You do not have to. Two sole traders may also cooperate on the basis of an association agreement under the Civil Code, without forming a new legal entity. An association has no legal capacity of its own, you conclude contracts personally, and you are jointly and severally bound by obligations towards third parties. As the cooperation grows, forming a company is usually the better course.
Two sole traders who begin taking on joint work sooner or later reach the question whether they are not already a firm. The Act leaves them a choice: they may remain independent entrepreneurs and regulate their cooperation by contract, or they may form a company. Both routes are legitimate, but they differ in who is the contracting party towards customers and suppliers and in who is liable for what.
An association agreement: cooperation without a new entity
The Civil Code allows several persons to associate in order to achieve an agreed purpose together (Section 829(1)). For entrepreneurs, the second subsection is decisive:
Associations have no capacity to have rights and obligations.
— Section 829(2) of Act No. 40/1964 Coll. (unofficial English translation)
An association therefore acquires no rights or obligations of its own. You sign contracts as individuals, and assets acquired through the joint activity become the co-ownership of all the participants, with equal shares unless the agreement provides otherwise (Sections 834 and 835(1)). For creditors, the Act has an unambiguous rule:
The participants are jointly and severally bound by obligations towards third parties.
— Section 835(2) of Act No. 40/1964 Coll. (unofficial English translation)
If a debt arises in the joint activity, the creditor may claim the whole amount from either of you. Decisions on managing joint matters are taken unanimously unless the agreement provides otherwise (Section 836(1)), which in the event of disagreement means deadlock. Leaving an association carries one further consequence: a participant who has left or been expelled is not released from responsibility for obligations arising from the joint activity up to the date of departure (Section 840). A participant may leave at any time for serious reasons, otherwise not at an inopportune time and to the detriment of the others (Section 838(1)).
When a company makes sense
A company is a separate legal entity. It concludes contracts, the assets belong to it and the customer sees a single contracting party. The difference between the forms lies mainly in liability. The partners of a general partnership are liable for its obligations with all their assets, jointly and severally (Section 86 of the Commercial Code), so from a risk perspective little changes compared with an association. The difference is that the debtor is the company and the creditor may generally turn to a partner only once the company has failed to perform a due obligation even within a reasonable time after a written demand (Sections 56(6) and 306(1) of the Commercial Code). A company also clearly separates the joint business from your other trades. In an s. r. o., a member is liable for the company’s obligations only up to the amount of their unpaid contribution entered in the Commercial Register (Section 106), which for most joint ventures carrying higher risk is the decisive argument.
An association agreement suits a limited cooperation, for example a single larger contract in which each party invoices its own part. A company is more suitable where you want to appear under a common name, employ people, invest in joint assets or one day admit another partner or sell an interest.
What to consider on either route
An association agreement should set out the purpose, each participant’s contribution, the division of proceeds, the manner of decision-making, the administration of joint assets and the rules on departure and settlement. In a company, that role is performed by the memorandum of association, which since 17 August 2026 is executed in the form of a notarial deed or of a document authorised by a lawyer, with the exception of an s. r. o. formed under the simplified procedure using the electronic form (Sections 57(1) and (4) and 110a of the Commercial Code). The tax and levy aspects of both routes should be gone through with your accountant.
How to proceed
If you are not sure which route fits your plans, we will compare them as part of our choice of legal form service. If you decide on an s. r. o., we will prepare the memorandum of association with rules on decision-making and a member’s departure, and form the company through our formation of an s.r.o. in Slovakia service. For partners who wish to retain personal liability, a general partnership is an alternative.
This answer provides general information on the law as at 12 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
