From this article you will find out:
- which legal form to choose in conducting your business;
- what decisions and information should be prepared before registering your firm;
- where and how to register the company;
- how to obtain financing for this purpose.
Which legal form to choose?
The choice of legal form for your own business is one of the first key decisions that will affect the manner, time and costs of establishment, as well as the company’s manner of operating. Your decision will have a daily effect on how your firm will be run – the level of tax, manner of settlement, responsibility for its conduct, manner of decision making, division of profits and whether you will bear personal responsibility for the firm’s commitments.
If you want to set a company, you have a few legal forms to choose from. These are:
- one-person economic activity;
- civil partnership;
- commercial law company, including:
- partnerships (unlimited company, limited liability partnership, limited partnership, joint-stock partnership);
- limited company (limited liability company, joint-stock company).
One-person economic activity is the most popular form that entrepreneurs decide on when setting up their own company in Poland. Apart from simplicity and convenience, the benefits of conducting business in this manner include the:
- lack of registration costs or required capital to start;
- possibility of conducting simplified accounting;
- possibility to take advantage of preferential rates of social security taxes (ZUS) for 24 months from the beginning of activity and reduced ZUS at the beginning (free from the obligation of paying social security taxes for 6 calendar months from the date of beginning economic activity).
A civil partnership is, in short, an economic activity established by more than one person. This form is the most convenient for those who do not wish to conduct business alone, but would like to further benefit from the reduced rates and simplicity characteristic of a one-person economic activity.
When deciding on one of the above forms, you have the opportunity to take advantage of support at the beginning in the form of attractive loans “First business – Support at the beginning: Loan to undertake economic activity”. In the framework of this program you may obtain even 90 thousand PLN for the purchase of equipment, goods and services, which will make your first steps in business easier.
Commercial law companies are a much more complicated legal form. Their establishment involves the writing of a founding agreement, sometimes in the form of a notarial deed, and a registration fee – varying depending on the legal form of the established company. Some of these, e.g. limited liability partnership, may be set up by individual professionals (as defined by the Code of Commercial Companies, Art. 88), who are e.g. architects, doctors, pharmacists or certified translators. Restrictions may also result from the area in which you want to conduct business – wishing to run a firm in the financial sector, you cannot do so in the form of one-person economic activity, and in the case of certain businesses (e.g. banks or insurance companies) the law determines one particular legal form. Before you decide to establish one of the forms of commercial law company, make use of legal and accounting advice.
Setting up a company – step by step
If you’re thinking of setting up a company because you’d like to develop an innovative project and you’re looking for a way to obtain capital, you can take advantage of many forms of support. One of these is “Loan for innovative firms”. This initiative, which gives you the chance to obtain as much as 20 million PLN to finance R&D activities, create new products or to obtain working capital for current needs (e.g. expenses related to preparing contracts or realisation of contracts).
However, if besides capital you are looking for access to know-how, check the offer of investment funds (VC funds) of those interested in projects at a very early stage of development. Besides financing (to 4 million PLN), they will assist you with their knowledge and experience in many areas of business, such as: accounting and finance, legal aspects, marketing, sales or business development.
Before that, however – after choosing the type of activity that suits you best – you have to formally register it. This involves a few important decisions which will have a significant influence on the shape of your business.
1. Choose the form of taxation
One-person economic activities and civil partnerships are subject to personal income tax - PIT and value added tax – VAT (obligatory only for limited companies).
While VAT is paid when purchasing goods or services, in the case of PIT you have a few forms of taxation to choose from:
- Settling PIT according to general rules, the tax will be 18% up to the sum of 85,528 PLN obtained income. Over this amount, the rate increases to 32%.
- Choosing the flat tax, the rate is constant regardless of how much you earn and amounts to 19% of income.
- Flat-rate sum on registered income is a form which depends on your company’s type of activity and may range from 3% to 20%. In the case of this form of taxation, the use of many parallel rates is possible.
- Tax card is a constant amount on a yearly scale, regardless of how much you earn. This type of tax was intended especially for craft-based services. The rate is determined each year and depends on how many people the firm employs, what it’s involved in and where it is located (number of inhabitants).
Members of partnerships may choose taxation by general rules or flat tax.
This is different in the case of limited companies:
Corporate income tax - CIT, which is the equivalent of PIT for legal persons, is valid in two rates - 15% and 19%. The rate of 15% is intended for companies whose income from sales does not exceed 1.2 million euro annually. It is also important that the income of a limited company is subject to double taxation – first income tax on legal persons - CIT, and then profit (paid to partners or shareholders in the form of dividends) is taxed again according to the 19% rate of PIT.
2. Find the appropriate PKD codes
When registering a company, you also indicate the code of PKD (Polska Klasyfikacja Działalności – Polish Classification of Activity). This a way of defining what your firm is involved in. In the application form you give one main code which best reflects the character of the business you run (the main economic activity), as well as additional codes (there is no limit to their number). Based on the PKD codes, your economic activity will also be given a REGON number.
3. Choose an accounting office
The next question that you need to answer is the place of maintaining your firm’s accounting documentation. This requires the decision whether to employ an accountant or to make use of an accounting office.
In the case of economic activity you can also decide to independently carry out the accounting. Internet accounting is very popular as it is much cheaper than traditional accounting, offers a convenient invoicing program and sending of documents to government offices, available on any device.
4. Set up a company account
A company account is not obligatory for a one-person economic activity – to conduct business you can use a private account. However, if you decide that it will be more convenient to divide personal and company finances, check which bank offers the best conditions. Pay attention to the:
- cost of running the account;
- card fee;
- cost of transfers;
- cash machine withdrawals;
- number of cash machines in your area.
Some banks allow a bank account to be opened even before starting the company, which is a convenient possibility (in the registration form you can immediately give the bank account number).
5. Register yourself and an employee at ZUS (Social Security)
To the registration form you can also attach registration for social security and health insurance. The other possibility is to contact ZUS directly within seven days of beginning your activity. Depending on which reduced rates you will benefit from and whether you register only yourself or members of your family, fill in and attach the form:
- ZUS ZUA – if you are registering for social and health insurance;
- ZUS ZZA – if you are registering only for health insurance;
- ZUS ZCNA – if you are registering a family member for health insurance.
If you plan to employ workers in your company, for their registration at ZUS you have – as in the case of beginning a new activity – seven days from the date of employment.
As an entrepreneur, you may also be interested in the possibility of taking advantage of a loan which will allow you to employ new workers and to finance the creation of a workplace or a few workplaces. The amount of support is even 6 times the average salary. If the employees remain in your company longer, you can apply to have the loan written off.
Company registration without leaving your home
A one-person economic activity or civil partnership can be established free over the internet, filling in the CEIDG-1 form on-line or submitting a filled-in form on paper at the Local Government Office for the place where you run your firm.
If you use a bank account over the internet, check if your bank does not allow you to register your company through the system of electronic banking. Remember that after setting up your firm in this manner, you must make a visit to ZUS and possibly a separate VAT registration.
Establishing a company in the form of some type of commercial law company is more complicated and in some cases requires a previous visit to a notary (the cost depends on the initial capital of the company and begins at a few hundred PLN), and next submitting registration documents to the National Court Register. Simplified registration (in pre-defined notarial acts) on-line is possible for unlimited companies, limited partnerships or limited liability companies. Registration in the system costs 350 PLN (entrance into the National Court Register and fee for registering the first entrance into the Court and Economic Monitor).
Members of civil partnerships and commercial law companies should within 14 days of setting up the company also submit a filled-in PPC-3 form and pay 0.5% of one’s own contribution. After registering the company they should also go to the Tax Office for the place where the company is run with a VAT-R form, in order to register the company as a VAT payer. In the case of one-person economic activities and civil partnerships who decide to be VAT payers, they can fill in a VAT-R form as an attachment to the registration form.
Although at first setting up one’s own business may seem complicated, most procedures have been simplified and restricted, so that entrepreneurs can fulfil all the formalities in one place on-line or during one visit to an office, and then concentrate on their business.