal entity, but functions as the representative of a foreign company and incurs obligations on the foreign company's behalf. Branch offices must fully list their business activities on their application for registration in the Commercial Register, as they are only allowed to engage in the business activities listed. The branch office must have an appointed director who is entitled to act on behalf of the foreign company as regards the branch office. He/she must be registered in the Commercial Register.

The law under which the branch's parent entity was founded also applies to the branch's internal dealings. If start-up losses are anticipated, establishing a branch office may permit the deduction of such losses against the foreign company’s income in its home jurisdiction. As of January 2002, there are no restrictions on acquisition of real estate by branch offices of foreign companies in the Czech Republic.

A joint-stock company is used for large companies. It is established by a founder’s deed by one shareholder, being a legal entity, or by a memorandum of association by more than one shareholder (whether individuals or legal entities). Both the founder’s deed and the memorandum of association must be executed in the form of a notarial deed. A joint-stock company is obliged to issue its articles of association. Bearer shares are freely transferable while transferability of registered shares may be restricted but not excluded by articles of association. If the registered shares are book-entered shares, they are transferred by registering the new owner with the Central Securities Depository.

Minimum registered capital is CZK 2,000,000 or CZK 20,000,000 if the company is founded through a public offer of shares. Non-monetary contributions must be fully settled before the company’s registration in the Commercial Register. A subscriber is obliged to pay the issue price of the subscribed shares within the time-limit fixed in the articles of association, but no later than one year after the company’s incorporation. The statutory body of a joint-stock company is the board of directors. The board of directors must have no fewer than three members, this shall not apply in the case of a company with sole shareholder. Its members are generally elected and recalled by the general meeting or by the supervisory board if the articles of association so stipulate. The board of directors decides on all matters that are not reserved to the general meeting or the supervisory board.

Each joint-stock company must establish a supervisory board, which monitors the activities of the Board of Directors and the operations of the joint-stock company. The supervisory board consists of at least three members and the number of its members must be divisible by three. If the company has more than 50 fulltime employees, the latter elect one-third of the supervisory board’s members. The articles of association may determine that employees can receive company shares under better conditions than other shareholders. However, the total of portions of the issue price or the purchase prices of all shares, which are not subject to full payment by employees, may not exceed 5% of the company’s registered capital at the time when the decision on such employees’ subscription is made.

Before registering in the Commercial Register, all companies must obtain a trade licence, or – for some types of business – a concession, corresponding to the activities they intend to perform or some other business authorization. For this purpose, they must appoint an authorised representative (“odpovědný zástupce” in Czech) who is responsible for the company’s compliance with the conditions of the trade licences. The appointment of a responsible representative is not required for some types of the general business activities (“volna zivnost” in Czech). An authorised representative must be designated for each activity performed by the company; however, one authorised representative may be responsible for more than one trade licence of the company. One authorised representative may not perform this function for more than four entrepreneurs.

Effective 1 August 2006, the company has the option to apply for registration with the tax office (for almost all types of taxes) along with the application for a trade licence.

A company comes into existence by registering in the Commercial Register (www.justice.cz) maintained by the respective Registry Court. The statutory body of the company must apply to the Commercial Register to register the company within 90 days from the date (i) the company was founded or (ii) the company’s trade licences or similar business authorization were issued and delivered. As of 1 July 2005, obligatory but standardized forms for applications to the Commercial Register are available. The Registry Court is obliged to register the company or to deliver another decision within the period of 5 working days, otherwise it is considered that the registration was performed on the following day after this period has expired.

The following documents must be attached to the application in particular:

• documents, not older than three months, showing the valid incorporation of the founder and the power of its representatives to act on its behalf;
• incorporation documentation, i.e. founder’s deed or memorandum of association;
• specimen signatures of directors (members of the company’s statutory body);
• evidence that the company’s registered capital was paid up in the minimum required amount (usually shown by a bank statement);
• a statement of credibility signed by each member of the statutory and supervisory body and the consent with the entry into the Commercial Register;
• extracts from the criminal registry for each proposed representative and supervisory board member (extract from the Czech Criminal Register and, if the representative is a foreigner, an extract from the Criminal Register from country of his/her origin and, if he/she is not a citizen of an EU country, an extract from the Criminal Registers of the countries where he/she spent at least three consecutive months in the three previous year; all of these documents/extracts must not be older than three months);
• extract from the Trade Licences Register or other authorization relating to its business activity;
• evidence of title (ownership right,, lease agreement or the consent of the owner) to the premises where the registered office of the company will be situated;
• powers of attorney for any person (obligatory for foreigners without a delivery address in the CR) to be registered in the Commercial Register in relation to the incorporation of the company (e.g. executive officers).

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