What is a sole trader company, who is responsible for the company's obligations, what are the accounting and tax matters?
One-man economic activity (individual business activity) is the simplest type of company. It is often referred to as self-employment and can only be founded by an individual. Due to the fact that its registration and operation are not complicated, it is the most suitable form of activity for small businesses.
Characteristics of a sole trader activity
A natural person conducting business activity has legal capacity, capacity to perform legal acts and judicial and procedural capacity. No contracts need to be drawn up for the purpose of operating as a sole trader. No minimum capital is required.
Responsibility for liabilities
As an entrepreneur, you are liable with all your assets for obligations arising out of your activity. This responsibility also extends to the spouse (excluding his or her personal property). This means that your private and business assets are treated equally by creditors. If your business does not generate a profit, you must cover all your liabilities (e.g. social security contributions, salaries of employees and co-workers, bills, contractual penalties, credit instalments) with private property. All the profits you make from your business immediately increase your private assets.
Once you have been registered (entered) with CEIDG, you become an entrepreneur. If you enter into a contract and buy goods or services that you will use to do business with, you are no longer a consumer. The law treats you as a professional trader. For example, you do not have the right to send back the purchased goods outside the company premises (e.g. via the Internet) within 14 days, without giving any reasons.
You also have additional information obligations. If you are a businessman sending correspondence to another person, you must indicate your company name, NIP and address.
Representing the company
As a sole trader you have the exclusive right to represent your business. Only you can enter into agreements with suppliers and recipients, only you are obliged to pay tax advances, submit an annual tax return and settle accounts with the Social Insurance Institution. Of course, you can delegate some of these things to other people on the basis of your power of attorney, but the actions of your attorneys-in-fact will always have an impact on your private property.
Name of the activity
Every activity must have its own name (company name). In case of an entry into CEIDG, your name (company) is at least the first and surname.
Registration of sole trader
You register as sole trader in the Central Register and Information on Business Activity (CEIDG). Only natural persons may be entered into CEIDG (it cannot be a legal person, e.g. a partnership).
Please note that both the CEIDG entry and the data update are free of charge!
Entry in the Central Register and Information on Economic Activity
NIP and REGON
When you register with CEIDG, you will be automatically assigned a NIP number. It is used to identify your business before tax authorities. You must give this number (NIP) every time you make pay a tax advance. Even if you settle tax from different sources on a single tax return (e.g. from business and employment), you indicate the NIP, not PESEL, as the identification number of the taxpayer.
When you register, you also receive a REGON number for statistical purposes. When registering your business, NIP and REGON numbers are assigned automatically - i.e. you do not have to submit separate applications for assigning these numbers to the tax office and the Central Statistical Office.
If you run a sole proprietor business, you will be a PIT taxpayer by virtue of your business activity. You can choose one of the forms of PIT taxation (tax scale, flat rate tax, lump sum on registered income, tax card).
For tax purposes, you only need to file an annual tax return, you do not need to prepare or submit any financial statements to any authority.
A sole trader may be subject to VAT.
Depending on the chosen form of taxation, you can settle according to the revenue and expense ledger, lump sum on registered income or maintain full accounting (accounting books). If your company's net revenue exceeds EUR 2 million, you will be required to switch to full accounting
Can I register several sole traders?
One natural person may only have one entry in the CEIDG. You may not have several sole proprietorships registered in your name.
You can run different types of business activity under one entry.
Obligations towards ZUS
By registering with CEIDG you will automatically be reported as a payer to the Social Insurance Institution (ZUS) (i.e. the one who pays contributions). However, you must report to the Social Insurance Institution (ZUS) as an insured person (you also report your employees and co-workers yourself). You can attach the registration application forms to the application to the Social Insurance Institution (ZUS) during the registration process (CEIDG-1). This does not apply to employees who you have to report directly to the Social Insurance Institution. You have seven days to notify the insured person of your obligation to take out insurance (start of business, employment of an employee or co-worker). You can take advantage of the start allowance (for 6 months only the health insurance contribution) and the small ZUS (reduced contributions).