Poland has been attracting the attention of foreign investors who seek to expand their business onto the European market. While planning to set up economic activity in Poland, it is of primary importance to choose the right business structure for it. In order to do so, it is worth taking a look at all forms of business distinguished by the Polish law, namely:
- sole trader (self-employment),
- civil law partnership,
- commercial companies à further divided into partnerships and companies per se.
Additionally, in certain circumstances, you can also create a branch of an enterprise, the particulars of which will be presented as last. Deciding on a certain structure is inseparably linked with features of a given business type that we will now briefly present.
– Sole trader (also referred to as “self-employment”) is usually chosen for smaller operations. It forms one of the simplest forms of activity where you and your business are considered one entity and therefore it is represented with your own name. It is intended solely for natural persons who need to register at Central Register and Information on Economic Activity (CEIDG). No capital is required to be paid when starting the activity. Importantly, here the entrepreneur is liable with all his or her own assets for obligations arising as a result of running the business.
– Civil law partnership (pl: spółka cywilna) is a very particular and relatively “loose” form of cooperation regulated by the Polish Civil Code, where at least two partners sign an agreement undertaking to pursue a common economic goal. The partners might be both natural persons or legal entities. One of the key issues here is that a civil law partnership as such has no legal personality. The status of entrepreneurs is granted only to its partners. As provided by the Civil Code, each of the partners is entitled (and obliged) to handle the affairs of the partnership, that is, for instance to carry out both factual and legal actions to ensure that the common goal specified in the agreement is being fulfilled. As for representation, on a general level the partners are entitled to represent the partnership to the same extent as they are authorized to manage its affairs. However, it is important to bear in mind that the issue may be handled differently in both the partnership agreement or the partners resolution. In a civil law partnership, all partners are liable jointly and severely and such regulation must not subject to any alteration.
COMMERCIAL COMPANIES – TARGET BUSINESS FORMS FOR FOREIGN INVESTORS
As noted above, they comprise two types of entities, that is partnerships and companies as such
(also: capital companies). To start with, it is worth taking a look at a general overview presenting the main differences between the two types:
| PARTNERSHIPS | COMPANIES | |
| LEGAL PERSONALITY | none | ✔ |
| PARTNERS | minimum 2 | 1 or more |
| PERSONAL LIABILITY | personal liability of partners as a rule | lack of personal liability of partners; they are only liable up to the amount of invested contributions |
| REPRESENTATION | usually by the partners themselves | special bodies, such as the management board or the supervisory board are appointed to represent the company |
| CHANGE IN THE STRUCTURE OF PARTNERS/SHAREHOLDERS | one of the ways is transferring the totality of rights and obligations of the partner if the partnership agreement provides so | essentially possible by transferring shares |
Moving on to details, it is essential to note that both categories are further divided into several specific types of business entities, which are shown on the graph below:
SPOLER ALERT: the companies marked in green are the business forms available for most Indian citizens, that is those who are not granted a residence permit in Poland. To know more about this issue, just read on.
Partnerships are divided into general partnership, professional partnership, limited partnership, and limited joint-stock partnership.
– General partnership (pl: spółka jawna) is the basic type of the entire partnership category in the sense that regulations governing general partnership apply also to other types of commercial partnerships unless otherwise specified by law. The partners can be both natural or legal persons. They are personally liable for the obligations of their business. The liability in question is also joint and several. The partners entering into the agreement must specify certain issues, including the scope of the business and contribution a given partner makes together with its worth. These cover both cash and kind contributions, that is real estate, equipment or even a person’s labour. As a rule, all partners have equal rights and obligations as well as equal share in the partnership’s profits and losses. They are, however, subject to certain modifications, while remembering that a partner cannot be deprived of the right to profit.
– Professional partnership (pl: spółka partnerska), as another type of commercial partnership, works similarly to general partnership but with several alterations. The most important one is that it can only be established by individuals who practice free professions specified by law, e.g. doctors, attorneys-at-law or architects. Another key difference is that by default the partners are not liable for the obligations connected with practice of other partners or employees under their supervision.
– Limited partnership (pl: spółka komandytowa) essentially comprises two types of partners: general partner and limited partner. The first one bears unlimited liability towards the creditors of the company, whereas the limited partner is liable only up to a predetermined, fixed amount. Consequently, limited partners have also limited rights to act for the partnership or conduct its affairs. Hence, a limited partnership is generally represented by general partners.
– Limited joint-stock partnership (pl: spółka komandytowo-akcyjna) is a partnership where a share capital of at least PLN 50,000 is required. There are two types of partners: a general partner whoso liability for the debts is unlimited + a shareholder. In other matters, namely involving share capital, shareholders’ contributions, shares, the supervisory board (if appointed) and the general meeting, the regulations concerning a joint-stock company apply. Interestingly, if the number of shareholders exceeds 25, then establishing a supervisory board of the company is necessary.
As for the other major category of commercial companies à that is capital companies (companies per se), their three types are distinguished by current legislation:
– Limited liability company (pl: spółka z ograniczoną odpowiedzialnością) like all capital companies is granted legal personality. It is formed by either one or more partners who are natural or legal persons. However, we should keep in mind that it cannot be formed only by another one-person limited liability company. It must also be remembered that typically the partners are not held liable for the company’s obligations beyond their invested contributions. Here the share capital needs to be at least PLN 5,000 and is divided into shares. The company carries out its operations via its bodies, such as a management board or a shareholders’ meeting. The management board generally, as the names suggests, manages the company’s affairs and represents it externally, whereas the meeting of shareholders is responsible for taking strategic decisions. As for the decision-making process, it takes form of a resolution passed by company bodies.
– Joint-stock company (pl: spółka akcyjna) is the only type of a company which can be listed on a stock exchange. Again, it has legal personality and is established by one or more persons, both natural and legal, and similarly to the previous example, it cannot be formed exclusively by a single-member limited liability company. The company’s articles of association must be drawn up in a deed attested by a civil-law notary. The share capital of a joint-stock company is at least PLN 100,000 and is divided into shares of equal nominal value. Here a shareholder receives shares for contributions made to the company. These include both cash and non-cash contributions (contributions in kind), e.g. movable property or real estate. The shares entitle you to receive a specified amount of the dividend, usually once a year. As a rule, shareholders are not liable for the company’s obligations (exception à joint-stock company in organization). In practice, the only risk on their side is losing their contribution. Again, operations are run by the governing bodies. A joint-stock company might be the right choice for large undertakings, especially if going public is one of the aims. Additionally, it is the required form of business for certain activities such as banks or insurance companies in Poland.
– The newly introduced simple joint-stock company (pl: prosta spółka akcyjna) which has been available for entrepreneurs since 2021. One of its main aims is to reach out to people planning to set up a new business, especially innovative start-ups. As a part of the “capital companies” family the simple joint-stock company is given legal personality and can established by one or several entities – both natural or legal persons (cannot be formed exclusively by a one-person limited liability company). Also, the shareholders are generally not responsible for the company’s liabilities. However, there are also multiple differences compared to other forms of capital companies. To start with, it is established and dissolved much more easily than the traditional joint-stock company. The required capital is only symbolic as it totals PLN 1. Here you can also establish the business using the S24 website. Another key feature is the flexible approach to the company’s bodies, which might be illustrated by, for instance the possibility to establish a board of directors which combines roles of the management board and supervisory board. Finally, as for the decision-making process, there is much more freedom for the shareholders to remotely pass the resolutions.
Yet another way of conducting a business activity in Poland is opening a branch office. This possibility is available for the EU and EEA citizens as well as citizens of countries that have signed a relevant mutual agreement with Poland à like India has with regard to selected sectors, including construction, tourism, transport or science and technology. But what exactly is a branch? It is an independent organizational unit of a foreign entrepreneur with no legal personality. Consequently, the foreign entrepreneur is liable for all of its operations. Importantly, with a branch you need to limit your activity to the scope of the original company operating abroad. However, the relevant minister might ban setting up the branch if it violates the Polish law.
Despite Poland’s devotion to economic freedom and its pro-business approach towards foreign investments, some forms of business activity are for many reasons restricted for certain entities. To understand it better, let us start with foreigners who might open up a business in any form of their choice without limitations:
a) EU or EEA citizen,
b) USA or Swiss Confederation citizen,
c) a citizen of a different country who has been granted a residence permit which allows them to start a business activity in Poland under the rules applying to Polish people.
Other people, that is Indian citizens with no residence permit in Poland, can only choose from selected activity forms, which are marked in green in the graph shown before and include:
- a limited partnership
- a limited joint-stock partnership
- a limited liability company
- a joint-stock company
- a simple joint-stock company
- + a branch office of an enterprise (when the mutual agreement provides so)
Last but not least, when deciding on a given business model in Poland it is worth consulting local law experts to know more about the peculiarities related to each of the presented company types and possible ways of modifying some of their default regulations laid down by law.
If you would like to know more about the forms of business activity in Poland or perhaps seek professional advice on the right form tailored to your needs, please contact us!
