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Choosing the right form of business
Of all the choices you make when starting a business, one of the most important is the type of legal structure you choose for your project. The right approach from the start will increase your chances of a successful investment.
There are five main types of business structures:
- sole proprietorship (self-employment)
- Cooperation
- Branch
- Limited liability company
- joint-stock company
There is no one-size-fits-all answer, and the decision whether to do business in Poland as a sole proprietorship, branch or limited liability company may change depending on the circumstances.
In addition to tax, legal and regulatory issues, a number of commercial factors, such as the origin of the product, available financing, company size, customers and the level of risk to be borne, must be considered when deciding which of these alternatives is most appropriate.
If your company will be doing business in more than one country, you will need to plan how to fit your business structure into the complex world of international tax and legal agreements - deciphering the right answer can itself be an expensive, albeit critical, project.
Most foreign entities wishing to do business in Poland set up a branch or establish a limited liability company. The sole proprietor option is popular for smaller operations. The table below shows some of the main characteristics of each type.
Sole proprietorship (self-employment)
Being a sole proprietor means running a business on your own. It is a relatively simple structure in which you are self-employed and legally, you and your business are considered one. It is the most common structure used by the self-employed and small businesses. This option is available without any restrictions to EU citizens.
Branch
The most important point to keep in mind when operating a branch office is that it is not a separate legal entity. This means that the foreign company is directly responsible for the activities and obligations of the Polish office. The main company must appoint an authorized person to represent the branch in Poland. The branch can also directly hire employees for the Polish establishment.
The Polish office is required to keep books of account and is required to file annual reports with the Commercial Court. The branch may also be subject to Polish income tax (if the branch's activities are profitable).
Limited liability company
The main benefit of a joint-stock company is that the liability of shareholders is limited to the amount paid for their shares in the company. The upshot is that if the shares are paid in full, shareholders will usually not be required to contribute further amounts in the event of the company's insolvency. The company is a separate legal entity, distinct from its shareholders and directors. This makes it an attractive proposition for a foreign investor who wants to start a business in Poland. The separate legal entity allows the company to enter into contracts directly and provides the parent company with protection against the liabilities of the subsidiary.
Establishing a limited liability company is a simple process that can usually be completed within 3 weeks.
Joint-stock company
The company has a separate personality from its shareholders and directors (exactly like a limited liability company). The separate legal personality allows the company to enter into contracts directly and provides the parent company with protection against the liabilities of the subsidiary. A joint-stock company is designed for large companies.
The establishment of a joint stock company is usually completed within 4-5 weeks.
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