It is important to understand which type of business would be best for you to establish in Poland as a foreigner. Because that would you doing business in Poland easily.
As a potential Polish entrepreneur who intends to register a company in Poland and organize a business, you will be faced with the choice of the legal form of the enterprise under which the activity will be carried out. The decision affects future costs associated with doing business, the procedure for registering a legal entity, taxation and personal liability for the obligations of the founders’ company.
In this regard, all aspects related to the functioning of your future Polish company depend on the choice of legal form, which will undoubtedly affect its effectiveness. You must analyze which legal form of business activity will be the most beneficial. Otherwise, there is a risk of excessive expenses and unnecessary overpayments, which can be critical for a business that has not yet begun to earn money (especially if resources are limited).
According to Polish legal regulations, there are the following forms of doing business in Poland :
- Jednoosobowa dzialalnosc gospodarcza – a private (individual) entrepreneur represented by an individual (similar to SPD, sole proprietorship).
- Spolka cywilna (association).
- Spolka jawna.
- A partnership.
- Limited partnership.
- Spolka z ograniczona odpowiedzialnoscia – LLC (limited liability company).
- Spolka akcyjna is a joint-stock company.
Next, we will consider the tasks and features of each of the forms, paying special attention to the question “is this or that form suitable for foreigners and non-residents in Poland?”, since each corresponds to certain tasks that an entrepreneur sets for himself or who wants to use the business immigration scheme to Poland thanks to company creation.
Jednoosobowa dzialalnosc gospodarcza – private (individual) entrepreneur
This legal form of economic activity, represented by an individual (similar to SPD, FLP), is the most popular among Poles. After all, in a situation where the taxpayer plans to run a business on his own, this legal form is the most optimal.
For foreigners, registration of activity in this legal form is possible only if they have a Pole’s card or a residence permit.
Basic conditions for registering and operating an individual entrepreneur in Poland
The formalities associated with the registration and maintenance of this legal form in Poland have been reduced to a minimum. All you have to do is submit an application for registration of activities at the Central Accounting and Business Information Office, acronym CEIDG (do Centralnej Ewidencji i Informacji o Działalności Gospodarczej), and your private enterprise is ready to operate. At the same time, the rules do not provide for any requirements regarding the attraction of start-up capital or authorized capital.
A private entrepreneur whose annual income does not exceed the equivalent of 1,200,000 euros can take advantage of a simplified tax accounting procedure by recording transactions in the income and expense book and the tax card that they receive upon registration with the tax office.
In addition, conducting private business activities, you have the opportunity to hire workers in a simplified form.
Disadvantages of a Polish sole proprietorship
Of course, like each of the Polish forms of doing business, jednoosobowa działalność gospodarcza has some drawbacks. In this case, the following can be distinguished:
- For the financial obligations of the company, a private entrepreneur is liable with all his property. At the same time, when you, as the owner of the enterprise, do not have a legally fixed division of property with your spouse (for example, in the form of a marriage contract), then he may also be held financially liable for settling the obligations of the company.
- The development of the company and its functioning depends on one person. It will be impossible to attract, for example, an investor or partner under this legal form (except by reformatting the enterprise).
- Regardless of whether your company is profitable or not, you are required to make monthly ZUS deductions (even when your business is unprofitable).
Spółka cywilna is also one of the most popular forms of doing business in Poland. To register this form of community, it is mandatory to draw up and register a memorandum of association or the so-called umowy spółki. This agreement is usually concluded between entrepreneurs who already have their own operating enterprises and intend to unite to conduct further activities.
Although the spółka cywilna (partnership) does not have the status of a legal entity, businessmen must notify the CEIDG of its formation in the form prescribed by Polish law.
Typically, this form of community does not pay income tax, since each of the participants in the partnership calculates income tax independently, based on the established norms in the memorandum of association spółki cywilnej.
At the same time, as in the case of a private enterprise, if the turnover does not exceed 1.2 million euros, tax accounting can be kept in a simplified form. If one of the participants in the partnership is a legal entity (for example, an LLC or a ZAO) and the amount of turnover exceeds the established quota, then it will be necessary to maintain full standard accounting and tax accounting in accordance with Polish standards.
The biggest plus of this form of doing business is the simplicity of the organizational structure and management of such an enterprise. Each of the participants and founders of the partnership spółki cywilnej has the right to represent interests before a third party in certain matters (if this does not contradict the charter reflected in the partnership agreement). In addition, when registering, you do not need to create an authorized fund and have any start-up capital to create this form of community.
There is a risk of joint liability of the founders for decision-making by individual members of the partnership. Even if one of them assumes obligations to a third party, then all the founders become responsible for their settlement. And at the same time, each founder will be responsible for these obligations with all his property.
Often this form of doing business in Poland does not inspire confidence when concluding contracts with counterparties of suppliers or customers. Especially when it comes to serious obligations, when the partnership is not registered with the CEIDG and does not have the status of a legal entity.
For what purposes is the creation of Spółki cywilnej suitable?
Entrepreneurs often choose this form in cases of the implementation of any project tasks, so that their combination will allow solving one or another common task without creating Polish LLCs or JSCs.
And in order to avoid all the risks associated with this economic form, while taking advantage of all its advantages, it is recommended:
- Take the memorandum of association (umowy spółki) very seriously.
- Check each of the participants for liabilities, history of litigation and corporate conflicts. At the same time, not only legal entities, but also their founders.
- To insure and create a number of binding additional agreements between all participants.
- Participate in and invest in community capital only as third parties.
Spółka jawna is the easiest in terms of creation and management among legal entities engaged in commercial activities or trading operations. When registering this form of enterprise, of course, as for all commercial “spools”, it is necessary to have a constituent statutory agreement and register the enterprise with KRS (State Register of Ships of Poland). Compared to spółka cywilna, this type of community is more reliable in terms of the obligations and responsibilities of the founders.
In this form of doing business, it is mandatory to have at least two founders of the community, and at the same time, each of them is responsible for the obligations of the community with their property. But given that Spółka jawna has its own funds and property on its balance sheet, when resolving debt issues, they are primarily satisfied with the property that is on the balance sheet and accounts of the company.
Compared to the same spółka cywilna, this eliminates the risk when a partnership, without having a common capital, is liable for obligations immediately with the personal property of the owners. At the same time, when the property of the “spool” is insufficient to cover the claims of creditors, the participants bear joint and several liability with their own property.
The undoubted advantage of this form is that the community does not pay income tax. It is paid by each of the participants separately. This is a very effective solution for certain types of activities. Although it should not be forgotten that if one of the founders is a legal entity, then it is required to submit a CIT income declaration spółki jawnej, in which there is a share of the legal entity.
Accounting and taxation can also be carried out in a simplified form.
A rather specific form of community, because it can only be registered by representatives of the “free professions”, such as doctors, lawyers and architects. A prerequisite for the registration of Spółki partnerskej is a properly drawn up memorandum of association in the form of a notarial deed and submission of an application for registration to KRS.
Accounting and Taxation (Spółki partnerskej)
Spółki partnerskej can use simplified tax accounting, or a standard form of accounting, if it is necessary to achieve the goals of the partner community. Income tax in this form is paid not by the “spool”, but by its founders separately, who have the right to choose whether to pay this tax as individuals, or choose a linear taxation system (opodatkowanie podatkiem liniowym).
It is important for the founders of Spółki partnerskej not to forget that each of the participants is equally responsible for the obligations of the community. However, each of them is not responsible for the harm that one of the members of the community brought to a third party as a result of their professional activities.
The name must contain at least one of the names of the community member with the prefix “and partners”, as well as a wording indicating the specialization of the company.
The Polish company spółka komandytowa is a legal form of business in which one of the partners “complementariusz” (komplementariusz) is liable without limitation for the obligations of the company. And the obligations of the remaining participants are limited to the so-called amount of “limited partnership” of the partnership, which is determined in the company agreement.
This is an ideal form of economic activity on the Polish market, especially in cases where partners have different financial potential, and when one of them has the necessary investments, and the second one has an idea for implementation. It is often used in Poland when creating start-ups or Polish enterprises with a high risk of non-return of investments.
To register a “pool of commanders”, it is necessary to draw up a memorandum of association in the form of a notarial deed and register the company with the KRS.
Income tax upon receipt of income is paid not by the enterprise, but directly by the members and founders of the company. At the same time, accounting cannot be carried out in a simplified form and requires full accounting in accordance with Polish standards.
The main requirement for the name is that the wording itself must contain the name of one or more “complementary partners” (general partners) and contain the expression “spółka komandytowa”.
Spolka z ograniczona odpowiedzialnoscia – Ltd. (Limited Liability Company)
A limited liability company (Polish LLC) or Spółka z ograniczoną odpowiedzialnością (sp. z oo) is a form of economic activity for legal entities. When creating a Polish company LLC, a minimum authorized capital of 5,000 zlotys, the equivalent of 1,250 euros, is required, due to which the debt and property obligations of the founders are limited to the contributed share, expressed as a percentage of the amount of contributed capital by all partners. At the same time, an LLC company in Poland can have either one founder or two or more.
When creating a company in Poland in the form of Spółka ograniczoną odpowiedzialnością, a prerequisite is the creation of a shift statutory (constituent) agreement in the prescribed form, which can be downloaded from the KRS website. If the founders want to improve the basic contract provided by the Ship Register, they are obliged to register it in the form of a notarial deed, after which, within 6 months after signing or registration, prepare and submit the appropriate forms to the State Ship Register (Krajowy Rejestr Sądowy).
This type of economic activity in Poland is required to carry out full-format accounting with an annual financial report in the form of “sprawozdań finansowych”. And if the founders are entitled to dividend payments, they must pay an additional tax on “payment of dividends to the founders of a Polish LLC”.
Pros and Cons
Like every form of doing business in Poland, Spółka z oo has its advantages and disadvantages. It is especially important to study them before the creation by foreign investors and founders, so that later they will not face unforeseen problems or financial costs.
- The founders of the community are not financially responsible for the obligations of the Polish company LLC. When any obligations appear, the community as a legal entity is responsible for them with its property.
- Opportunity to conduct business on a large scale.
- The most profitable option for establishing an enterprise in Poland by foreigners.
- Easily sold, taking into account the constant demand on the market, especially if the founders decide to curtail their activities in Poland.
The disadvantages include:
- Mandatory contribution of the authorized capital in the amount of PLN 5,000 (although this is a more formal requirement, in fact no one checks the presence of this amount on the company’s accounts).
- Compulsory full accounting (which can cost a minimum of 50 euros per month of additional costs).
- A fairly subtle and complex process of creating a legal entity (although, at first glance, it may seem simple, ignorance of all the intricacies of the process can affect additional financial costs).
Spolka akcyjna – Joint-Stock Company
Establishment of a joint stock company in Poland is the most suitable form of business activity for those companies that plan to enter the securities and shares market. To register spółki akcyjnej, it is necessary to have a share capital of at least PLN 100,000 in the form of a contribution from each founder of the equivalent share of the community that they claim.
Requirements for Setting Up a Joint Stock Company in Poland
- Drawing up a written memorandum of association of a joint-stock company in the form of a notarial deed by its founders.
- The contribution of the authorized capital in a specially established form.
- Appointment of the board of directors and supervisory board.
- Entering, in the prescribed form, data into KRS.
Full accounting records must be maintained and the annual financial report must be approved by an accredited external auditor.
Advantages of a Joint Stock Company
- Opportunity to have a large number of shareholders.
- Ease of accumulation of funds and the possibility of attracting additional capital by issuing shares or bonds.
- Shareholders are not liable for the obligations of the company.
- The need to contribute the authorized capital in the amount of 100 thousand zł.
- Lack of influence on the decisions of the enterprise by the founders with small shares.
- Full and extended accounting.
- The cost of creating a joint stock company in Poland is associated with quite serious costs.
To make a decision on the choice of legal form, an entrepreneur must decide what type of activity his future Polish enterprise will be engaged in, and whether he wants to do business on his own or with a partner.
Analysis and evaluation of options are fundamental to successful beginnings in Poland and the European Union. And it doesn’t matter if you register a company for Polish business or for business immigration to Poland. Get our expert’s help to setup your business in Poland right. Contact us for complete help and successful business setup.