Setting up an e-shop: to do business as a self-employed person or a limited company?

Do you dream of having your own online shop? All you have to do is meet a few legal conditions. We will advise you which legal form to choose and what requirements an e-shop must meet.

How to officially set up an e-shop?

To run an e-shop you need the status of an entrepreneur. But before you start making the rounds of the authorities, think about what legal form your e-shop will take - other mandatory formalities depend on this.

You have two basic options:

1. a natural person's business (i.e. self-employed)
2. a company (most often Ltd.)

Each option has its pros and cons, which we will go through below.

E-shop as a sole proprietorship

As a sole trader, you start your business almost immediately, as the processing of a trade is very quick and requires a minimum of administration. This also means lower start-up costs - you pay CZK 1,000 to set up a sole trader business at the office, and if you don't dare to do it, we will do it for you for CZK 3,000. Accounting is also usually simpler. If you use flat-rate expenses or flat-rate tax, you only need to record your income.

Self-employed persons run their business under their own name and surname, which are registered in the trade register. These details are compulsory in all company documentation.

However, you can also run an e-shop under a different brand name (it does not have to bear your name). Just choose an original name that does not match the name of another business or a foreign trademark. The name of the e-shop must also not be misleading or infringe intellectual property rights. Otherwise, however, your hands are fairly free when it comes to choosing a name. Remember, however, that your registered identification information must appear on the website and in business communications.

However, there is one major disadvantage of being self-employed - you are liable for the company's liabilities with all your personal assets. This means that if your e-shop goes into debt, creditors will be after your savings and personal belongings.

Self-employed status is generally particularly useful for starting a business. If you are planning to expand, recruit staff and so on, setting up a limited company is more suitable for the future.

E-shop in the form of an Ltd.

Although doing business as an LLC is more administratively demanding, it has several advantages over a traditional sole proprietorship. The company can be called almost anything, so your personal details do not have to appear on invoices. In addition, you can do business with other partners and share the responsibilities and risks.

Unlike a sole trader, partners are only liable for the company's liabilities up to the amount of the outstanding share capital (SC). In other words, if you pay off the capital on time, your personal assets are safe. This is because an LLC as a legal entity is liable for its liabilities with all of its assets (and sometimes also the managing director if he or she breaches his or her legal obligations).

If you want to name your e-shop after your company, as a limited company you have a simpler situation. Limited liability companies have their name registered in the Commercial Register (OR), the so-called business name, under which they officially appear in documents and business communications. This business name can also be easily used as the name of an e-shop - it will also be clearer for the customer. Of course, you can also name your e-shop differently as an Ltd. under similar conditions as a self-employed person.

Even an LLC has its pitfalls. You have to keep accounts and taxing profits is more complicated than for a sole trader. Expect higher set-up costs and more administration both at the start and during the course of the business.

Both e-commerce options have their pros and cons, so we recommend choosing the form of business based on your specific situation and goals. A detailed comparison between a sole trader and a limited company can also help.

E-shop designation and mandatory documentation

As an e-shop operator, you need to label your online shop properly, just like a bricks-and-mortar shop. On the website, you must provide your name (self-employed) or business name (limited company), registered office, registration number (+ VAT number) and registration details. Check out our contact page for inspiration.

Before starting your business, be sure to draw up terms and conditions, a complaints policy and a personal data processing policy, which you must also publish on the website. We recommend that you include information on the website for customers about the 14-day withdrawal period.

Need help with the formal start-up of your e-shop? Set up your business online, order a trade licence or get in touch with our experts using the form below.