Companies in Poland, a comprehensive guide for entrepreneurs

Introduction to the World of Companies

A company is not just a form of business, but the foundation of business success. In Poland, companies can take many forms, each offering unique benefits and challenges. In this article, we will take a closer look at the different types of companies, their characteristics, legal and tax obligations, and advantages and disadvantages, to help entrepreneurs choose the best form for their business.

Companies – Types and Characteristics

In Poland, companies fall into two main categories: partnerships and capital companies, each of which has its unique characteristics and is tailored to different business needs.

Partnerships, including general partnerships, partnerships, limited partnerships and limited joint-stock partnerships, are characterized by close cooperation between partners. They are often chosen by smaller businesses for their simplicity of management and low maintenance costs. In partnerships, partners are liable for the company’s obligations with their assets, which can be both an advantage and a disadvantage, depending on the business situation.

• General Partnership – partners are liable for the company’s debts without limitation, which means that their assets can be used to cover the company’s debts.
• Partnership – intended mainly for the liberal professions, such as doctors or lawyers, offers some limitations on liability.
• Limited Partnership – consists of general partners (liable without limitation) and limited partners (liable up to the amount contributed).
• Limited joint-stock partnership – combines the features of a limited partnership and a joint-stock company, offering flexibility in raising capital.

Capital Companies

Capital companies, such as limited liability companies (Ltd.) and joint stock companies (S.A.), offer greater flexibility and limited liability for shareholders. They are ideal for larger companies that need a solid organizational structure and want to minimize personal financial risk.

• Limited Liability Company (Sp. z o.o.) – this is the most popular form of capital company in Poland. It offers limited liability for partners, which means that their assets are protected from the company’s liabilities. The process of establishing a limited liability company requires a notarized deed and registration with the National Court Register.
• A Joint Stock Company (S.A.) – is characterized by the ability to raise capital by issuing shares. This is the preferred form for large companies, especially those planning to go public. The process of establishing a joint-stock company is more complicated and costly than that of a limited liability company.

Choosing the Right Form of Company

The choice between a partnership and a corporation should be made after careful analysis of business needs, growth plans, and preferences for management structure and legal liability. Partnerships are often preferred by smaller businesses that value simplicity of management and close relationships between partners. Equity partnerships, on the other hand, are ideal for larger businesses that need a solid organizational structure and want to minimize the personal financial risks of the partners.

Partnerships

Partnerships in Poland are a popular form of business, especially among smaller companies. They are characterized by the personal liability of partners and close relationships between them, which is both a strength and a potential challenge.

Characteristics of Partnerships

In partnerships, such as general partnerships, partnerships, limited partnerships and limited joint-stock partnerships, the partners have direct influence over management and business decisions. This close cooperation and the ability to directly influence the direction of the business are often key factors in choosing this legal form.

• General Partnership – in this form, all partners are liable for the company’s obligations with all their assets, which means a high level of risk, but also full control over the running of the business.
• Partnership – designed for professionals (e.g., doctors, lawyers), offers certain limitations on liability, which may be attractive to professionals wishing to run a joint practice.
• Limited Partnership – consists of general partners (liable without limitation) and limited partners (liable up to the amount contributed), which allows some flexibility in risk management.
• Limited Joint-Stock Partnership – combines the features of a limited partnership and a joint-stock company, offering opportunities to raise capital while limiting the liability of some partners.

Advantages of Partnerships

• Simplicity of Management – partnerships offer simplicity in management and decision-making, which is especially important for smaller companies.

• Low Maintenance Costs – not having to prepare complex financial statements or conduct audits lowers operating costs.

• Close Cooperation – direct cooperation between partners promotes effective decision-making and rapid response to changing market conditions.

Disadvantages of Partnerships

• Personal Liability – partners are liable for the company’s obligations with their assets, which can pose significant risks, especially in volatile market conditions.

• Limitations on Raising Capital – partnerships may face difficulties in raising additional capital, which may limit their ability to grow.

Limited Liability Company (Sp. z o.o.) – everything you need to know about it

Limited liability company (sp. z o.o.) is one of the most popular forms of business in Poland, especially among small and medium-sized enterprises. Its main advantage is the limited liability of the partners, which means that their assets are protected from the company’s liabilities.

Process of Establishing a Limited Liability Company.

Establishing a limited liability company requires several steps, including the preparation of a notarial deed, which is the basic incorporation document. This deed should contain information such as the company’s name, registered office, objects of activity, amount of share capital and details of shareholders. After the notarial deed is drawn up, the company must be registered with the National Court Register, which is necessary to obtain legal personality.

Limited Liability

The main advantage of a limited liability company is that the liability of the partners is limited to the amount of contributions made. This means that in the event of financial problems for the company, the personal assets of the partners remain protected. This is a key factor in attracting entrepreneurs who want to minimize personal business risk.

Flexibility in Management

A limited liability company offers great flexibility in management and organizational structure. Shareholders have the ability to shape the management and supervisory structure, allowing them to tailor the management model to their specific business needs and characteristics.

Advantages of Limited Liability Company

• Protection of partners’ personal assets.
• Flexibility in making business decisions.
• Ability to easily transfer shares.
• Credibility in the eyes of contractors and financial institutions.

Disadvantages of Limited Liability Company

• Relatively higher costs of establishment and operation compared to partnerships.
• The need to comply with stricter commercial laws.
• Obligation to prepare and publish annual financial statements.

Company Contract

The contract of a limited liability company should be drawn up in the form of a notarial deed and contain all the essential elements, such as the capital structure, the rights and obligations of the shareholders and the rules of operation of the company. It is the document that defines the company’s rules, structure and management.

Liability in a Limited Liability Company.

In a limited liability company, liability for the company’s obligations is limited, but in certain situations, the board of directors may be personally liable, especially in the event of failure to perform its obligations under the law.

A limited liability company is an attractive option for entrepreneurs seeking a form of business that combines the protection of personal assets with management flexibility. Its popularity is due to its favourable combination of financial security and adaptability to a variety of business needs.

Joint Stock Company (S.A.) – everything you need to know

The joint stock company (S.A.) in Poland is considered a prestigious and robust form of business, especially for larger companies and those considering going public. It is a legal form that offers many advantages, but it also involves a more complex and costly process of establishment and operation.

Characteristics of a Joint Stock Company

A joint-stock company is characterized by a high degree of flexibility in raising capital, mainly through the issuance of shares. Shareholders of a joint-stock company have limited liability, which means that their risk is limited to the amount of contributions made. This is particularly attractive to investors who want to invest capital without risking their personal assets.

The Process of Establishing a Joint Stock Company

Establishing a joint-stock company requires the drafting of Articles of Incorporation in the form of a notarial deed and registration with the National Court Register. The process also requires raising sufficient share capital, which must be paid in before the company can be registered. A joint-stock company must also have a board of directors and a supervisory board, which further complicates the process of organizing the company.

Advantages of a Public Limited Company

• Capital Raising – a limited company can raise capital by issuing shares, which is a major advantage for growing businesses.
• Limited Liability – shareholders are not personally liable for the company’s liabilities, which minimises investment risk.
• Prestige – the joint stock company form is often seen as more prestigious, which can attract larger investors and customers.

Disadvantages of the Public Limited Company

• Complexity and Cost – the process of setting up and running a public limited company is more complicated and costly than other forms of company.
• Formal Requirements – a public limited company must comply with a number of legal requirements, including regular publication of accounts and compliance with corporate regulations.

Simple Joint Stock Company – what is it?

It is also worth mentioning the simple joint-stock company, which is a newer form of joint-stock company in Poland, introduced to facilitate access to capital for young companies and startups. The simple joint-stock company offers simplified procedures and lower capital requirements compared to the traditional joint-stock company.

Company Registration Process – Step by Step

Registering a company in Poland is a process that requires meeting certain legal and administrative requirements. It involves a number of key stages that vary depending on the type of company. Below is a detailed guide to the registration process, covering both partnerships and limited liability companies.

1. Selection of the Legal Form and Name of the Company

The first step is to choose the appropriate legal form of the company. This can be a partnership (e.g. general partnership, limited partnership) or a limited liability company (e.g. limited liability, joint stock company). Next, a unique name should be chosen for the company that does not clash with the names of already existing business entities.

2. Preparation of the Notarial Deed (for Capital Companies)

In the case of limited liability companies, such as a limited liability company or a joint stock company, it is necessary to draw up a notarial deed. This document should contain the company’s articles of association, which specify, among other things, its registered office, the object of its activities, the amount of its share capital and information about its shareholders.

3. Registration at the National Court Register

Once the notarial deed has been drawn up, the company must be registered with the National Court Register (KRS). This process requires the submission of the relevant forms and the attachment of the required documents, such as the notarial deed, proofs of payment of share capital and declarations by members of the board of directors.

4. Registration with the Tax Office and Social Insurance Institution (ZUS)

Once registered with the National Court Register, the company must be notified to the relevant tax office and the Social Insurance Institution (ZUS). This is necessary in order to obtain a tax identification number (NIP) and a REGON number.

5. Opening a Bank Account

Each company should have a separate bank account. Once you have obtained your NIP and REGON numbers, you can open a company account with the bank of your choice.

6. Registration Costs

The costs of registering a company depend on its legal form. For limited liability companies, the biggest cost is usually the fee for drawing up the notarial deed and the court fees for entry into the National Court Register. For partnerships, the process is usually cheaper and less complicated.

7. Further Legal and Tax Issues

Once the registration process is complete, the company must also take care of other legal and tax obligations, such as bookkeeping, preparation of financial statements and regular tax returns.

Company registration is a complex process that requires careful planning and an understanding of the applicable legislation. Therefore, entrepreneurs often enlist the help of legal and accounting specialists to ensure that all registration steps are carried out correctly and in accordance with the applicable requirements.

Tax Obligations of Companies

The tax obligations of companies in Poland vary depending on their legal form. Understanding these obligations is key to proper operation and avoiding legal and tax risks.

Partnerships and Their Tax Obligations

In partnerships, such as general partnerships, partnerships and limited partnerships, taxes are usually paid by the partners. This means that the partnership income is attributed directly to the partners and taxed as their personal income. The partners must therefore account for personal income tax (PIT) taking into account their share of the partnership’s profits.

Capital Companies – CIT and Other Obligations.

Limited companies, such as limited liability companies (Ltd.) and joint stock companies (S.A.), are subject to corporate income tax (CIT). This means that the company, as a separate legal entity, pays tax on its income. 2023 also introduces new reporting obligations for real estate companies, which require detailed documentation and tax settlements.

New Regulations and JPK_CIT

New regulations have also been introduced in recent years, including the Single Control File for CIT (JPK_CIT), which requires limited liability companies to report detailed data on transactions and tax liabilities. This is part of wider changes to the tax system aimed at increasing transparency and facilitating tax audits.

Liability of Board Members

The liability of board members of limited liability companies for tax obligations is also worth noting. Failure to properly manage the company’s tax affairs may lead to personal liability of board members, including criminal and fiscal liability.

Summary

In both partnerships and limited companies, a thorough understanding of and compliance with tax obligations is crucial. This requires regular monitoring of regulatory developments and working with competent tax advisers to ensure compliance with applicable regulations and avoid potential risks.