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Everything you need to know before you start your own business
Entering the world of self-employment can be exciting, but also challenging. At every turn, you’ll face decisions that can impact your future success as an entrepreneur. Review the main requirements and procedures involved in starting a business so you can confidently launch your venture.
What will you learn in this article?
- Who is a self-employed individual?
- Should you operate as a self-employed individual or start a company?
- How do you choose a line of business?
- Business categories and their requirements
- How do you demonstrate professional competence?
- Where should you establish your business address?
- How do you calculate and pay contributions?
- How to Report Your Income and File a Tax Return?
- We’ll set up your business quickly and hassle-free
Who is a self-employed person?
A self-employed individual is a natural person who conducts business on their own account, in their own name, and at their own risk, and whose income derives from business activities. A self-employed individual may be, for example, a craftsman, consultant, instructor, coach, or others.
Unlike an employee, who has a supervisor and contractual obligations to an employer, as a self-employed person you perform your work independently. You bear all business risks, including liability for debts, and you must ensure that you pay your own taxes and social and health insurance contributions.
A self-employed person may conduct business as:
- primary activity —a “full-time” business, meaning the business is your main occupation and source of income;
- a secondary activity —typically running a business while employed, studying, on maternity/parental leave, or retired.
Wondering which type of activity is better for you? Read more about taxes and contributions when running a business as a secondary activity.
Should You Run a Business as a Self-Employed Individual or Start a Company?
As a budding entrepreneur, you face the decision of whether to operate as a sole proprietor (OSVČ; natural person) or to establish a company (s.r.o.; legal entity) right away. What are the pros and cons of each?
Self-Employment – OSVČ
| Advantages | Disadvantages |
|---|---|
| An easier and faster way to start a business without the need for complicated paperwork. | Personal liability for business obligations; in the event of problems, your personal assets may be at risk. |
| Lower costs for accounting and tax returns, with a flat-rate tax that can be as low as zero. | Higher tax burden on higher income (especially regarding insurance premium payments). |
| Greater flexibility in business operations; you don’t have to deal with joint decision-making or approval by other partners. | Limited financing options, such as more difficult access to bank loans. |
Company – s.r.o.
| Advantages | Disadvantages |
|---|---|
| Limited liability of shareholders, meaning that personal assets are not at risk in the event of liabilities. | A more complex and costly process of establishing and managing the company, including the obligation to maintain accounting records. |
| A practical way for multiple people to run a business together. | Higher operating and administrative costs. |
| Greater credibility with business partners and customers. | An obligation to publish financial statements and other information; you lose privacy—the company’s financial situation is publicly accessible. |
Choosing a legal business structure is a highly individual decision. It depends on your business plan, potential risks, and projected revenue. You can read more about both options and the differences between them in the article “Self-Employed or LLC?”
How do you choose a line of business?
To start a trade, you must meet the general requirements for self-employed individuals, namely having a clean criminal record and legal capacity. Additional requirements depend on the type of trade.
Business Categories and Their Requirements
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1
Unrestricted: You simply need to meet the general requirements, and the business is yours. This category includes, for example, work in advertising or marketing, teaching courses, translation, working as a bicycle courier, and more.
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2
Skilled trades: In addition to the general requirements, you must also demonstrate professional competence. Skilled trades include, for example, bakers, stove fitters, hairdressers, carpenters, butchers, and similar professions.
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3
Regulated: When registering for these trades, you must again demonstrate professional competence. Regulated trades include fields such as bookkeeping, real estate brokerage, massage services, operating a driving school or an optician’s shop, and others.
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4
Concession-Based: Here, obtaining an official permit (concession) is required. The government uses this to regulate highly competitive industries or those that require heightened safety standards. Examples include transportation services (including couriers), operating a travel agency, and alcohol production.
You can find detailed tips and advice for getting started in the article “How to Choose a Trade—An Overview of Fields and Requirements.”
How do you demonstrate professional competence?
For regulated and skilled trades, you can demonstrate professional competence by:
- througheducation in the field or a related field—provide your transcript or diploma;
- throughprofessional certification or retraining—submit a certificate of retraining;
- through work experience in the field —provide a confirmation from your employer regarding your experience, including your employment contract.
If you do not have the appropriate education or work experience yourself, don’t despair. You can appoint a so-called “responsible representative” who is professionally qualified for the given activity and will be responsible for the operation of your business.
Where should you establish your business address?
When registering a business, you must enter the address of your registered office on the form right away. You should at least be able to receive mail and communicate with government agencies at this address. You basically have four options for where to establish your registered office:
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1
Using your permanent residence as your business address is a simple and cost-effective solution; as a self-employed person, you do not even need the property owner’s consent. The downside, however, is a loss of privacy—your address will appear in public records.
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2
Own property (e.g., an office) is a better choice from a privacy perspective than having your registered office in an apartment. Plus, you don’t have to worry about getting permission from someone else to use the property as your registered office —you can simply sign the agreement yourself.
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3
A third-party property (e.g., an office) conveys a professional image. Consider whether the cost of renting the space will unnecessarily strain your cash flow. To list the address of a third-party property in the Trade License Register, you’ll need the officially certified consent of the property owner.
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4
A virtual office —this combines the use of a third-party address without the need to pay for an expensive physical office. For just a few crowns, you can use an attractive address while continuing to work comfortably from home. You can obtain the property owner’s consent from the service provider (e.g., from us).
You can read more about business registered offices in the article “Where to Establish a Business Registered Office ” (the principles apply similarly to self-employed individuals).
How to Calculate and Pay Social Security Contributions?
While employers deduct insurance premiums from employees’ wages or salaries, self-employed individuals must manage these payments themselves. Each year, the government sets so-called “advance payments” for business owners—amounts they pay monthly as contributions to health and social insurance.
Health Insurance
Health insurance payments vary depending on the type of business activity:
- Primary business activity – the amount of monthly advance payments is based on the taxable income reported on your tax return. You must pay at least the minimum advance payment set by the government for the given year (3,306 CZK in 2026), even if you are just starting your business.
- Secondary activity – health insurance premiums are calculated based on actual income. As a self-employed person starting a secondary activity or as a person covered by state insurance (student, retiree, person on maternity or parental leave), you pay nothing in the first year; thereafter, you pay the insurance premium in a lump sum for the entire year. The following year, insurance companies will calculate the amount of your advance payment. You can find a more detailed overview of who the state pays insurance premiums for here.
Social Insurance
Social insurance consists of a mandatory component (pension insurance and the contribution to the state employment policy) and a voluntary component (sickness insurance).
Social insurance payments vary depending on the type of activity:
- Main Activity – Each month, you pay advance payments of at least the minimum amount set by the state. In 2026, self-employed individuals starting out will pay a reduced social insurance premium of 3,575 CZK, while established self-employed individuals will pay 5,005 CZK.
- Secondary activity — You pay an advance payment of 1, 574 CZK for 2026 only if your annual gross profit (the difference between business income and expenses) exceeds the so-called threshold amount, which is 117,521 CZK (or a proportionally lower amount based on the number of months in business).
TIP: Self-employed individuals engaged in their primary business activity may opt for the flat-rate tax, which combines payments for health and social insurance as well as income tax into a single amount. If you meet its conditions, you do not have to file a tax return or submit reports to insurance companies.
Income and Expense Reports
After the end of the tax period, you must submit a statement of income and expenses to the Czech Social Security Administration (ČSSZ) and your health insurance provider; this statement is used to determine advance payments for the following year and to calculate any overpayment or underpayment of insurance premiums.
- The deadline for submitting both statements is always within 1 month of the date your tax return is filed.
- You can submit them electronically through your health insurance company’s website and the ČSSZ ePortal.
Are you a foreigner looking to start a business in the Czech Republic? We’ll help you obtain a trade license and advise you on how foreigners pay health and social insurance contributions and where they should properly file their taxes.
How do you report your income and file a tax return?
In addition to paying insurance premiums, every self-employed person is required to pay income tax at a rate of 15% and file a tax return.
Four Options for Taxing Business Income
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1
Flat-rate tax: The simplest way to pay income tax and insurance premiums. If you opt for the flat-rate tax, you simply send the prescribed amount once a month, which covers not only income tax but also insurance premiums. You do not need to file a tax return or submit reports to the insurance company or the Czech Social Security Administration (ČSSZ).
The flat-rate tax has three brackets with different payment amounts, which change every year. You must enroll in the flat-rate tax system either immediately upon starting your business or by January 10 of the given year.
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2
Flat-Rate Expenses: With flat-rate expenses, you only track your income, while you claim expenses on your tax return as a percentage of your income. The advantage is that you can claim higher expenses than you actually have, thereby reducing your taxable income. The expense percentage varies depending on the type of business activity (30%, 40%, 60%, or 80%). You can only claim the flat-rate deduction on income up to 2 million CZK.
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3
Tax records: With tax records, you track both your income and actual expenses, which are used to calculate your final tax liability on your tax return. In addition, you must keep a record of your assets and liabilities. Tax records are generally worthwhile for business activities with very high expenses.
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Accounting: The most demanding option is keeping accounting records. You are required to do so if, as a self-employed individual, your annual income exceeds 25 million CZK. You track expenses, revenues, and all cash flows in your business using double-entry bookkeeping, just like a corporation. It is therefore an administratively complex process that is disadvantageous for most self-employed individuals.
TIP: Want to learn more about the pros and cons of each option? Read our article on how to report business income for tax purposes.
Tax Return
Every self-employed person must file a tax return, with the exception of those who are registered for the flat-rate tax or have an annual income of less than 50,000 CZK (or 20,000 CZK if employed).
As a self-employed individual, you are required to file your return electronically via the MojeDaně portal. On the form, you’ll enter your income and expenses (flat-rate or actual), which will be used to calculate your income tax. You can find step-by-step instructions in the article on how to file a tax return.
The deadline for electronic filing is May 2. If a tax advisor is filing your return on your behalf, you can submit it as late as July 1.
Is a new self-employed person a VAT payer or not?
One common misconception among new entrepreneurs is that, as a self-employed individual, they will be able to make purchases “tax-free” (VAT-free). In reality, however, this is not the case. When starting a business, a self-employed person is not automatically a VAT payer. You become one only when your annual turnover exceeds 2 million CZK.
We’ll set up your business quickly and hassle-free
Now you know everything you need to start a business. Don’t like waiting in line at government offices? We’ll handle the business registration for you! We’ll advise you on choosing a business category and take care of all the paperwork. Contact us using the form below or simply click the button to order the service right away.
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