Classification of Business

Enterprises
 Typology of enterprises

 Legal forms
 Size of enterprise
 Type of production
 Sectors and branch of economy
 three groups according to
independence criteria:

The new definition of SME categorizes them in

following:
linked enterprises, when one company owns
most of the capital or voting rights in the
other company,
 partner enterprises, when one company is an
upstream enterprise and owns more than
25% of the capital or voting rights in a
downstream enterprise,
 autonomous enterprises that do not meet the
two above mentioned criteria of
independence.
 Size clasification - EU

Enterprise Number of Annual or Annual

Category employees turnover balance sheet
Annual Work Unit total
Medium- < 250 ≤ 50 mil. € ≤ 43 mil. €
sized (in yr. 1996: 40 mil.) (in yr. 1996: 27
mil.)
Small < 50 ≤ 10 mil. € ≤ 10 mil. €
(in yr. 1996: 7 mil.) (in yr. 1996: 5 mil.)
Micro < 10 ≤ 2 mil. € ≤ 2 mil. €
(not defined) (not defined)
 Enterprise share according to the
number of employees

Number of employees % of enterprises

1-9 96,0
10 - 49 3,1
50 - 249 0,7
250 and more 0,2
 Type of production
Enterprises with production:

a) Single part production – small amount of the same products

b) Batch (line) production – production of the same type of
product repeating in batches;
Size of batch:
b1) small
b2) medium
b3) great
c) Continual production – production of great amount of small
type of products
 Sectors

1. Primary sector (primary production, basic

industry, např. agriculture, forestry, mining
industry)

2. Secondary sector (manufacturing industry,

e.g. manufacturing, food, textile).

3. Terciary sector (non-productive enterprises,

např. trade, transport, banks).
 Legal forms
1. Natural person (tradesman, enterpreneur)
2. Corporations
3. Cooperative
4. State enterprises, state organisations
5. Budgetary organisation
6. Contributory organisation
7. Foundation
8. Association
9. Not-for-profit organisation
10. Others
 Definitions

 The
The definition
definition of
of aa natural
natural person:
person: He/she
He/she is
is aa citizen
citizen born
born in
in the
the Czech
Czech
Republic.
Republic. The
The natural
natural person
person must
must be
be 18
18 years
years old
old to
to achieve
achieve full
full legal
legal
capacity.
capacity.


 The
The definition
definition ofof an
an entrepreneur
entrepreneur (physical
(physical person):
person): Entrepreneurs
Entrepreneurs
are
are natural
natural people
people devoted
devoted to
to business
business (so-called
(so-called self-employed
self-employed people;
people;
Czech
Czech acronym
acronym OSVČ).
OSVČ). They
They have
have entrepreneurial
entrepreneurial resources,
resources, which
which they
they
use
use for
for the
the realisation
realisation of
of business
business plans,
plans, but
but they
they accept
accept the
the business
business risk.
risk.


 Entrepreneurs
Entrepreneurs carry
carry the
the business
business risk.
risk.

 Their
Their personnel
personnel property
property is
is aa business
business liability.
liability.


The
The definition
definition of
of legal
legal (juridical)
(juridical) person:
person: This
This is
is aa business
business entity
entity
(corporation) according to a business code or other specific legal
(corporation) according to a business code or other specific legal
conditions.
conditions.


 In
In the
the Czech
Czech Republic,
Republic, people
people may
may carry
carry out
out business
business in
in two
two ways
ways -- as
as aa
natural
natural person
person (self-employed)
(self-employed) or
or as
as aa legal
legal entity.
entity.
 The legal forms of business are as
follows:

 sole owner, e.g. trader (Czech acronym

OSVČ),
 silent partnership,
 limited liability company (Czech acronym
s.r.o.),
 limited partnership (Czech acronym k.s.),
 unlimited partnership (Czech acronym
v.o.s.),
 joint-stock company (Czech acronym a.s.),
 cooperative.
 Types of business organisations

a) personal established by 2 and more people,

partners participate on business,
collective company liability
co-partnership, limited partership

b) capital capital participation of partners on business

they do not have participate personally on
business,
limited company Ltd, joint-stock company
(public limited company – plc.)
 Sequence of establishment of
companies

1) Signing of partnership contract

2)Deposit the capital in the bank

3) Application in the licence authority.

4) Registration in Companies register.

 Legal Forms of Business
Organisation

 Proprietorship
 Partnership
 Cooperation
 Sole Owner – Natural Person
(Entrepreneur)

 The natural person (individual

entrepreneur) can carry on business
activities in their own name on the
basis of a valid trade licence or other
permission.
 In the case of a foreign non-EU
individual, registration in the
Commercial Register is also required.
 Silent Partnership
A silent partnership is established by a written
contract between a silent partner and a
Czech entrepreneur.

The silent partner invests in the Czech business

and awaits the results – a share of the
profits.
Silent partners are only liable for losses to the
extent of their original investment.
 Limited liability company
Spole čnost s ru
Společnost čením omezeným
ručením
Ltd

Together into amount of

Liability of owners
outstanding deposit

Minimum of capital min. 200 000 CZK

Minimum of partners (founders) min. 1, max. 50

General meeting – highest

institution
Institutions
Executives – corporate inst.
Advisory board - voluntary
Profit/loss sharing According of share of business
share
 Joint stock company
This form of business is characterized by the limited liability of its
owners
owners,, the issuance of shares of easily transferable stock
stock,, and
existence as a going concern
concern..

The process of becoming a corporation

corporation,, call incorporation
incorporation,, gives the
company separate legal standing from its owners and protects those
owners from being personally liable in the event that the company is
sued (a condition known as limited liability).
liability).

Incorporation also provides companies with a more flexible way to

manage their ownership structure
structure..
 Joint stock company

 Owners have limited liability
liability..

 Share capital must be at least CZK 1 million
million..

 The company must put at least 20% of the capital
into a reserve fund
fund,, which is funded by after -tax
after-tax
profits
profits..

 The accounts must be audited annually annually..

 There must be at least three members on the board
of directors
directors,, and each member must be a Czech
citizen or resident
 Joint stock company
Liability of stock holders none

min. 2 000 000 CZK without tender of

Minimum of capital stocks
min. 20 000 000 CZK with tender of stocks

Minimum of partners min. 2 natural person or 1 corporate

(founders) bodies (legal entities)
Shareholder´s meeting
Institutions Board of directors
Advisory board – min. 3 members
According of share of nominal value of
Profit/loss sharing
stock to all stocks
The minimum share capital condition is CZK 2 million for companies
set up without a public offer for share subscription.
The shares may be issued either in certificated or uncertificated (paperless) form.
All joint-stock companies are required to establish reserves of at least 20% of their share capital.
 Cooperative - dru žstvo
družstvo
Liability of owners No liability

Minimum of capital min. 50 000 CZK

min. 5 partners or 2 corporate
Minimum of partners (founders)
bodies (legal entities)
Member meeting
board of directors – corporate
Institutions inst.
Control commision – 3
members
According to level of member
Profit share
deposit
 Limited partnership ((comandite)
comandite) –
Komanditn
Komanditníí spole čnost
společnost

General partner – Sole trader is

liable for the debts of business to the
full extent of his personal assets
Liability of owners
Limited partner – amount of
outstanding deposit

Minimum of capital Limited partner minimum 5000

Minimum of partners
1+1
(founders)
profit 1 : 1, than General partner the
same amount and Limited partner
Profit/loss sharing among their deposits
loss – General partner the same
amount
 Unlimited
Unlimited-- partnership - Veřejná
Veřejná
obchodn
obchodníí spole čnost
společnost
Together liability for the
Liability of owners debts of business to the full
extent of personal assets

Minimum of capital Is not defined

2 natural person or 2
Minimum of partners
corporate bodies (legal
(founders)
entities)

Profit/loss sharing Equal share

In an unlimited partnership (Czech acronym v.o.s.), all partners (minimally two)

are jointly and severally liable for the partnership’s obligations.
Partnership profits are shared equally unless otherwise specified in the partnership agreement.
There is no minimum capital requirement.
 Sources:

http://www.businessinfo.cz/en/section/g
uidelines-starting-a-business-
psc/1001864/