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JUDr. Jakub Dohnal, Ph.D., LL.M.
associate, managing partner
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The problems of business corporations are governed by the Act on Business Corporations of 01 January 2014 (Act No. 90/2012 Coll., hereinafter referred to as the “ABC”) which came into force on that day together with the Civil Code (Act No. 89/2012 Coll.). Capital companies – Limited Liability Company, Joint Stock Company. A profit share is determined on the basis of ordinary or extraordinary financial statements approved by the supreme body of the business corporation. The supreme body is in the case of a capital company a general meeting. Under Section 190 (2)g), respectively Section 421 (2)g) of ABC approving the financial statements falls within the competency of the general meeting. A proper closing of books must be discussed within 6 months after the last day preceding the fiscal period. In contrary to the previous legal regulations, the profit share may be paid not only to the associates, but also to other persons, if so indicated by the Memorandum of Association. These other persons may be e.g. other people interested in the operation of the company, e.g. members of other bodies of the company, employees or third party (e.g. associate´s creditor). The statutory body decides on the payment of a profit share, the maturity period is 3 months but another deadline may be agreed too. Regarding Limited Liability Companies there is the possibility to pay the profit share in another manner than in cash, if so decided by the general meeting, unless you want to get the profit share in e.g. potatoes or screws, it is suitable to exclude this option from the Articles. Regarding the Joint Stock Company the profit share may be paid in another manner than in cash only if determined by the Articles. The current legal regulations offer to use the advance payment of the share payment, which was not possible before. The payment of the advance payment may be proceeded upon closing of books in progress whereas reserve funds, created for other purposes, may not be used for the payment, neither own resources which are assigned and their purpose cannot be changed by the business corporation. The risk of payment of advances is in the situation when at the end of fiscal period there is no enough funds for payment of the originally intended profit share and it will be necessary to return advances partly or in whole. The paid profit share cannot be returned unless the conditions set by ABC were breached, even unwittingly. The insolvency test is applied for the payment of a profit share or its advance payment under which it is not possible to pay it if the company went bankrupt due to such payment. Partnerships – general partnership, limited partnership The supreme body of the companies are all associates; therefore they distribute a possible profit. The consent of the associates is necessary, unless determined by the Memorandum of Association otherwise. The profit and loss is equally divided among the associates Regarding the limited partnership the profit is divided between the company and unlimited partner.
A part of the profit which fell to the limited partnership shall be divided after taxation between the limited partners who bear the risk of loss.
The so-called double profit taxation is applied at capital companies and limited partnership. At first the profit is assessed by a corporation tax amounting 19% and then by an income tax (or a withholding tax) of a person who shall get the profit share, however, this does not apply at subsidiary companies. The situation is different at general partnership when the general partnership is not obliged to declare. The profit is therefore divided equally among the associates and each of them shall then record it in the tax declaration. The total tax in case of general partnership shall be 15%. Most of the above mentioned may be agreed by the Memorandum of Association, Articles of Association and founder´s transaction, otherwise than in ABC. This is our daily matter. If you want to ask how to proceed your case in the best way, feel free to call us at + 420 800 770 888 for free and arrange a meeting with one of our specialists on the Commercial Law.