One-man business is conducted by individuals on the basis of an entry in a special register called the business activity register. The business activity register is kept by a proper county office (county office is an office in which the inhabitant of a given county takes care of most matters and formalities, including those that concern business activity). The basic features of a one-man business are as follows:
• The business is conducted by one natural person, • There is a personal liability with all assets of the person who runs the business, • There is no need for any start-up capital, • The business activity is taxed in the form of personal income tax – PIT.
Civil law partnership
A civil law partnership is a special form of doing business in Poland. This is a contract under which at least two entrepreneurs undertake to jointly run the business, i.e. to achieve a common economic purpose. The name “partnership” may be misleading in this case, because the business form described here does not constitute an autonomous economic entity and it is merely a contract between partners, each of whom is an independent entrepreneur. A civil law partnership is a peculiar modification of a one-man business.
As a principle, the partners in a civil law partnership must make a contribution of assets to the partnership and these assets become their joint property. This means that in the course of the partnership’s duration no partner can independently manage these assets or his share in the assets, e.g. he cannot sell it. All partners bear full as well as joint and several liability for the obligations arising from the operation of a civil law partnership. The concept of a joint and several liability requires an explanation. It means that a creditor of the partnership may demand the payment of the debt from all the partners, a few of them or only one of them (according to his free choice). Each of these partners is responsible for the full amount of the debt, even if he did not incur it himself but another partner did. If one of the partners repays the debt, the remaining partners are exempt from the liability. It is therefore clear that any form of activity in which the entrepreneurs (partners) are jointly and severally liable, requires considerable trust between the partners.
Under the Polish law there are the following types of partnerships:
limited joint-stock partnership.
The most essential element in a partnership are the partners. In principle, they represent the partnership, manage its affairs (business), they are also responsible for its obligations, including their own assets (and also for the partnership’s tax liabilities). Such partnerships do not have separate organizational bodies, such as the management or supervisory board. The partners of a partnership share their profits in a relatively simple way and they are subject to personal income tax. The activity of the partners is generally based on mutual trust, common operation of the business, a desire to run the business with these specific individuals, namely the other partners. The composition of the partners in partnerships is generally fairly constant – the participation (share) in a partnership cannot be traded, for example, it cannot be sold. General partnership is, in principle, dissolved when one of the partners dies or terminates the partnership agreement.
FORMATION A COMPANY UNDER THE POLISH LAW
There are two types of companies under the Polish law:
limited liability company,
Companies have the so-called legal personality, namely they are independent legal entities and they may acquire rights and incur obligations in their own name (for example, if a company buys a real property, machine, etc., then it becomes the property of the company and not its individual shareholders). One of the most important features of these companies lies in the fact that the shareholders are not liable for the obligations of the company – the company itself bears such liability. The company’s asset liability also applies to taxes – the company is the taxpayer and it bears liability for its tax obligations. The company has its own assets, separate from the assets of the shareholders (even if it is a one-man limited liability company, namely a company that has only one shareholder). If, therefore, a limited liability company has a debt, it pays it off only from its own assets (and not from the assets of shareholders).
When setting up a company, it must be provided with adequate capital by the shareholders (it may be money or assets, such as real estate, machinery, car, etc.). Money or items brought by the shareholders are called “contributions” to the company. Shareholders’ contributions form the capital of the company. In exchange for their contributions, shareholders receive shares. Based on these shares, shareholders may exercise their rights in the company. Such rights are in particular:
the right to a part of the profits in the company if the company gains such a profit,
the right to vote at the shareholders meeting,
the right to convene the shareholders meeting.
Companies are represented and managed by its body – the management board (and not by shareholders, although shareholders can be board members).
Starting a business in Poland
Depending on the form in which we intend to run a business, its registration is carried out as follows:
1/ Those who intend to run a one-man business or a civil law partnership, should register their business in the county office (Polish: “urząd gminy”). The registration takes place at the office competent as for the location of the business (or the main place where it is carried out, if someone intends to run it in several places, for example, she/he has several production plants in different municipalities). Currently, the registration takes place at the so-called “one window”, therefore the entrepreneur no longer needs to visit separately the tax office and the statistical office or other offices or courts. The appropriate tax registration as well as the registration in order to obtain a statistical number (REGON) is made in the county office. It is necessary to fill in an integrated EDG application. The notification of business activity is not subject to any fees. Business activity can be started as early as at the date of filing. Naturally, the application can also specify a different date of commencing the business. As for a civil law partnership, only the partners are obliged to carry out the registration (each of the partners separately) since the partnership itself is not considered a legal entity in the legal sense. However, a civil law partnership obtains its own tax number (NIP – Tax Identification Number), regardless of the tax identification numbers of individual partners. 2/ All commercial law companies and partnerships, namely general partnership, professional partnership, limited partnership, limited joint-stock partnership, limited liability company and joint-stock company are registered in the register of the entrepreneurs of the National Court Register (Polish: ‘Krajowy Rejestr Sądowy’ – KRS). This is the register kept by the commercial courts. It covers both partnerships and companies as well as other entities (associations, cooperatives, foundations, etc.). The register is publicly available – everyone has access to it and may obtain the appropriate certified copies of documents on their company or another. What is primarily needed in order to register a partnership or a company is to prepare and sign articles of association. In the case of most partnerships and companies the latter must be in the notarial deed form (only the articles of association of a general partnership and professional partnership may be concluded in writing without a deed). After drawing up and signing the articles of association, a relevant application together with the required documents (in particular the articles of association and other attachments) shall be filed with the competent district court – commercial court that keeps such a register. It is necessary to fill in a number of forms very carefully. In case of even small or insignificant mistakes or absence of some required documents, the court unfortunately calls to submit the missing documents or to correct the errors. The forms are available at the court that keeps the register, as well as in the electronic version, for example on the webpage of the Ministry of Justice (www.ms.gov.pl). The said webpage also provides a list of commercial courts that deal with the registration in the National Court Register. Given the number and the nature of the documents submitted to the National Court Register, as well as on account of the requirements for the applications to be on special forms, it is recommended to use legal advice in that matter. All documents in foreign languages should be submitted along with their translation into Polish made by a Polish sworn translator.
Business activity conducted by foreigners
The rules of doing business in Poland are mainly regulated by the act on the freedom of economic activity as of 2 July 2004, which applies to both Polish citizens and foreigners. In accordance with the provisions of the said act, foreigners are entitled to take up and conduct economic activity on Polish territory. However, not all foreigners enjoy the same rights in this respect. Since Poland joined the European Union, the Polish market has become open to the citizens and entrepreneurs from the EU Member States, who may undertake and conduct economic activities under the same rules as Polish citizens. Yet, in respect to other foreigners (non-EU citizens), the provisions of the said act introduce some limitations. On the rules under which the foreigners may conduct business activity in Poland, see the subsequent sections.
The citizens of non-EU countries as well as the companies from these countries have the right to undertake and run business only in some forms, namely only in the form of:
limited joint-stock partnership,
limited liability company or joint stock company, and to join such companies and take hold of or purchase their shares.
They must therefore choose one of the four specified business forms. They can independently set up one of the abovementioned partnerships or companies, such as a limited liability company, or join an existing and operating company (run by foreigners or Poles), for example by buying shares from another shareholder or taking hold of new shares in connection with increasing the share capital of such a company.
The foreigners from non-EU countries cannot undertake business activity in Poland in other forms, such as one-man business, civil law partnership, general partnership, professional partnership.
To summerize in our opinion the best type of busines in Poland for foreigners is limited liability company. See the features of limited liability company under the Polish law.
FEE ON A COMPANY FORMATION
Our Law Office provides legal services concerning formation of companies under Polish Law. Registration of a new company usually takes 1-3 day after singning all documents and paymnet of our fee . Our fee for company registration is 1500 Euro (Our services include for NIP (tax) ,VAT Eu ,REGON statistical number) and it includes all costs and the government official fees except the tax on incorporation which is 0,5% of share capital. Minimum share capital is 5000 PLN (1 Euro is ca 4,30 PLN). Next day after registrtion we send the extract from court register. NIP (tax ID), VAT and REGON (statistical) number is usually granted after 7 days. it is possible to set up a company in Poland on the basis of the power of attorney. The scenario in following: after granting me power of attorney I will register a company and there’s 7 days for payment of share capital and delivery to the register court the origin declaration of the all members of management board that share capital was fully paid. Moreover within 7 days I need to deliver patern of the singature of all members of management board ( with notarial confirmation of the signature). the registration on the basis of PoA costs more – 200 EURO per each shareholder involved in setting up of company on the PoA. We also offer the services: – virtual address (office) it costs 80 Euro (350 PLN) per month; – legal services ia all busuness and family matters 100 Euro per hour; – sale of ready made company 2000 Euro + share capital paid up on company account; – opening company account in polish bank (100 Euro); – accountancy services (price depends on the scope) ; – invitation letter for Visa purposes 200 EURO per person;