Categories
Everything you need to know before you start your own business
Entering the world of self-employment can be exciting but also challenging. Every step of the way, you will be faced with decisions that can affect your future success in business. Read through the main requirements and essentials of setting up a business so you can start your business with confidence.
What do you learn in this article?
- Who is self-employed?
- Run a business as a self-employed person or set up a company?
- How to choose a business?
- Categories of trades and their conditions
- How to prove professional competence?
- Where to locate the registered office of the business?
- How to calculate and pay taxes?
- How to tax your income and file a tax return?
- We will set up your trade quickly and without complications
Who is a self-employed person?
A self-employed person or self-employed person is a natural person who runs a business on their own account, name and responsibility and whose income is derived from business activities. A self-employed person can be, for example, a craftsman, a consultant, a lecturer or a coach, etc.
Unlike an employee, who has a supervisor and contractual obligations to the employer, as a self-employed person you perform your work independently. You bear all the business risks, including liability for debts, and you must make your own arrangements for paying taxes and social and health insurance contributions.
A self-employed person can run a business on:
- main activity - a "full-time" business, i.e. the trade is your main job and source of income;
- a secondary activity - typically a business while working, studying, on maternity/parental leave or retired.
Wondering which type of activity is better for you? Read more about the tax and levy implications of running a side business.
Run a business as a self-employed person or set up a company?
As a budding entrepreneur, you are faced with the decision of whether to run a business as a sole trader (self-employed; individual) or a company (limited company; legal entity). What are the pros and cons?
Trade - self-employed
| Advantages | Disadvantages |
|---|---|
| Easier and faster start of the business without the need for complicated administration. | Personal liability for the liabilities of the business, if problems arise your personal assets may be at risk. |
| Lower bookkeeping and tax return costs, up to zero with a flat rate tax. | Higher tax burden with higher income (especially on insurance payments). |
| More flexibility in the business, you don't deal with joint decision making and approval from other partners. | Limited options for obtaining finance, e.g. more difficult access to bank loans. |
Company - Ltd.
| Advantages | Disadvantages |
|---|---|
| Limited liability of partners, meaning personal assets are not at risk in the event of liabilities. | More complex and costly process of setting up and running a company, including the obligation to keep accounts. |
| A practical way to run a multi-person business. | Higher operating and administrative costs. |
| Greater credibility with business partners and customers. | Obligation to publish financial statements and other information, losing privacy - company's financial position is publicly traceable. |
The choice of legal form of business is very individual. It depends on your business plan, potential risks and income. Read more about the two options and the differences between them in the article Self-employed or Ltd.
How to choose a business?
To set up a business, you must meet the general conditions for self-employment, namely good character and legal capacity. Other conditions depend on the type of business.
Categories of trades and their conditions
-
1
Free: You just need to meet the general conditions and the trade is yours. This includes work in advertising or marketing, running courses, translating, working as a bicycle courier and more.
-
2
Craft: In addition to the general conditions, you must also demonstrate professional competence. Artisan trades include e.g. baker, stove maker, hairdresser, carpenter, butcher and the like.
-
3
Bound: when declaring this trade, you must again prove professional competence. Bound trades include trades such as bookkeeping, real estate brokerage, massage services, running a driving school or optician, etc.
-
4
Licensed: Here, the condition is to obtain an official permit (concession). This is an attempt by the state to regulate highly competitive industries or industries that require increased security. This includes, for example, the activities of a transport operator including couriers, the operation of a travel agency, the production of alcohol, etc.
For detailed tips and advice on getting started, see How to choose a trade - an overview of trades and conditions.
How to prove professional competence?
You can prove your competence for the following trades:
- education in the trade or in a related field - you can provide your certificate or diploma;
- a professional qualification or retraining - you must provide a certificate of retraining;
- work experience in the field - you must provide a certificate from your employer stating your experience, including your employment contract.
If you don't have the necessary training or experience yourself, don't worry. You can bring in a so-called responsible representative who is qualified for the activity and will be responsible for the operation of your trade.
Where to locate the business?
When setting up a business, you should fill in the address of the registered office of the self-employed person on the form. You should at least be able to receive mail and communicate with the authorities there. You basically have 4 options where to locate your registered office:
-
1
A permanent residence is a simple and cost-effective solution, as a self-employed person you don't even need the consent of the property owner. However, the disadvantage is the loss of privacy - your address will appear in public registers.
-
2
Owning your own property (e.g. an office) is a better choice than a home office from a privacy perspective. In addition, you don't have to deal with getting someone else's consent for the location of the residence - you can sign it yourself.
-
3
A foreign property (e.g. an office) looks professional. Consider whether the cost of renting the space will put an unnecessary strain on your cash flow. You'll need to get the address of someone else's premises on the business register to get the owner of that property to give you their notarised consent.
-
4
Virtual office - this is a combination of having someone else's address without having to pay for an expensive physical office. For a few pennies, you benefit from an attractive address while you can continue to work from home in peace. You get the property owner's consent from the service provider (e.g. us).
For more information on business headquarters, see Where to locate a business headquarters (the principles apply similarly to self-employed people).
How do I calculate and pay my levies?
While the employer pays the contributions for the employee as part of the wage or salary, the self-employed person must keep track of these payments themselves. Each year, the state sets so-called advance payments for entrepreneurs - amounts they pay each month as health and social security contributions.
Health insurance
Payment of health insurance varies according to the type of business:
- Main activity - the amount of monthly advances is based on the tax base shown on the tax return. You pay at least the minimum advance set by the state for the year (CZK 3,143 in 2025), even if you are just starting your business.
- Secondary activity - health insurance premiums are calculated according to your actual income. As a self-employed person starting a secondary activity or a state insured person (student, pensioner, maternity or parental leave) you pay nothing in the first year, after that you pay the insurance for the whole year at once. In the following year, the insurance companies will calculate the amount of the advance payment. You can find a more detailed overview of who the state pays insurance premiums for here.
Social insurance
Social insurance has a compulsory part (pension insurance and state employment insurance) and an optional part (sickness insurance).
Payment of social insurance varies according to the type of activity:
- Main activity - you pay at least the minimum amount set by the state each month. In 2025, self-employed persons who start their own business pay a reduced social insurance premium of CZK 3,399, while permanent sole traders pay CZK 4,759.
- Secondary activity - you pay a deposit of CZK 1,496 for 2025 only if your annual gross profit (the difference between income and expenses from the business) exceeds the so-called decisive amount, which is CZK 111,736 (or proportionally less depending on the number of months of business).
TIP: Self-employed people can apply for a flat-rate tax, which combines health and social insurance payments and income tax in one amount. If you comply with its terms, you don't have to file a tax return or reports for insurance companies.
Income and expenditure statements
After the end of the tax year, you must send a statement of income and expenditure to the Social Insurance Institution and your health insurance company, which will be used to determine the next year's advance payments and calculate any overpayment or underpayment of insurance premiums.
- The deadline for filing both statements is always within 1 month of the date of filing the tax return.
- You can file electronically via the website of your health insurance company and the ePortal of the Social Insurance Institution.
Are you a foreigner and want to do business in the Czech Republic? We will help you to set up a trade license and advise you on how foreigners pay health and social insurance contributions or where to pay taxes correctly.
How to tax your income and file your tax return?
In addition to paying insurance premiums, every self-employed person is also required to pay income tax at a rate of 15% and file a tax return.
Four options for taxing business income
-
1
Flat tax: The simplest way of paying income tax and insurance premiums. If you sign up for a flat tax, you just need to send a prescribed amount once a month, which includes not only income tax but also insurance contributions. You don't file tax returns or reports for the insurance company and the Social Security Agency.
The flat-rate tax has 3 bands with different payment amounts that change each year. You have to register for the flat-rate tax either when you set up your business or by 10 January of the year.
-
2
Lump sum expenses: for lump sum expenses, you only track your income, while expenses are claimed as a percentage of income on your tax return. The advantage is that you can claim more expenses than you actually have, reducing your tax base. The percentage of expenses varies according to the type of activity (30, 40, 60 or 80%). You can only claim the flat rate on income up to CZK 2 million.
-
3
Tax records. In addition, you must keep track of your assets and debts. Tax records are usually useful for businesses with very high expenses.
-
4
Accounting: The most challenging option is bookkeeping. It is compulsory if you have an income of more than CZK 25 million a year as a self-employed person. You keep track of costs, revenues and all financial flows in your business in the form of double-entry bookkeeping, just like a company. It is therefore an administratively complex process that is disadvantageous for most self-employed people.
TIP: Want to learn more about the pros and cons of each option? Read our article on how to tax business income.
Tax returns
Every self-employed person must file a tax return, except those who are registered for a flat-rate tax or have an income of less than CZK 50,000 per year (or CZK 20,000 if employed).
As a sole trader, you are obliged to fill in the return electronically on the MyTax portal. You enter your income and expenses (flat-rate or real) on which income tax will be calculated. You can find step-by-step instructions in the article on how to complete your tax return.
The deadline for electronic filing is May 2. If you have a tax preparer file your return for you, you may not submit it until July 1.
Is a self-employed person starting out subject to VAT or not?
One of the common misconceptions among start-up entrepreneurs is that as a self-employed person they will be able to make purchases so-called tax-free (VAT). However, in reality this is not the case. At the beginning of a business, a sole trader is not automatically a VAT payer. You only become one when you exceed a turnover of CZK 2 million per calendar year.
We will set up your trade quickly and without complications
Now you know everything you need to start a business. Don't like queuing at the authorities? We will handle the trade for you! We will advise you on the choice of branch and all the administration. Contact us using the form below or simply click on the button and order the service directly.
Write to us and we’ll get back
to you within 24 hours.
Follow us:
Categories
- All articles
- News 38
- Tips and advice 115
- Taxes and Accounting 74
- Company Incorporation 41
- Ready-Made Companies 6
- Virtual registered office 5
- Limited Liability Company 41
- Joint-stock Company 24
- Branch office 3
- Trade licenses 45
Recommended
Trade License
Want to do business as self-employed, but you get…
Want to do business as self-employed, but you get lost in the administration for notifying your trade? Save time, we'll…
Learn more
News from our blog
News
4
minutes
Tips and advice
6
minutes
Tips and advice
13
minutes
Tips and advice
11
minutes
News
2
minutes
Tips and advice
6
minutes
News
6
minutes
Tips and advice
2
minutes
Tips and advice
4
minutes
News
4
minutes
Tips and advice
6
minutes
Tips and advice
13
minutes
Tips and advice
11
minutes
News
2
minutes
Tips and advice
6
minutes
News
6
minutes
Tips and advice
2
minutes
Tips and advice
4
minutes
