5 best practices for successful small business owners in the Czech Republic

Transitioning from a freelancer to a company (usually s.r.o.) has a number of benefits according to Daniel Macek a lawyer for MACEK.LEGAL, a law firm that specializes mainly in corporate and employment law.

“People tend to trust companies or at least perceive them as more credible,” he says.

Aside from optics and tax advantages, setting up a s.r.o. (the Czech equivalent of a limited liability company) can be advantageous for other reasons: you can hire employees as the business grows, as well as protect yourself against liability issues.

“When you’re a freelancer you’re liable for all your mistakes,” says Macek. “But if you’ve established a company, you’re just liable for the amount of the unpaid contribution to the share capital you put in. You can’t be sued personally or lose your home.”

Establishment of a limited liability company requires the preparation of documents for members of a company, director and administrator of capital, as well as securing the date of the establishment of the company with a notary, securing trade licenses for the established company, and ensuring the registration of the company in the Commercial Register.

MACEK.LEGAL can help potential entrepreneurs make the move from trade license to s.r.o.

Good business relationships with customers and employees begin by getting things in writing, says Macek. "Both parties know where they stand, what they have agreed on and what will happen in the event of a breach of contract."

He adds that his firm encounters numerous cases where people establish cooperation based simply on an oral agreement, which is incredibly difficult to prove in the event of a dispute.

But it's also possible to go overboard with complicated contractual documentation. "We advise against this style of contract," says Macek. "Contracts should be reasonably short, but enshrine everything the parties have agreed."

A trademark (known in Czech as ochranná známka) isn’t just your business name or company logo; it’s a symbol of your unique presence that stands out against the competition -- and it’s important to protect that symbol from trademark infringement for a number of reasons, says Iva Čípová, a lawyer from MACEK.LEGAL who specializes in trademarks.

“By registering the trademark, you acquire an exclusive right to use the trademark and you ensure that your trademark is not similar to any other registered trademarks,” she says.

She notes that “If you accidentally (or even intentionally) infringe upon someone else’s trademark, you could face legal fees and fines, registering yours protects you on several levels."

Being forced to rename your company or create a new logo could have a lasting negative impact on your business including a loss of clientele who may be confused with regards to your identity.

Filing a trademark application with the Industrial Property Office is required to establish your trademark in the Czech Republic (or with the European Union Intellectual Property Office in case of European Union trademark). MACEK.LEGAL specializes in this kind of work and can help you make the process run smoothly.

When repeat e-mails or phone calls to your client fail, there’s a cheaper and more efficient way to collect what’s owed to you, says Macek, “If the debtor refuses to pay you the amount due or it’s not possible to contact him/her, you can file a lawsuit.”

However, he advises first sending a “pre-action call for payment,” which entitles you, if you’re successful in court, to demand reimbursement of legal costs from the debtor.

“In our experience, a pre-action call for payment, especially if it is written by a lawyer, often has a psychological effect on the debtor, when he realizes that the creditor is ready to enforce the claim in court,” says Macek.

He adds that in many cases, the debtor will pay the amount due simply based on a pre-action call for payment and the dispute can be settled out of court.

MACEK.LEGAL can check debtors in the central register of executions free of charge as well as assist you with deciding on next steps, whether selling the debt, negotiating a repayment schedule with the debtor, or filing a lawsuit in court.

Many small businesses wait to hire legal representation until they face a crisis. However, having legal consultation can help you face a number of issues that are likely to arise as your business grows.

“From drafting and negotiating contracts to helping you work with independent contractors or employee issues, as well as all the situations outlined mentioned above, securing legal counsel is a good investment that can protect your business interests,” says Čípová.

She adds that having legal help at your fingertips can be much less expensive than ending up in court. MACEK.LEGAL offers a number of services to help you successfully operate and safeguard your business.

This article was written in association with MACEK.LEGAL. Read more about your partner content policies here.