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Overview

Foreign investors may conduct business activities in Poland using the following legal forms:

  • Joint-stock company (spółka akcyjna),
  • Limited liability company (spółka z ograniczoną odpowiedzialnością),
  • Limited joint-stock partnership (spółka komandytowo – akcyjna),
  • Limited partnership (spółka komandytowa),
  • Registered partnership (spółka jawna),
  • Professional partnership (spółka partnerska),
  • European Company (spółka europejska),
  • European Economic Interest Grouping (Europejskie zgrupowanie interesów gospodarczych),
  • Civil partnership (spółka cywilna), and
  • Sole proprietorship (indywidualna działalność gospodarcza).

Instead of incorporating a legal entity in Poland, foreign investors may set up a branch or a representative office in Poland.

As a general rule, investors from EU and EFTA member states or from countries which entered into specific agreements with the EU, may conduct business activities on the territory of Poland on the same terms as Polish citizens. Thus, all the afore-mentioned forms of conducting business are available to them.

Foreign investors from other countries, no matter whether they are companies or natural persons, may conduct economic activity in Poland through establishing or acquiring shares in the following companies:

  • limited liability company, joint-stock company, limited partnership or limited joint-stock partnership.

If a foreign investor legalizes its stay in Poland and obtains a permit to conduct economic activity in Poland, it may choose from all the aforementioned forms of conducting business.

Below we will present the pros and cons of conducting business activities through the most popular forms, i.e., limited liability company, joint-stock company, limited partnership, limited joint-stock partnership, registered partnership and professional partnership.

Limited Liability Company

The most popular form of conducting business activity in Poland, including foreign investments, is a limited liability company ("LLC"). An LLC is a separate entity from its shareholders (or a sole shareholder), therefore shareholders (or a sole shareholder) are not liable for an LLC's debts. Instead, shareholders may only lose their investment in the LLC.

An LLC's popularity among domestic and foreign investors is due to:

  • relatively low costs of incorporation, low operational costs, simple rules regarding day-to-day management of the company, possibility of conducting the business right after signing the Articles of Association, fast registration procedure, and low minimum share capital requirements (PLN 5,000, which is equivalent to approximately EUR 1,200).

An LLC may be incorporated by one or more persons and/or entities. It may not be however created by another limited liability company with a single shareholder. The latter limitation is only valid at the moment of creation of an LLC. An LLC's Articles of Association require the form of a notarial deed and need to be signed before a Polish notary public. They may also be signed by a proxy on the basis of a power of attorney.

An LLC usually has two governing bodies: the Management Board and the General Meeting of Shareholders. A Supervisory Board is obligatory only for LLC's with more than 25 shareholders and if their share capital exceeds PLN 500,000. Polish and foreign investors usually do not appoint a Supervisory Board when it is not obligatory.

The Management Board deals with the LLC's affairs and represents the LLC towards third parties. It shall consist of one or more members which are usually appointed by the General Meeting of Shareholders. Under certain circumstances, Management Board members may be liable for an LLC's debts.

The General Meeting of Shareholders consists of the LLC's shareholders. Its most important powers include: annual approval of the LLC's financial statements and the Management Board report for the previous calendar year, discharging members of the board for performing their duties, amending the Articles of Association, and deciding on winding up the company.

Incorporating an LLC and registering it in the appropriate registers, including the National Court Register, tax office and statistical office, usually takes up to one month. However, an LLC may start its business activity immediately after signing the Articles of Association.

A foreign investor may also choose to set up an LLC with standardized Articles of Association. In such case, it may become the owner of an LLC in one day. The Articles of Association of such LLC may be amended by an investor immediately after registration.

An LLC is subject to Polish income tax on corporations which amounts to 19%. Dividends are also taxed.

Joint-stock Company

A Joint-stock company ("JSC") is very similar to an LLC as regards shareholders and management board members liability, taxation and governing bodies. The Supervisory Board is obligatory in each JSC.

As a general rule, provisions of law governing the functioning of a JSC are more formalistic and provide for a number of additional duties in comparison to an LLC, which has a direct effect on the costs of conducting activity through a JSC.

The minimum share capital of a JSC shall amount to PLN 100,000 (approx. EUR 23,500) and the minimum value of one share must be PLN 0.01 (approx. EUR 0.002).

As opposed to an LLC:

  • a JSC’s financial statements shall be audited each year,
  • any in-kind contribution towards JSC share capital requires the preparation of a valuation report,
  • a reserve capital must be created by 8% of the JSC’s annual profits being transferred to that fund until it reaches one third of the company’s share capital.

The duties of JSC bodies are very similar to the duties of LLC bodies.

A JSC is often chosen by investors planning an IPO, searching for PE/VC investors, or when it is obligatory under Polish law (i.e., banks, pension funds or other financial institutions).

Limited Partnership

Limited partnership ("LP") is an entity without legal personality which is created by two types of partners:

  • a partner whose liability for the company’s obligations is unlimited (such partner is liable for an LP’s obligations jointly and severally with all its assets), and
  • a partner whose liability for the company’s obligations is limited to a fixed amount, which does not have to correspond to the partner’s contribution to the LP.

An LP is a very popular form of conducting business as it enables limiting the liability of all partners (typically it is the LLC that is a partner jointly and severally responsible for the company's obligations) and is not taxed by the corporations income tax. There are also no minimum requirements as regards shareholders' contributions to LP.

Limited Joint-stock Partnership

Limited joint-stock partnership ("LJSP") is a hybrid of an LP and a JSC. It is created by two types of partners:

  • a partner whose liability for LJSP obligations towards third parties is not limited in any manner, and
  • a shareholder who is not liable for LJSP obligations towards third parties at all (it may only lose its investment in the company).

A partner's position is very similar to a partner of an LP or an RP and the shareholder's position is the same as the position of a shareholder of a JSC.

The minimum share capital of an LJSP is PLN 50,000. An LJSP is governed by partners and the General Meeting which consists of shareholders and partners. If an LJSP has more than 25 shareholders, a Supervisory Board must be established.

Until the beginning of 2014, an LJSP was a very attractive form of conducting business in Poland as it enabled investors to limit their liability for a company's obligations (it is a common practice to establish an LJSP with the LLC as a sole partner) and the company itself was not taxed with corporate income tax (only shareholders paid income tax on dividends). As of 1 January 2014, an LJSP is taxed by corporate income tax.

Registered Partnership

Registered partnership ("RP") is an entity without legal personality, though it may act on its own behalf and have its own assets and debts. All of an RP's partners are jointly and severally liable for a company's obligations. However, creditors are legally obliged to seek satisfaction from an RP's assets first. A partner's liability for a company's debts may not be validly limited or excluded.

An RP is not taxed by corporate income tax. There are also no minimum requirements as regards partners' contributions. It is not popular among foreign investors due to the shareholders' unlimited liability. An RP is often chosen by small and mid-size Polish businesses.

Professional Partnership

Professional partnership ("PP") is an entity without legal personality which is often created by investors wishing to conduct freelance professions in Poland, such as, for instance, attorneys-at law, notaries, architects and accountants.

A PP's partners are personally liable for its obligations towards third parties with their personal assets. However, each partner is liable only for obligations stemming from its own actions or omissions (or people working under its management).

A PP is not subject to corporate income tax and there are no minimum requirements as regards the partners' contributions.

Other Forms

Investors not wishing to establish a separate legal entity may set up a branch office in Poland (whose scope of activities shall be the same as the scope of the investor's activities) or a representative office (whose scope of activities is limited to promoting and advertising the investor's activity in Poland). A European Company may be a good solution for investors wishing to move a company's seat for all its activities within the EU and European Economic Interest Grouping seems to be a good solution for entities which do not want to make a profit, but to develop the economic interests and activities of its members.

Additional Resources

Region: Poland
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.
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