A trade licence alongside employment: what you need to know

A trade licence alongside employment is a popular way to try out running a business and earn some extra money while keeping a stable income. Before you get started, however, it is good to know the rules, the obligations and the possible pitfalls.

When combining the two makes sense

Combining employment and a trade licence is a good fit when you want to test a business idea without losing the security of a wage. Your basic income and insurance are covered, and at the same time you are building something of your own. It is a low-risk way to find out whether your business has a future. Step by step, you can verify demand, fine-tune your offer and prices and win your first customers while your job keeps you financially afloat. If the business starts to do well, you can move smoothly to working on it full time without needless stress.

Your employer’s consent and competition

Check your employment contract and internal regulations. If you were to do business in the same field as your employer, you may need their consent – the law protects the employer against competing activities. That way you will avoid needless conflict or even being given notice.

Contributions and so-called secondary activity

When combined with employment, a trade licence is often treated as a secondary activity, which can mean a more favourable contribution regime until your income exceeds a certain threshold. The exact limits, rates and conditions change regularly, however, so always check the current figures in up-to-date sources or with an accountant. As a general rule:

• in your main employment, your employer pays health insurance on your behalf,
• social insurance from your trade licence may depend on the level of your income,
• you file a single income tax return covering all your income once a year.

How to set up a trade licence

1. Choose your business activities according to what you will be doing.
2. Register your trade licence with the trade licensing office (živnostenský úrad), which can also be done electronically.
3. Register with the tax office and fulfil your registration obligations.
4. Set up a business account and a record-keeping system.

Tax return and records

You have to keep records of your income from your trade licence and report it once a year in your tax return together with your employment income. You can claim either actual expenses or flat-rate expenses, if these are more advantageous for you. Keeping thorough records from day one will save you a lot of worry at the end of the year. Keep your receipts, invoices and payment confirmations and record your income as you go, not after the fact. You will save time and reduce the risk of forgetting something when you file your return.

Time management when combining the two

An underestimated challenge of combining the two is time and energy. After a working day it is often hard to give your business your full attention, so plan realistically how many hours a week you can devote to it. Set priorities, automate whatever you can and do not be afraid to delegate some tasks. A sustainable pace is more important than burning yourself out in the short term, which could harm your job as well.

What to watch out for

New entrepreneurs most often come unstuck by not setting money aside for tax and contributions, or by underestimating the paperwork. A trade licence alongside employment may reduce the risk, but your obligations as an entrepreneur are the same as for a main activity. As your income grows, consider whether it would pay you to switch to a different form of business.

Set up properly, combining the two is an excellent springboard. If you are unsure about contributions or record-keeping, an accountant’s advice will quickly pay for itself in time saved and peace of mind.

Related articles: Franchising: the advantages and risks of doing business under a brand, Business idea: how to validate it before you launch, How to choose the right legal form for your business.

Frequently asked questions

Do I need my employer’s consent for a trade licence alongside my job?

You need consent mainly if you were to do business in the same field as your employer, since the law protects the employer against competition. So always check your employment contract and internal regulations.

Do I pay contributions twice when combining a trade licence and employment?

Not twice in full. Your employer pays health insurance for you on the basis of your employment, and a trade licence is often assessed as a secondary activity with a more lenient regime. Check the current limits and rates with an accountant.