The particularities of entrepreneurship according to

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Keywords: commercial law, entrepreneurship, freelancer, The Trade Licensing Act. Introduction. Entrepreneurship is the performance based on voluntary, free ...
The particularities of entrepreneurship according to The Trade Licensing Act in the conditions of the Slovak Republic Petra Milošovičová, Faculty of Management, Comenius University in Bratislava, Bratislava, Slovak Republic, e-mail: [email protected] Alexandra Mittelman, Faculty of Management, Comenius University in Bratislava, Bratislava, Slovak Republic, e-mail: [email protected] Boris Mucha, Faculty of Management, Comenius University in Bratislava, Bratislava, Slovak Republic, e-mail: [email protected] Tomáš Peráček, Faculty of Management, Comenius University in Bratislava, Bratislava, Slovak Republic, e-mail: [email protected]

Abstract The change in the social structure in November 1989 has brought many significant changes. It was mainly the change of the type of economics of state from planned to market-oriented that had the consequence of the necessity to adopt an act that would regulate comprehensively certain type of entrepreneurship. The common Czechoslovak legislator accepted the requirements of society and approved two codex’s that regulated comprehensively the issue of entrepreneurship in the former Czechoslovakia. It was Commercial Code and The Trade Licensing Act. However, the aim of this paper is only the review of trade entrepreneurship mainly by means of the analysis of case-law, professional literature and legislations. In this field, there is a significant absence in research and scientific performance in the field of law and economy despite its undeniable importance in commercial sphere. Confirmation or denial of the hypothesis of the necessity to approve the new trade licensing act represents the main aim of this paper that preferably points at the field of commercial law with the significant laps to civil and administrative law. Keywords: commercial law, entrepreneurship, freelancer, The Trade Licensing Act.

Introduction Entrepreneurship is the performance based on voluntary, free decision-making whether to begin, when to finish entrepreneurship and whether to run business alone or with other people and in what extent. It is possible to run business by means of more legal forms divided from the simplest that is for the individual trade to those most complex that the establishment of public limited company. The Article 35 of the Constitution of SR enables every person to run business in the Slovak Republic. According to the opinion of Constitutional Court of Slovak Republic (1996), it is necessary to understand the right to run business as the constitutional guarantee of freedom of performance of economic activity according to consideration. This right is recognized to every person by means of right to run business and it guarantees the possibility to execute economic performance where economic competition exists as well as where it does not exist. The part of that guarantee is not the protection of entrepreneur against the entry of competitor into the chosen economic performance. As the research of the conditions of freelance entrepreneurship is only on the edge of the interest of legal theory, authors are interested to fill this gap. It is possible to reach the aim by means of case law, professional literature, literature in the field of commercial law (Kubíček, Mamojka, Patakyová) and administrative law (Škultéty, Machajová, Reken), as well as legislations.

Basic expressions of the Trade Licensing Act On 2nd of October 1991, Act no. 455/1991 of collection of laws on freelance entrepreneurship (the trade licensing act) was approved by Federal Assembly of the Czech and Slovak Federal Republic that came into effect on 15. 11. 1991 and entered into force on 1. 1. 1992. Professional literature (Kubíček, Mamojka and Patakyová, 2008) states that it is possible to express the correlation of the legal regime of Commercial Code and the trade Licensing Act by words saying that „every trade is entrepreneurship but not every entrepreneurship is a trade.“ The trade licensing act in its enactment of § 2 defines the expression trade as „a systematic performance operated independently, on its behalf, on its own responsibility, for the purpose of gaining its own profit and under the conditions stated by this act.“ This expression is almost identical with the definition of entrepreneurship included in the provision of § 2 of Commercial Code, according to which entrepreneurship is a systematic performance performed independently by entrepreneur on their own behalf and on own responsibility for the purpose of gaining profit (Capandová, 2015). On the basis of the mentioned definitions, entrepreneurship consists of 5 characters that have to be fulfilled cumulatively in order to be called entrepreneurship either according to Commercial Code or the trade licensing act. The first character is sustainability. It is fulfilled as the criterion of entrepreneurship by performing certain activity only during the specific period, e.g. selling of ice-cream, whereas it is important that the intention of entrepreneur is to perform this activity repeatedly. Independence as the second criterion in the performance of entrepreneurship has to be explained as entrepreneur himself decides about the way and forms of his performance, they are not bound by orders of third person. Srebalová states that the third criterion „on its own behalf“ means that entrepreneur does not perform on the behalf of someone else. However, they do not have to perform entrepreneurial activity personally, they can perform it by means of a third person, e.g. procurator. Own responsibility is another character that is fulfilled when there is nobody to bear responsibility for the performance of entrepreneur, only entrepreneurs themselves. Gaining profit as the last character is its main purpose of entrepreneurship, however it does not matter if profit was gained in reality, its intention to make profit is important. The provision of § 3 part 1 of the trade licensing act specifies in detail negatively the expression trade, according to which a trade is not for maintaing performances restricted by act of the state or legal entity determined by the special legal enactment e.g. post act, the use of the results of intellectual creative performance protected by special acts, performance of healing activity, performance when doing certain activities as for example psychologists and medical workers of veterinary doctors, veterinary employees and attorneys, notaries, patent representatives, bailiffs, experts and interpreters, auditors and tax advisors (Komjathy, 2016). It is not possible to include under the freelancers the performance of banks and branches of foreign banks, institutions of electronic money, payment institutions or other providers of payment services, providers of payment systems, insurance companies that make business on basis of particular acts. From the decision performance of The Supreme Courts of slovak Republic (2009) courts also stems the fact that a trade is not either a performance that from its character fulfills the characters of a trade according to provision of § 2 of the trade licensing act, but it is in conflict with good manners, e.g. prostitution. It is not possible to include into the category trade also the sale of unprocessed or processed vegetable or animal products from their own small growing and breeding performance by natural persons and the sale of forest plants, it is so called sale of the

products from courtyard, the most often at the public events as for example grape harvesting, markets, etc.

Trade running Trade, according to law, can be run by natural person (freelancer) or legal entity if they fulfill the conditions established by the trade licensing act. The same law is guaranteed to legal entities and natural persons who have registered place or domicile outside the territory of the Slovak Republic. General conditions of trade running by natural persons are: to reach the age of 18 years, full competency for legal acts and integrity. A person that posseses integrity is according to Vrabko, Machajová, Reken et al. (2001) not the person that was lawfully convicted for the economic crime, crime against property or other crime commited intentionally whose professional conduct is connected to the subject of entrepreneurship if he is not seen as he was not convicted. In the chosen cases, Act imposes the obligation to fulfill the particular conditions of running trade (Peráček, Vojtech, Srebalová et al. 2017). It is about particular or other ability according to the trade licensing act or particular acts. In legal entity, particular conditions have to be fulfilled by their responsible deputy. The particular professional ability can be understood as the complex of theoretical knowledge, practical abilities and technical and technological practices that everyone who performs performances stated in the attachment no 4 of the trade licensing act has to fulfill.

Barriers to running license However, not every person can run trade. The act bans to run trade to natural person or legal entity whose property was closed by bankruptcy till 3 years of termination of bankruptcy or after repeated confirmation of forced adjustment, however not earlier than after one year from the settlement of its liabilities that are bound to bankruptcy according to the lawful order of the court. However, if entrepreneur caused bankruptcy or forced adjustment intentionally they can run trade the earliest after 5 years from the total adjustment of their liabilities that are bound to bankruptcy according to lawful order of the court. However, this restriction is according to our opinion valid for legal entity or natural person to whom bankruptcy was proposed in stated period, but the proposal was denied for the lack of assets enough for at least the cost of legal charges. It stems from decisive performance of courts that the exemption is the situation if there is a bankruptcy or forced adjustment because of failure or criminal act of third person (Saxunová, Nováčková and Kajanová, 2017). Moreover, it is possible that Trade Licensing Office forgives the stated barrier if economic situation of person and their behavior suggest that they will fulfill properly their commitments in running trade, they will require the decision of the Slovak License Chamber before decision. This barrier can not be forgiven if the court announced bankruptcy to entrepreneur’s assets twice in 5 years or if bankruptcy was invoked intentionally (The Supreme Court of Slovak Republic, 2016). Trade can not be run by natural person whom the court or administrative body imposed prohibition regarding running trade till the prohibition is valid while courts and administrative bodies that decided about the prohibition of entrepreneurship announce this matter to Trade Licensing Office that issued certificate of trade permission to natural person or legal entity in the period of 15 days from the validity of decision.

Trade permission

Generally, trade permission starts by the day of announcement or if it is in the announcement stated later day of trade starts, the permission starts by this day while the day of announcement is the day by which the announcement has all the requirements stated by law. The certificate of trade permission is the acknowledgement about conditions fulfilling stated by act on running trades (Varga, 2012). The most used document is the abstract of the trade register. Trade permission can be performed on the whole territory of the Slovak Republic and on the basis of its character it is non-transferable, i.e. it is not possible to transfer it to other person while other person can perform it only in certain situations, stated by the trade licensing act.

Trade running by means of responsible deputy Performance of some trades requires also the person with required qualification, e.g. butcher, carpenter, etc. In the conditions of the Slovak Republic it is the responsible deputy who is a natural person appointed by entrepreneur by means of who, entrepreneur arranges professional performance during trade running. Responsible deputy has to be employed by entrepreneur when running trade, but this does not apply if it is a husband or wife of entrepreneur or a direct acquaintance or a sibling or if it is a legal person its partner or member and if it is a town , its mayor. Responsible deputy has to fulfill general and particular conditions of trade running and has to have domicile in the territory of the Slovak Republic or other approval for residence. However, it stems from the judgment of High Court of Justice in Prag (1993) that the particular appointment of responsible deputy does not discharge entrepreneur from his obligations, mainly the obligation to keep conditions stated by the trade licensing act or particular regulations whose breach can be prosecuted by sanctions. Types of trades We divide trades according to requirements for professional abilities or according to the subject of entrepreneurship. From the point of view of professional ability, we divide trades into: 1.

craft, if the condition for running trade is professional ability gained in particular major

2.

regulated, if the condition of trade running is the professional ability gained otherwise,

3.

free, if the condition of running trade is not stated professional ability.

The Czech Supreme Administrative Court (2002) states in this context, that entrepreneur runs business without authorization, if he does not have trade permission to perform an activity that is a trade or if he has trade permission that the subject of the real performed activity does not cover. Craft trades are trades taxatively named in the attachment no. 1 of the trade licensing act as for example: masonry, carpentry, roofing, stone-cutting, watchmaking, butchery. Professional ability is according to § 21 of the trade licensing act is proved by vocational certificate or other document about the proper termination of the particular major. Regulated trades are trades also taxatively named in the attachment no. 2 of the trade licensing act. The professional literature (Strážovská and Jančíková, 2017) ranges among them doe example the production of weapons and ammunitions, repairs and construction of determined measuring tools, technical certification of construction products. Professional ability for regulated trades is adjusted by particular regulations stated in attachment no.2 of the act or directly stated by this attachment.

The legislator used the method of negative calculation in definition of free trades. We can state from the deduction of the provision of § 25 of the trade licensing act that free trades are those that are not stated in the attachments no. 1 and 2 and its marking does not answer to the content of trades named in these attachments. General conditions have to be fulfilled for its running and therefore the demonstration of professional or other ability is not required. From the point of view of the subject entrepreneurship, trades are then divided into commercial, production and providing services. Commercial trades are mainly the purchase of goods for the sale to the end user (retail) or for the sale other freelancers (wholesale). According to Škultéty, Machajová, Reken et al. (2000) pub performance can be named as commercial trade that is the preparation and sale of meals and drinks if they are sold for the direct consumption on the place. The sale of ready made food or supplementary goods and the sale for the direct consumption is the part of the permission for pub performance. It is then stated that the pub performance is not the sale for the direct consumption for example non-alcoholic drinks and industrially produced milk drinks, cocktails, beer, wine and distillates, ice-cream if industrially-produced concentrates and frozen creams are used for its preparation, thermally fast treated meat products and usual sidedishes as well as meat-free meals, etc.

The obligations of entrepreneur Entrepreneur has to keep conditions stated by law regulations when maintaining trade. Except of this, they are obliged to maintain trade appropriately, fairly and professionally. As it was mentioned, they can not get rid of this obligation not only in the case if entrepreneurial performance is provided by means of responsible deputy. The trades that are not performed appropriately, fairly and professionally are according to the Supreme Court of Slovak Republic (2015) the trades where there are repeatedly offered non-qualitable products and services from the reasons of breaching the particular regulations mainly the technical standards and professional conventions. Entrepreneur who does not provide trade appropriately and fairly is the entrepreneur who without the relevant reasons does not fulfill his tax and fee obligations according to the particular regulations that is for example the secondary insolvency. The second reason is the provision of performance that is the subject of their entrepreneurship by natural person without the employment relationship compulsorily concluded. In the practice, it is the illegal employment of people without the employment contract or other contract mainly with the aim to omit the obligation to pay taxes to Social insurance and health insurance (Treľová and Olšavský, 2017).

The requirements of notification of trade The person who wants to perform trade is obliged to announce it to correspondil local Trade Licensing Office according to the registered place of legal entity or the domicile of natural person and to state required data together with attachment according to law (Jančíková and Strážovská 2016). If Trade Licensing Office finds out that the announcement has all the requirements by trade licensing act and entrepreneur fulfills the conditions stated by this act, it issues the certificate of trade permission at least till three working days from the date on which trade announcement and extract from the police records were delivered. The Certificate of Trade permission issued to natural person includes personal data of entrepreneur, commercial name, identification number, subject or subjects of entrepreneurship, the place of entrepreneurship, time that the permission is issued for, if the provision of trade is

announced for the definite period- the date of the beginning of trade, if there is a later date of beginning of entrepreneurship is announced- the date of the issue of the certificate of trade permission. The certificate of trade permission issued to legal entity has to include the same date. Košičiarová, Machajová, Škultéty et al. (2006) states, that if Trade Licensing Office finds out the absence of some requirements required by law or it is obscure, it recalls entrepreneur to remove limitations of announcement. In the recall, it determines the appropriate period for its removal, at least 15 days. If there are serious reasons, Trade Licensing Office can extend the period repeatedly on the request of entrepreneur. If entrepreneur removes limitations in this period, there is a convalidation of application and certificate will be issued. If it be to the contrary, we agree with the opinion of legislator about the necessity of suspension of administrative procedure. Following, administrative body decides, that trade permission has not even existed.

Interruption and discharge of trade permission It is possible for entrepreneur to announce interruption of performing of trade to local Trade Licensing Office, whose effect starts from the date of the delivery of announcement about interruption of performation of trade to Trade Licensing Office. However, we think that with the usage of the institute of analogia legis that it is possible to state in the announcement also the later date as the date of delivery and this date will be the date the interruption of trade permission. After its interruption, entrepreneur gets trade permission by the expiry of period of interuption of performance of trade or by the date of stated in the announcement about the change of the date of interruption of trade performance, while the interruption itself can not take longer than six months and longer than three years. The Supreme Court of the Czech Republic (2007) understands the interruption of trade as the situation when the trade permission is valid, i.e. there exists the possibility to perform on its basis self-employed gainful activities, however, it is not valid for the transient period. Trade permission can be discharged on the basis of various law facts. Freelancer can at any time voluntarily decide to close trade entrepreneurship by the date stated in the announcement about its discharge to Trade Licensing Office. The time expiration of trade permission also causes its discharge without other necessity to announce it to Trade Licensing Office. The consequence of law occurence such as the death of natural person (freelancer), if heirs do not continue in trade, their heirs or administrator of heritage, trade permission discharges. As it was already mentioned above, this permission discharges the latest by the validity of inheritance decision after the death of freelancer. Trade permission discharges also in the case of legal entity discharge, whose trade permission were given without lawyer (Schmidt, 1999). The professional literature (Wefersová, 2012) ranges among the special cases of trade permission discharge the decision of Trade Licensing Office about trade permission discharge as the consequence of not obeying law. The right to cancel trade permission indirectly belongs to the Supreme Court of Slovak Republic (2014), if there is a penalty of prohibition of entrepreneurship. In case of foreigners, the right terminates by the expiration of time of permitted temporary or permanent residence of entrepreneur or by its discharge. The local Trade Licensing Office can according to registered place of legal entity or domicile of natural person from its own or other initiative cancel trade permission for one or more trades or to suspend its running, eventually to suspend running of trade in its premises that is on the territory of its competence if entrepreneur seriously breaches the conditions stated by trade licensing act or by other special regulations. The reason for issuing this decision is for example in case of taxi service unreasonable overcharge of fare and not issuing payment document (The Supreme Court

of the Czech Republic, 2003). The act also admits to entrepreneur the right from their own or other initiative to cancel trade permission for one or more trades of entrepreneur did not begin to run trade in the period longer than two years from the establishment of trade permission or if he ceases to run trade for the period longer than two years without suspension of running trade.

Trade control and imposing sanctions. In the fifth part of the trade licensing act, the regulation of control and sanctions is included, that belongs to the competence of Trade Licensing Office in the place of a county. From provision of § 61 part 2 stems that the subsidiary competence of administrative order for the performance of controlling activity as well as the issue of decision about sanction imposing. The sanctions amount is graded according to the importance of law breach. If there is in practice the case of unauthorized entrepreneurship, i.e. without the trade permission, the control authority will obligatorily impose to natural person or legal entity who runs free trade the fine till the amount of 1.659 Eur. However, if it is craft or regulated trade, upper boundary of fine will rise up to 3.319 Eur. Not fulfilling the conditions as not to appoint responsible deputy or not to announce the establishment of business premises is punished with the sanction to the amount of 1.659 eur (Srebalová, 2008). Entrepreneur is punished with the fine up to the amount of 663 eur if for example does not announce responsible deputy to the Trade License Office even if he was not obliged to do so or if he does not announce the closing of business premises. The incorrect marking of business premises is considered as less serious breach of obligations, controller can impose a fine up to 165 eur, if the breach of obligations is reliably found out and entrepreneur willing to pay the fine. However, entrepreneur can not appeal against this decision but it stems from the analysis of the judgement of Supreme Court of Slovak Republic (2011) that this judgement suffers by such a serious defects that the hypothesis of the court about its unimportance is hardly impugnable, it is possible to inspect it within the framework of administrative justice. The imposed fines are the income of the state budget of the Slovak Republic. The issue of business entrepreneurship is similarly regulated in the countries of the European Union. As some authors point out, under certain circumstances it is possible to do business with Slovak entrepreneurship licence temporarily also in other EU Member States. If you are interested in a permanent business, it is not possible to use a Slovak entrepreneurship license, it would be considered an illegal business. For example, in Austria or in another member states of the European Union, a Slovak natural person can do business with a Slovak entrepreneurship licence using the Institute for Cross-Border Services. The second option is to acquire Austrian entrepreneurship licence. Institute for CrossBorder Services only applies to temporary or occasional business in Austria. If an entrepreneur is interested in doing business continuously or regularly in Austria, he must apply for Austrian entrepreneurship licence. The process of obtaining an Austrian entrepreneurship licence (Wefers, 2012) is divided into five basic steps. This is an application for residence in Austria, registration with the Chamber of Commerce, the establishment of a trade itself, a notice on the establishment of a trade in a financial office and a notice on the establishment of a trade in a social insurance company. As in the Slovak Republic, the basic condition for obtaining a business in Austria is the age of eighteen. Another assumption is the nationality of one of the countries of the European Union or of the European Economic Area. In the case of aliens from third countries, the law requires a residence permit. The applicant for Austrian entrepreneurship licence must also comply with the condition of good repute in relation to the trade concerned. However, the Trade Licensing Office may grant an exemption. Authorization to conduct a trade is due at the delivery of the notice. It is

a special obligation for a newly-established trader to notify the social insurance company and the tax office within the first month after the establishment of the trade.

Conclusion We have not been successful from the content of this paper to confirm the hypothesis of the necessity to adopt the new trade licensing act and therefore we are denying it. We have found out from the analysis of its final provisions that it was amended more than 90 times till 2018 what according to our opinion was required constantly changing social need. However, not even this decreases the quality of the act and it is possible to use also the results of decision performance of the Czech courts within the framework of explanation of its content. The tradition of trade entrepreneurship extents to the times when the Slovak Republic was the part of Habsburg monarchy. It is a type of entrepreneurship that applies mainly in the area of small family entrepreneurship that has strong positives and attractive advantages. This form has the significant flexibility to the needs of citizens, it is relatively immune against the negatives of economic cycles and it generally does not require the big starting investments. However, from the point of view of entrepreneurship, it is very variable and able to react dynamically to the development of market mechanism. It is fully shown also in the attractiveness and popularity of this subjective form of entrepreneurship. The biggest advantage against the entrepreneurship with the form of commercial companies is very simple and cheap way of getting trade permission mainly in the case of free trades. After the delivery of announcement to Trade Licensing Office that fulfills all law requirements, freelancer can immediately start to run business. However, the biggest weakness against the entrepreneurship by the form of capital commercial companies is the full responsibility of freelancer for their liabilities that in case of declaration of insolvency can literally ruin also the family of freelancer. References Act no. 36/2005 Coll. on Family as amended Act no. 40/1964 Coll. Civil Code as amended Act no. 455/1991 Coll. on Trade Licensing (Trade Act) as amended, Act No. 513/1991 Coll. Commercial Code as amended Capandová P., (2015). Selected Issues of Legislation with regard to Operating Pharmacies in the Slovak Republic, Acta Facultatis Pharmaceuticae Universitatis Comenianae, 72(1), 1-8. Jančíková, E. and Strážovská, Ľ., (2016). Importance of family business for EU economies, Actual problems of economics, 182(8), 33-40. Komjathy, H. (2016). Financial aspects of comunity pharmacies in Slovakia (2009-2014), European pharmaceutical Journal, 73(2), 12-17. Košičiarová, S., Machajová, J., Škultéty, P. et al. (2006). Správne právo hmotné: Osobitná časť, Univerzita Komenského v Bratislave, Právnická fakulta, Bratislava.

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