Starting a sole proprietorship comes with a significant challenge. Independence here is not only about freedom but also responsibility – you must have awareness of taxes, finances, and a clear head.
Here, you’ll find a comparison of opening a business in Poland, focusing on a sole proprietorship (JDG) and a limited liability company (sp. z o.o.). In this article, you’ll learn specifically how to open a sole proprietorship and what to pay attention to. The topic often seems intimidating at first, until you learn more about it, so we encourage you to read on!
Briefly, what is a sole proprietorship?
According to the regulations, it is an “organized economic activity carried out in one’s own name and on an ongoing basis.” The main aspect in identifying a sole proprietorship is taking on the direct risks associated with it.
Now we can move on to specifics.
So where to start?
Accounting! Accurate accounting is the absolute foundation of a business. Trust us – it’s about invoices from suppliers and those issued to customers, calculating taxes to be paid, and ensuring timely settlements.
Since you’re here, you’ve probably already made your decision (if you’re a foreigner, make sure to check here). With that in mind, you can expect some formalities at the start – and of course, you’re right.
First – registration. Yes, that’s where you should start. You need to fill out and submit the CEIDG-1 form. Depending on your preference and how much time you have, you can submit it online, by mail, or in person.
In short, you need:
- Company name (with first and last name).
- The business address (with the legal title, e.g. rented premises, virtual office, own home).
- The codes of the business activity (PKD – some may require a cash register, VAT registration, or a license).
- The form of taxation (which one to choose? Details here).
- A bank account (a private one is sufficient until VAT registration, then a business account is required).
It’s a straightforward process that doesn’t involve any initial costs. However, additional fees may arise later. These are related to obtaining the necessary permits, licenses, or concessions in certain industries. In such cases, registration with the appropriate authorities could be required. Also, requirements for professional qualifications, premises, and equipment should be checked.
REGON and NIP
After successful registration, you will automatically receive a REGON number and a Tax Identification Number (NIP).
The NIP is essential for tax purposes, specifically for filing tax returns. It is required when contacting the Tax Office, and you must use this number when signing contracts. It is also a mandatory element on invoices, along with the business name and address.
The REGON number, on the other hand, is mainly required for filing ZUS (social security) declarations. Besides that, it does not have any significant functions.
This is as certain as death – taxes
Income from running a business, like any other, is subject to taxation, and you should expect it. As mentioned earlier, you must choose a taxation form during registration.
It’s worth considering this choice carefully. Selected taxation form can only be changed at the beginning of the next year. A poor decision may result in higher tax burdens, which everyone wants to avoid.
Taxation form applies only to income tax and indirectly to the health insurance contribution, which we discuss later. You may also need to pay VAT, which is a completely separate tax. It should not be confused with income tax. The obligation to settle VAT depends on registering for it. Whether this is mandatory and other important aspects of this tax can be found here.
Social Security (ZUS) Contributions in JDG
Along with registering the business, you must also register as a ZUS contributions payer. You have 7 days from the start of the business to do this.
If a sole proprietorship is your only title for insurance, you must obligatorily register for social insurance. We mean pension, disability, accident, and optionally sickness insurance (voluntary). You also register for health insurance which is always obligatory.
Remember about the health insurance contribution
One of the most important aspects here is the health insurance contribution. Its amount depends on the chosen form of taxation. Therefore, when analyzing and determining the most beneficial taxation form, the health insurance contribution must also be taken into account.
Detailed information about ZUS contributions, available reliefs, and the impact of the chosen taxation form on the health insurance contribution can be found here.
We also remind you about a fairly recent matter, the so-called ,,ZUS contributions vacations”. It is the possibility of being exempt from paying social insurance contributions for one month.
Summary of the topic
As you can see, the process of setting up a sole proprietorship in Poland is neither terrifying, nor difficult. If you’ve read this article and are aware of all the aspects related to starting a business right now… You don’t have to worry.
When starting a sole proprietorship, you can benefit from startup relief. You have also ability to deduct costs, flexible working hours or unlimited earnings. However, it’s important to remember that this also comes with certain limitations. Those are lack of employee benefits, the need to handle formalities, timely tax payments, irregular incomes, and full responsibility with your entire personal assets.
Therefore, everything depends on your individual preferences, but one thing is certain – take care of good accounting. There are matters that you might not always have time or the mental space for, and that’s completely understandable. As an accounting company, we’re here to help with any issues, questions, and responsibilities you can entrust to us. This will save you from consequences and allow you to fully unlock the potential of your business. Simple and pleasant, right? Feel free to contact us!
