LIMITED LIABILITY COMPANY IN POLAND – HOW TO OPEN IT FROM A TO Z?

This form of business is popular among entrepreneurs in Poland, but the decision is just the beginning. Now, you will face a series of formalities, which are usually not the most relaxing ones.

More information about how to set up a business in Poland, sole proprietorship vs limited liability company, can be found here.

However, here you will find detailed information on how to set up a limited liability company (LLC) only. It requires a bit more attention at the beginning, so it’s worth taking a closer look. Especially if you’re already decided and want to get to the specifics.

Briefly about the LLC. In Poland

A limited liability company (LLC) is a legal form of business, in which shareholders are liable for the company’s debts up to the amount of their contributions. Its governing bodies are the general meeting of shareholders and the board members and optionally also the supervisory board. Importantly, an LLC can be established and operated by a single person.

Where do you start?

First of all, just as we emphasized in the post about “setting up a sole proprietorship”, it’s important to ensure good accounting from the start. The biggest difference here is that a LLC is required to maintain full accounting records. This means recording all transactions in accordance with accounting principles, starting from the very first event that has financial or asset-related consequences. Most often, this will be the payment of the share capital.

In addition to maintaining full accounting records, an LLC is required to prepare a financial statement each year, including a balance sheet and an income statement. In this type of business form, there is no room for mistakes or oversights. It is important to ensure this by establishing a partnership with an experienced accounting company from the very beginning.

However, the first step that cannot be skipped is registration. If you are a foreigner and want to make sure whether you can set up a limited liability company in Poland, make sure to check here.

What options do you have?

You can complete the registration in two ways: online, through the S24 system, or traditionally with a notary. What are the differences between these options?

Traditional registration with a notary is more expensive, more complicated and time-consuming, but on the other hand, there are no limitations. Online registration through the S24 system requires using the standard template for the company’s articles of association available in the system. It is very basic and allows for very few modifications. Additionally, the share capital must be contributed in cash, whereas with a notary, it can also be contributed in the form of an in-kind contribution.

The articles of association and the National Court Register (KRS)

The articles of association of an LLC that you wish to establish is a document containing essential information about the company. Forming the company, meaning entering into an agreement between the shareholders, is not the same as its registration in the National Court Register (KRS). Only the entry into the business register grants the company legal personality and allows it to operate legally in the business world. Until registration, the company with the signed agreement can function, but as an LLC in organization.

What documents and information are needed for registration?

The most important, already mentioned above, is the Articles of association. It must contain at a minimum:

1. The name and address of the company’s registered office.
   
2. The company’s business activity (defines the scope of the company’s business operations).
   
3. The amount of share capital (minimum 5000 PLN).
   
4. The details of the shareholders, along with the number of their shares and their value.
   
5. The details of the board members, specifying their positions (president or board member) and the length of their term (maximum 5 years).
   
6. Method of representation of the company.
   
7. In what form do shareholders contribute share capital (cash or in-kind contribution).
   
8. The duration of the company, if specified.

The following documents are also required:

• a statement regarding the contribution of the share capital,
• a list of shareholders,
• a statement regarding the mailing addresses of the shareholders
  
• a statement regarding the mailing addresses of board members,
  
• a statement regarding the foreigner status.

What happens after the company is registered in the KRS?

The registration itself is not the end of the formalities. If the registration is successful and the company is entered into the business register in the KRS, the following obligations must be fulfilled:

1. Submitting the declaration and paying the PCC-3 tax (this applies to S24. However, with a notary, he will collect this tax himself). This must be done within 14 days of signing the articles of association (not the registration in the KRS). Therefore, it must be done even if the company is not registered within those 14 days. The tax rate is 0.5% of the share capital.
   
2. Registration in the Central Register of Beneficial Owners (CRBR) – the registration must be done within 7 days from the moment of registration.
   
3. Opening a bank account – although the law does not directly require this, in practice, it is necessary.
   
4. Submission of the NIP-8 form – it must be submitted within 21 days of the company’s registration.
   
5. The statement about coverage of share capital – the board is required to submit it to the registry court within 7 days of the registration entry (if it was not submitted during registration).
   
6. UPL-1 authorization – it is used to authorize a specific person to submit electronic tax declarations on behalf of the company. This is necessary, even for just one person. In an LLC, no one, including the board members, is automatically authorized, unlike in the case of a sole proprietorship.
   Tax declarations cannot be signed with income (as in the case of a sole proprietorship). Therefore, it is important to submit this authorization at least a few days before the first submission of the tax declaration.

In addition to the above-mentioned formalities, VAT registration may also be required. It is mandatory if the company’s activities fall within the catalog of activities requiring VAT registration. Otherwise, you can take advantage of the registration threshold. It is 200,000 PLN in revenue, with a proportional limit in the year of registration. You can read more about VAT and its registration here.

Taxes around the corner, CIT and PIT

A limited liability company (LLC) is a legal entity separate from its shareholders, also in terms of tax aspects. In this regard, regarding income tax, the tax obligation rests with the company itself.

Income is subject to corporate income tax (CIT), which covers the entire company’s profits, regardless of their source.

First, the company settles its tax obligations, and then the shareholders pay a flat-rate personal income tax (PIT) on the dividend. This means a share of the profits, without the possibility of deductions.

This results in double taxation. It is one of the disadvantages of a limited liability company (LLC), but with proper planning, it is not that problematic.

The topic is explained in detail in our blog post here. You will find information about advances, settlements, tax reliefs, and much more.

Finally, briefly about Social Security insurance (ZUS)

As a general rule, a limited liability company (LLC) and its shareholders are not subject to mandatory ZUS insurance. The LLC becomes a ZUS payer only when it hires its first employee or starts paying a salary to the first board member appointed.

The exception is A sole shareholder company, where the sole shareholder is treated by ZUS like a sole proprietorship (JDG). In this case, the shareholder must register as a ZUS payer within 7 days of the company’s registration and pay contributions for themselves privately. The company does not pay these contributions.

To sum up

A limited liability company (LLC) is a popular choice, although it requires a bit more involvement than a sole proprietorship (JDG). The minimum share capital is reasonable, and the registration costs are not prohibitive. Among its advantages, the limited liability of shareholders and the legal personality are definitely worth mentioning. This allows the company to incur obligations and acquire rights.

However, not everything is as rosy as it seems. As we know, a limited liability company (LLC) involves, among other things, double taxation and the obligation to maintain full accounting records. This requires the support of competent professionals. Therefore, everyone should make this decision consciously and carefully.

Speaking of support – now it’s our turn! As an accounting company we will be happy to assist you – from the registration of the company to its ongoing management. We will make sure that accounting doesn’t burden your mind and becomes the simplest part of the entire process. We love what we do – the greatest satisfaction comes from the satisfaction of our clients.