Types of Business Entities

/ Doing Business in Poland

According to the Polish legal framework, economic activities may be carried out in many various forms. Below are their brief characteristics and key information about each type of business in Poland.


Sole proprietorship (self-employment; individual business entity)

The most frequently chosen legal form of doing business. Formalities related to the establishment of sole proprietorship are completely minimized. For a private individual to be allowed to conduct his or her sole economic activity, he or she must be registered in the appropriate registry, i.e. fill in a relevant application (free of charge -application for entry in the Central Register of Business Activity and Information, CEIDG). Entrepreneurs intending to commence operations in this form do not need to expend significant registration costs nor have any solid initial capital. However, a private individual running their business in this form bears unlimited personal liability for any obligations arising from the activities of their enterprise. It also has the exclusive right to represent its business. This form is available only to citizens of EU and EEA Member States. Citizens of third party States are required to obtain special permits.


Civil law partnership

Contrary to what the designation may suggest, a civil law partnership is not an independent economic entity, it has no legal personality. It is only a contractual relationship, i.e. a written contract concluded between two or more individuals (natural, legal or organizational entities with legal capacity) forming a partnership with the purpose of jointly conducting their business activities. When the partners are natural persons, the name should include at least the forenames and surnames of all the partners, with the addition of the name "spółka cywilna" or the abbreviation (sc.). No initial capital is required when establishing a civil partnership. Each partner is authorized and obliged to manage the affairs of the partnership and represent the partnership externally. Partners are personally, jointly and severally liable for the obligations of the partnership. The partnership by itself does not need to be registered, but each partner is required to make such registration. Company accounting is simplified if the partners are natural persons and the last year's revenue did not exceed EUR 2 million. Full bookkeeping is maintained in other cases. This form of business activity is available only to citizens of EU and EEA Member States. Citizens of third party States are required to obtain special permits.


Commercial partnerships (Commercial law companies: partnership)

Commercial partnerships, contrary to civil law partnerships, are autonomous economic entities that are not legal entities, but under valid legislation they have certain significant attributes of legal entities. These partnerships may acquire titles, contract obligations, sue and be sued on their own behalf. Commercial partnerships as entrepreneurs must be recorded in the registry of entrepreneurs of the National Court Register (KRS). We divide commercial law companies into: personal companies (general partnership, partnership, limited partnership, limited joint-stock partnership) and capital companies (joint-stock company - S.A. and limited liability company - z o.o.).


Registered partnership (General Partnership)

General partnership is the simplest legal form of economic activity, regulated by the Commercial Companies Code, focusing primarily on the personal component, namely on the partners. A minimum of two partners (natural persons, legal persons or organizational entities with legal capacity). A deed of a registered partnership should be executed in writing unless the deed obligates the partner to deliver a contribution for which any special form is prescribed, e.g. for real property to be contributed to the partnership, the deed of partnership must be executed as a notarized deed. An entry in the National Court Register is also required. The name of the company should include the name of at least one partner or the company's name, as well as the designation "spółka jawna" or "sp. j.". Partners provide contributions to the partnership. The value of such contributions must be defined, but no minimum initial capital is required. As in the case of a civil law partnership, each partner is authorized and obligated to manage the affairs of the partnership and represent the partnership externally. Each partner is liable for the obligations of the partnership without any limitation, with their entire property, jointly with the remaining partners and with the partnership. However, this liability is defined as subsidiary liability, meaning that a creditor of a partnership may carry out an execution from partner’s assets where execution from partnership’s assets proves ineffective. This form of business activity is available only to citizens of EU and EEA Member States. Citizens of third party States are required to obtain special permits.


Professional partnership

A partnership is a specific type of company. Its founders can only be private individuals authorized to practise the liberal professions specified in Article 88 of the Code of Commercial Partnerships and Companies, including: advocate; pharmacist; architect; building engineer; sworn translator, etc.

The condition for establishing a partnership is drawing up the partnership agreement in the form of a notarial deed and registering it in the National Court Register. The material substance of the enterprise typically consists of the partners’ contributions, without a specified minimum value of initial capital for a professional partnership. A unique quality of a professional partnership is a specific regulation of liability rules. Each partner may only be held liable for the consequences of his own actions but cannot be held liable for the obligations of the partnership occurring as a consequence of other partners’ deeds, as well as for the partnership’s obligations resulting from the actions or default of the persons employed by the partnership and subordinate to another partner. The bookkeeping of a partnership can be done by means of full or simplified bookkeeping. The name of the partnership should include the name of at least one partner with the designation "and partner" or "and partners" or the designation "partnership", as well as an indication of the liberal profession performed in the partnership (e.g. "architects"). This form of business activity is available only to citizens of EU and EEA Member States. Citizens of third party States are required to obtain special permits.


Limited partnership

This is a specific type of a commercial partnership, distinguished by the presence of two types of partners: limited partners and general partners. It is a good legal form of activity for entities with different financial potential. A limited partner is the partner bearing limited liability for the partnership’s obligations towards its creditors (only up to the amount of commandite sum defined in the deed of partnership). The name shall include the surname or full name of at least one general partner as well as the designation "spółka komandytowa" or "sp. k." The name may not include the name or business name of a limited partner. The deed of a limited partnership shall be made in the form of a notarised deed. Partners provide contributions to the partnership. The value of such contributions must be defined, but – as in the case of a registered partnership – no minimum initial capital is required. Division of partners’ liability is related to the scope of their authority to manage the affairs of the partnership and represent the partnership externally. A limited partner may only represent the partnership as a proxy and is neither authorized nor obliged to manage the affairs of the partnership. The general partner is responsible for managing the affairs of the partnership and for representing the partnership externally. This form of business activity is available to citizens of any State. Similarly to the previous types of companies, the limited partnership does not have a legal personality, so income tax payers are the partners. Full accounting is required.

An interesting version of a limited partnership, which is advantageous in many ways, is a limited liability company & co. limited partnership. In this specific organizational form, the limited partner is a private individual – shareholder of a limited liability company, and the limited liability company itself becomes the general partner.


Limited joint-stock partnership

A joint-stock limited partnership is a separate type of commercial law company (although the legislator classifies them as partnerships). It contains features of two types of companies - joint-stock and limited partnership. In this type of partnership, at least one partner is the general partner, who is liable for the partnership’s obligations before creditors without any limitations, and at least one partner is a shareholder. The basis for the company's operation is its articles of association in the form of a notarial deed and registration in the National Court Register. A limited joint-stock partnership is the only type of partnership where at least PLN 50,000 initial capital must be raised. Therefore, this partnership is capitalized higher than any of the existing types of companies. The partnership is represented externally by general partners, while shareholders are neither liable for the partnership’s obligations nor engaged in management of the partnership (they are only allowed to represent the partnership as proxies). The name shall include the surname or full name of the firm of at least one general partner, as well as the designation "limited joint-stock partnership" or "S.K.A." The name may not include the name or business name of the shareholder. Interestingly, a general partner may (by contributing to the capital of the partnership) obtain the status of shareholder. In turn, a shareholder can obtain the status of a general partner - the name of the partnership must include the shareholder's name or business name. The partnership is subject to corporate income tax. This form of business activity is available to citizens of any State.


Commercial companies (Commercial law companies: equities)

Apart from partnerships, the Polish legislative framework envisages two additional forms of conducting economic activities, namely companies with share capital: a limited liability company (Sp. z o.o.) and a joint-stock company (S.A.). Their objective is to conduct more extensive operations than those of partnerships.

Joint-stock companies are particularly fitted for handling major economic undertakings, requiring involvement of significant equity. Both these types of companies are corporate legal entities, operate as independent entrepreneurs and must therefore be registered in the registry of entrepreneurs of the National Court Register.

Companies are the most commonly chosen forms of conducting business activities in Poland. The factor which strongly contributes to their popularity is, among other things, the limitation of personal liability of shareholders up to the amounts of their respective contributions to cover the initial capital.


Limited liability company (z o.o.)

This type of organization is most commonly chosen by persons intending to engage in small or medium-sized entrepreneurial activity. Although this type of company may be managed by third persons other than shareholders, it is common practice to delegate managing functions to one or more shareholders. The company is primarily liable with its own assets. The members of the management board are jointly and severally liable for the company's obligations with all their assets. A minimum of one founder is required (natural person, legal person or organizational unit with legal capacity). The founder cannot be only a one-person limited liability company. A deed of formation of a limited liability company should be executed as a notarised deed. Within 6 months of signing the agreement the company must be registered in the National Court Register. Shareholders provide contributions to the company, covering the initial capital (share capital). Its minimum amount is PLN 5 000, thanks to which the property liability of the partners is limited to the amount of the capital contribution to the company. A limited liability company can be run as a one-person or multi-person company. There are no restrictions preventing acquisition of the entire shareholding in an existing limited liability company by another sole-shareholder limited liability company. Unlike partnerships, companies operate as corporate legal entities through their bodies. The bodies of a limited liability company are: a general meeting of shareholders, and a management board, as well as supervisory bodies that are obligatory only in specific circumstances (a supervisory board and/or a revision committee). The ranges of competence of the specific bodies of the company are divided by law and may be further regulated in the deed of company formation. In any case, the management board shall manage the affairs of the company and represent the company. In this business case, full accounting and filing of financial statements are required. The partners must also pay PIT on dividends paid. The name of a limited liability company does not have to include the names of the partners, it can be chosen freely, but must include the term "spółka z ograniczoną odpowiedzialnością" or "spółka z o.o." or "sp. z o.o.". This form of business activity is available to citizens of any State.


Joint-stock company (S.A.)

A joint-stock company (S.A.) is an organization, which is capable of obtaining significant equity from a large group of investors in a relatively short time and at a relatively low cost. Therefore, this form is most commonly applied in the case of major economic undertakings that aim to go public. A characteristic feature of this company is the absolute separation of managing functions from shareholding functions – in joint-stock companies, day-to-day management is exercised by one or more persons specializing in management activities. Because shareholders are not directly engaged in company management, they are capable of diversifying their portfolios and engaging their capital in many business operations at the same time. The company is liable with its own assets. Shareholders bear only the risk of losing their shares in the company. Another important quality of a joint-stock company is unrestricted transferability of the company’s shares. Articles of a joint-stock company should be executed as a notarized deed and its entry in the National Court Register should be made. The signatories of such deed become the founders of the joint-stock company. Afterwards, shareholders provide contributions to cover the initial capital. The minimum value of initial capital of a joint-stock company is PLN 100,000. As in the case of a limited liability company, a joint-stock company cannot be established (formed) solely by a single-shareholder limited liability company. A joint-stock company operates through its bodies in a manner provided for in the respective statute. These include: the general meeting (of shareholders), the management board, and the supervisory board, which is obligatory unlike in the case of a limited liability company. The accounts of a public limited company must be kept using full accounting. Annual financial statements are audited by a certified public accountant. The name may be chosen voluntarily, but must include the term "spółka akcyjna" or "S.A.". This form of business activity is available to citizens of any State.


Branch and representative office of a foreign entrepreneur in Poland

Branch

A foreign entrepreneur may open a branch in the territory of Poland, on a mutual basis, meaning a separate and organizationally independent operation of the entrepreneur’s business, conducted outside his head office. The key characteristic quality of a branch is that it does not have a legal identity but operates within the limits of the legal identity of the foreign entrepreneur, who established the branch. A foreign entrepreneur’s branch must be recorded in the registry of entrepreneurs of the National Court Register, and the costs of registration procedure are the same as those applicable to commercial companies. Registration is made on the basis of a relevant resolution/decision to establish a branch office, with simultaneous registration of the foreign entrepreneur’s data (including submission of articles of association/deed of company and a copy of applicable registration for the foreign entrepreneur). The foreign entrepreneur must appoint his authorized representative at the branch office. This person is entitled and authorized to operate within the branch, however only for and on behalf of the foreign entrepreneur. A branch does not have its separate corporate name and identifies itself in the market with the corporate name of the foreign entrepreneur. A branch has its own separate property and therefore, the foreign entrepreneur is obliged to keep separate accounts for the branch in the Polish language, according to Polish accounting laws. A branch may carry out business activities only within the scope of the business activity of the foreign entrepreneur. Branches of companies from Member States of the European Union or the European Economic Area may operate in Poland on the same principles as Polish companies.


Representative office

A foreign entrepreneur is also permitted to open a representative office in Poland. This legal concept is very similar to that of a branch: a representative office does not have a legal identity and it constitutes a unit of organisation that is entirely and absolutely subordinate to the foreign entrepreneur. The basic difference between the two types of foreign offices is that a representative office may only carry out advertising and promotional operations for and on behalf of the foreign entrepreneur. Unlike branches, which are recorded in the registry of entrepreneurs of the National Court Register, formation of a representative office requires registration in the registry of representative offices of foreign entrepreneurs, which is maintained by the competent minister of the economy. The remaining duties and obligations of an entrepreneur establishing a representative office are similar to those applicable to formation of a branch.


Cross border forms of entrepreneurship

European Economic Interest Grouping (EEIG)

This cross-border form of doing business is regulated with reference to the Act of 4 March 2005 on the European Economic Interest Grouping and the European Company (Dz.U.2022.259 t.j.). It is a legal form of transnational business that combines the features of a (general) partnership and a consortium. An EEIG must be composed of at least 2 entities (companies and/or private individuals) conducting their business activities or having their registered offices in two different EU Member States. The legal structure of an EEIG is similar to the legal structure of a general partnership adopted in the Code of Commercial Companies. To the EEIG with its seat in Poland the provisions on general partnership apply. Under these provisions EIG is an organizational unit without legal personality. An EEIG is subject to entry in the National Court Register on the principles specified for general partnerships. An important difference from a general partnership is that third parties are appointed to conduct the affairs and represent the EEIG, which are the administrators of the grouping. The purpose of EEIG is to facilitate or develop the economic activities of the specific members, not solely to make a profit. The activities of an EEIG are therefore auxiliary to those of its members.


European company (Societas Europaea or SE)

A European Company is a form of company regulated by Regulation 2157/2001/EC and Directive 2001/86/EC. This is a public limited-liability company, which should exist within the frameworks of companies’ laws of the particular Member States also with national joint-stock companies. An SE has a legal identity and is required to have a relatively high share capital – EUR 120,000. As compared to the Polish joint-stock company, there are several important differences in the SE case: formation of an SE, registered office and change (movement) of registered office, free choice of the scheme of corporate bodies in an SE (single or dual), and employee participation in management of an SE. A European company can only be created through: a cross-border merger of public limited companies domiciled within the EU if at least two of them are governed by the laws of different Member States, the creation of a European company as a parent company in a holding structure consisting of national public limited companies and limited liability companies, the creation of a subsidiary by at least two companies within the meaning of Article 48 (2) EC, the conversion of a public limited company governed only by national law, the creation by a European company of another single-member company in this form. The registered office and the head office of the European company must be located in the same country of the European Union.

Last update : 26.05.2022

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