In Poland two main forms of conducting business activity are:
- sole-tradership and
- limited liability company.
Sole-tradership constitutes more than 70 % of all entrepreneurs in the private sector.
In the case of companies registered in the National Court Register (KRS), limited liability company is chosen by more than 80 % of applicants.
The above mentioned activities are very different as regards:
- registration of activity (including costs),
- the possibility to choose the form of taxation,
- reporting obligations when operating,
- risk to private assets.
It is important to know when choosing the legal form what is our business model - whether we want to have partners in our activities, whether we will trade with a broad range of entities, and the capital we have for start.
Remember that sole tradership can always be turned into a company registered in the National Court Register (KRS).
Before the decision on the selection of activities it is worth making sure whether your business idea requires registration. If you don't know whether you should register your activity, read additional information.
Below we set out for you basic differences between sole tradership registered in the CEIDG and a limited liability company.
Registration of sole tradership is free of charge - remember that no one has the right to require the fee from you for the fact that you entered register of entrepreneurs or because you change your data. To register in the CEIDG you only need to fill in and submit a form.
If you want to find out how you can submit the form to the CEIDG - read the additional information in the section Registration of business activity.
In the case of a limited liability company, the Registry Court shall levy a fee for registration of the company in the KRS. There are two ways of obtaining entry. If you want to operate on the basis of standard contract of the company (without modification of the model set out in the Commercial Code), you can register your company online, using a template contract - it is so called S24. The cost of registration is PLN 250, you do not pay the cost of drawing up a contract by a notary.
If you want to know how the registration of the company under S24 mode looks like - read the additional information in the section Registration of business activity.
If you want to register a limited liability company in the traditional manner, by submitting paper application to court, the fee is 500 PLN. The cost of drawing up a contract by a notary must be added.
Every change in the register is subject to a fee of 250 PLN.
The possibility to choose the form of taxation
As an entrepreneur entered in the CEIDG during registration and also while running business, you can choose the form of PIT tax - you can choose how you will settle tax on the profits generated. More on available forms of taxation can be found in the section Income tax forms.
If you operate in the form of limited liability company, the taxpayer of income tax will be the company. It is not possible to choose forms of taxation. The company pays CIT and then profit after taxation will be divided between the shareholders (or transferred to the sole shareholder). From received profit the shareholder must pay PIT. This means that double taxation of company profits occurs. The company pays CIT and later its partner pays PIT.
In the case of sole tradership entered in the CEIDG you do not have to submit additional reports to any authority. It is sufficient that once a year you will submit a tax return (PIT) in which you settle achieved profit/loss.
In the case of limited liability company, you must each year draw up a financial report which you must submit to the KRS. For submitting the report you will be charged PLN 40. Furthermore, the court will charge a fee of PLN 100 for the publication of advertisement in the Court and Economic Monitor.
Protection of personal assets
The main difference in this case is the fact that an entrepreneur entered in the CEIDG is liable for the debts with entire assets. If, in the course of the operation debts will be incurred - e.g. you won't earn money to pay wages to an employee, pay a bill, pay contributions to ZUS, then you need to pay them from private assets. In extreme cases, this means that if your business is unprofitable, you might lose savings, a car or an apartment.
In the case of limited liability company, as it is a separate legal entity (legal person), the company is responsible for its liabilities. They are covered by the assets of a company with share capital. If the company's assets were insufficient to repay its debts, the company collapses.You, as the owner of shares in the company risk losing them (your private assets are protected).
An exception to the protection of the personal assets is applicable when you are a member of the board of directors of a company. In this case, if you do not apply in due time for bankruptcy of company, you will be liable for the debt with entire assets.
If you want to know more about business termination, find out more in the tab Closing company.
If you have started economic activity for the first time, it is relevant that as an entrepreneur entered in the CEIDG you can benefit from the so-called small ZUS, whereas as a shareholder of single-person limited liability company you have to pay social security contributions in the basic amount.
If you don't know what the preferences related to so-called small ZUS are, we can help you. Read the article Rules for using small ZUS.Share Print