Legal forms of business in Poland
Poland is a promising country for investment. More and more foreign entrepreneurs do businesses in Poland.
The first step to start a business is to choose the appropriate legal form of your venture.
The Polish Code of Commercial Companies allows to do business in the six forms:
- Limited Liability Company (LLC),
- Joint-stock company / Public Limited Company (PLC),
- General Partnership,
- Limited Partnership (LP),
- Limited Liability Partnership (LLP),
- Partnership limited by shares.
Please find below a brief description and characteristics of each type.
1.Limited Liability Company
Is often chosen by foreign investors.
The shareholders of the entity are not personally liable for the company’s debts. The main
feature of the LLC is to ensure that the company is treated as the separate legal entity from its shareholders or sole shareholder.
Others advantages of the LLC:
■ relatively low costs of incorporation of the company,
■ low operational costs,
■ the company may conduct business activities immediately after signing the Articles of Association,
■ fast registration process at KRS (National Court Register),
■ limited liability and low minimal seed capital,
■ clear and simple rules in relation to the daily management of the company.
The LLC may be incorporated by one or more person or/and entity. Polish law does not prohibit the holding of 100% of shares by another single-shareholder LLC.
Under Polish law, the LLC must have a minimum share capital of 5k PLN with the minimum nominal value of 50.00 PLN per each share. Contributions may be made in cash or in kind.
The limited liability company may have three governing bodies:
- the management board,
- the general meeting of the shareholders and
- the supervisory board.
The latter is required only if the company has more than 25 shareholders and if its share capital exceeds 500,000.00 PLN.
The Management Board is a body which deals with the affairs of the company and represents the company before the third parties. The Management Board may consist of one or more members (no difference whether Poles or foreigners), that can be appointed from the shareholders or from third persons.
The General Meeting of the Shareholders consists of the shareholders. The Supervisory Board consists of at least three members appointed by the resolution of the General Meeting of the Shareholders. The statutory duty of the Supervisory Board is to exercise permanent control over all areas of the company’s activities. The shareholders of a LLC are not liable for the company’s debts or obligations. Instead, shareholders can only lose their investment (monetary contribution or in-kind contribution invested to take up the shares in the share capital of the company).
- Joint-stock Company / Public Limited Company (PLC)
Is very similar to a limited liability company with regard to the liability of shareholders, governing body and taxation. However, the provisions stipulated by the Code of Commercial Companies are more formalistic and provide additional obligations which must be fulfilled by the bodies of the company. In fact, this legal form is used for business planning IPO (Initial public offering), searching for PE (private equity) /VC (Venture capital) investors or when this form is required by Polish law (e.g. banks, pension funds and other financial institutions).
Under Polish law the joint-stock company must have a minimum share capital of 100k PLN and the minimum nominal value of the stock must be 0.01 PLN.
The PLC company has three governing bodies:
- the Management Board,
- the General Assembly and
- the Supervisory Board, which is statutory.
The General Assembly is a body created by stockholders who may exercise the rights stipulated in the Code of Commercial Companies and the statute. An Annual General Assembly must be called within six months of the company’s financial year and the items on the agenda are stipulated by law.
The features, duties and obligation of the Supervisory Board and Management Board are almost the same as in case of a LLC. The stockholders of the PLC are not liable for any debts and any obligations of the company. The stockholders can only lose their investment (e.g. monetary contribution or in-kind contribution invested to take up the shares in the share capital of the company).
- General Partnership
A general partnership is an association of at least two partners operating an enterprise under its own business name. The rights and obligations of the partners are stipulated in the partnership agreement. Each partner has unlimited liability for the debts of the General partnership.
- Limited Partnership
There are general partners with unlimited liability and limited partners, whose liability is restricted to their fixed partnership contributions.
- Limited Liability Partnership
A limited liability partnership is a partnership incorporated by professionals (such as lawyers, tax advisors or doctors), for the purpose of rendering professional services. A partner is not liable for the obligation of the partnership incurred in connection with the professional activities of other partners.
- Partnership Limited by Shares
It has at least one partner with unlimited liability (general partner) and at least one partner that is a stockholder. This form of activity is relatively uncommon.
Other corporate entities
It’s he simplest form of doing small business in Poland. The owner has unlimited liability for any debts of the company.
A civil partnership does not have any legal personality and is considered by Polish law as a civil agreement between at least two individuals or legal entities. Foreign investors rarely choose this legal vehicle for their investments in Poland, as it is mostly used for small businesses.