Share capital is one of the main elements of a limited liability company (s.r.o.). When establishing a new company, it is necessary to determine its amount. In the following text, we will answer questions regarding the meaning of share capital, its influences, and how to determine a share capital amount.
What is Authorized Share Capital?
Share capital represents the financial resources available to a company at the beginning of its existence. It refers to the value of contributions made by the owners into the newly formed company. These contributions can be:
· Monetary (cash or deposit into a bank account).
· Non-monetary (assets valued based on an expert appraisal, such as movable or immovable property).
What amount should be chosen for Authorized Share Capital (Nominal Capital)?
The minimum amount of share capital for a limited liability company is 1 CZK (Czech koruna). Previously, the minimum value of share capital was much higher (200,000 CZK), but it was reduced to 1 koruna in 2014 to remove barriers to starting new businesses.
In practice, it is recommended to choose a higher amount for share capital when establishing a new company, for example, at least 10,000 CZK or more.
Why choose a higher share capital?
As mentioned before, share capital represents the financial resources of the company. Its amount should cover at least the basic costs associated with company formation, which are significantly higher than 1 CZK.
The total incorporation costs of an s.r.o. can be around 10,000 CZK. This amount does not include expenses for renting premises for the company’s registered office, which is a legal requirement. If you do not have your own property, you can use a virtual office, which also incurs additional costs to fulfill legal obligations.
When determining the share capital, it is therefore advisable to consider other necessary costs associated with starting a business, such as equipment and advertising. Even with maximum savings, an amount of 1 CZK will not be sufficient for a successful business start.
If you choose a share capital of 1 CZK, it may negatively affect the credibility of your company and create complications when applying for loans or transferring shares among partners.
How to contribute the share capital?
Contributing the share capital is one of the final steps before registration in the Commercial Register. How and when should it be contributed?
By depositing it into a bank account
After the notarial deed is prepared, you must open a special account at a bank for depositing the share capital and transfer the financial resources to that account. Once the deposit is made, the bank will issue a confirmation that allows the notary to complete the process of registering the company in the register.
In cash
Since 2021, it is possible to contribute the share capital in cash, up to 20,000 CZK, directly at the notary. This option facilitates and expedites the process of company establishment. This option is particularly useful for foreigners, as banks require the completion of security questionnaires that need approval
FAQ
What is authorized share capital in a Czech s.r.o.?
It represents the financial resources provided by company founders at incorporation. Contributions can be monetary (cash or bank deposit) or non-monetary (assets such as property, equipment, or other valuables with expert valuation).
What is the minimum share capital required?
Since 2014, the minimum is just 1 CZK. Previously, it was 200,000 CZK. However, in practice, founders often choose at least 10,000 CZK to cover setup costs and build credibility.
Why should I set a higher share capital than 1 CZK?
A symbolic 1 CZK capital may damage your company’s credibility with banks, partners, or investors. It may also cause complications in share transfers or loan applications. A higher amount (e.g., 10,000 CZK) better reflects real startup costs and financial stability.
How can share capital be contributed?
By depositing funds into a special bank account, confirmed by the bank for the notary.
In cash, directly at the notary, up to 20,000 CZK (a simplified option available since 2021, useful for foreigners).
What costs should be considered when setting share capital?
Beyond incorporation expenses (around 10,000 CZK), companies must budget for a registered office (lease or virtual office), equipment, marketing, and operational costs. Share capital should realistically cover these startup needs.
