Ready-made

Ready-made company vs. new LLC from a notary

It sounds almost like a fairy tale – you want to start a business, you long for your own LLC, but you have neither the time nor the desire to run around government offices. Therefore, you take advantage of an offer to buy a pre-prepared, i.e., ready-made company. However, in practice, it can often be far from a fairy tale; the cheapest offer can become expensive, and tempting offers rarely warn of the risks.

Why should you reconsider buying a ready-made company, what risks might you face, and is there a safer and more advantageous alternative?

Start your business faster, cheaper, and without risk. Establish your own LLC!

Source: Freepik.com

What is a ready-made company

What exactly should one imagine under the term ready-made company? It is a company established in the past that was created purely for the purpose of sale. It is registered in the Commercial Register, has an assigned ID number (IČO), a chosen name, a registered office, its own executive director, a shareholder, and usually fully paid-up share capital. However, it does not carry out any business activity and is thus essentially just an empty shell waiting to be taken over by a new owner.

Entrepreneurs often buy ready-made companies to use them as so-called SPV companies (Special Purpose Vehicles). These serve to protect the parent company from risk and to legally separate assets, for example, in large development projects.

The popularity of ready-made companies stems from the fact that many entrepreneurs believe the administrative process associated with establishing a new limited liability company (or a joint-stock company, for which ready-made companies also exist) is complex and lengthy. After all, sellers of ready-made companies often fuel these fears.

In reality, however, there are easier, faster, and safer ways to get your own LLC. Furthermore, acquiring a ready-made firm carries certain unpleasant risks.

Credibility of a ready-made? It depends on who you ask…

Many sellers of ready-made companies argue that the longer a company has been registered in the Commercial Register, the more credible it appears (after all, it has been on the market for several years). However, in practice, an entrepreneur may encounter a client who only needs one look at the register to find that the company’s history consists essentially of waiting for a new owner. In their eyes, this can cause distrust toward the company instead.

Similar disappointment (often with worse consequences) may await an entrepreneur who acquires a ready-made company for the purpose of obtaining a loan more easily (again, due to the longer history of the firm). The bank will verify the facts in the Commercial Register and may assess the allocation of funds with a much stricter eye.

Risks of ready-made companies

Although a ready-made firm should be completely free of liabilities, you may encounter unscrupulous sellers offering companies that are not entirely without history. The price is great, the negotiations are fast, and the company is “guaranteed” clean—the previous owner even confirmed it in writing before going abroad. Although technically this is not a ready-made in such a case, do you know how to tell? The new owner relies on many assurances. Then an unpleasant surprise may await them, such as a creditor demanding debt repayment! Czech courts have already encountered such cases.

The person registered in the Commercial Register as a shareholder may no longer be a shareholder. It is possible that this information was simply not updated in the Commercial Register or the transfer took place the day before. And it may not be intentional; mistakes happen.

Certainly, everything has a solution, but do you want to start your business by waiting for “it” to be resolved?

Ready-made company: Is it really the cheapest and fastest way to your own LLC?

Let’s return to the frequently repeated promises of ready-made company sellers that buying an already prepared firm represents the fastest, easiest, and cheapest way to get your own LLC. In reality, this may not be true in any of the declared points.

Speed of a ready-made company

Regarding speed, the purchase and subsequent transfer of a ready-made company to a new owner takes just as long as establishing an LLC in the previously mentioned standard (uncomplicated) variant. Why buy “second hand” in a few hours when you can have your own company, clean and truly without history?

Simplicity of a ready-made company

Buying a ready-made company may not even be easy. Given the number of firms offering this service, you will spend a lot of time choosing a suitable seller, after which you will certainly verify if someone is cheaper, if they have good references, or if there is an opaque foreign company behind them—this can be quite a challenge, especially for inexperienced, aspiring entrepreneurs.

Price of a ready-made company

How much does a ready-made company actually cost? Its establishment costs little, its sale costs more, and what about the difference? That is the seller’s profit. Is it worth buying? The price depends on several factors—firstly, the time the ready-made firm has been “active” (the longer the history, the higher the price), and secondly, the amount of share capital or VAT registration. Of course, the seller’s pricing policy also plays a role. You can find offers on the internet ranging from thousands to hundreds of thousands of crowns. The price for a ready-made company is formed by several different factors for each seller; for notaries, it is always the notary tariff, a regulation issued by the Ministry of Justice.

Always verify what the price includes. It may happen that the low price will be far from final.

Do you want to buy a ready-made company? Establish your own LLC instead!

Is there any other way to easily acquire a limited liability company? The good news is yes. Establish it yourself, or rather contact your nearest notary. With their help, you can often handle all necessary documents within a single day (from the memorandum of association/deed of foundation to the trade license and entry into the Commercial Register, etc.). You can start doing business practically immediately—without unnecessary delays and waiting.

By using the services of a professional in the form of a notary, you are always assured that the establishment of your LLC will take place safely and without complications—fully in accordance with current legislation. You won’t have to worry about overlooking anything; the notary will prepare all documents or check them before the company is registered in the Commercial Register and send them to the court in electronic form.

As for the price for establishing a limited liability company with a notary, it is unbeatably the cheapest way. You do not need any intermediaries who would have to use the notary’s services anyway (and subsequently charge you for them).

How to proceed with the establishment of a limited liability company?

1. Open the page with the address https://www.nkcr.cz/sro-online-informace
   It will be appropriate to prepare basic information about the company you want to establish and about the persons of future shareholders and executives. If you have a valid electronic signature (recognized or qualified), you can use it in the process of drafting the deed.
2. Log in using bank identity or Citizen Identity
   These options include a wide range of login methods. Within the Citizen Identity, it is also expected that a remote notarial deed can be drafted by citizens from other EU countries (electronic identification means assurance level “high”).
3. Confirm your contact details
   This is just the first name, last name, email, and phone.
4. Next is the selection of a notary and language choice
   You can choose your notary. If you do not require a specific notary, the system can assign one to you from those who are currently online. You can specify from which region you want to choose a notary, or choose a language preference.
5. Fill in the basic details about the requested company into the form
   This includes the name, registered office, object of business, executive, manner of acting, and shareholders, for whom you can add the amount of their contribution and share in the company. You can supplement or change everything additionally. The application will allow the notary to check these details and resolve any discrepancies with you. Help is also available.
6. Consent to provide data
   The application will connect you with the specific notary you have chosen or call several notaries who meet the specified criteria. Before establishing a connection, you grant consent so that the notary can see your data.
7. Preparation and signing of documents
   You will enter a virtual meeting room (videoconference) with the notary, where you can exchange documents, consult their content, and sign them. Based on these, the notary will then register the company in the register.
   Currently, it is essential that you have your own (previously issued) electronic signature; otherwise, it will not be possible to sign the remote notarial deed.
   In pilot operation since March 2022, there is now the possibility of having a qualified certificate issued directly by a notary during the online establishment process if you do not have one. This option is only available at selected notaries.
8. Payment
   Payment is handled by a payment gateway that offers standard payment methods commonly used when shopping and paying in online stores. More detailed information on online payments here.

Read more about establishing an LLC with a notary in the article Step-by-step procedure for establishing an LLC.