Registration of a limited company in Poland by a foreigner
I. Why is it worth starting a company in Poland?
1) Low corporate tax.
Poland has recently become downright a tax haven. The lowest CIT (corporate income tax) rate is 9% and can even be used by companies with annual revenues of EUR 1 million. However, this preference does not apply to income from capital gains, nor does it apply if the company's revenues exceed the value specified in the Act.
2) Tax exemption for persons up to the age of 26.
When a company uses the work of persons under the age of 26, it does not pay income tax on those persons' remuneration if they do not exceed the second tax threshold. In addition, if these persons are students, there is also no need to pay social security contributions in the case of a mandate contract. Thus, in such a situation, the total cost of employing a person is equal to the net payment (money a person receives after taxes and deductions have been withheld).
3) Qualified and efficient employees.
Polish employees are characterized by high skills, appropriate education and diligence. This is especially true for students who usually know foreign languages and can do intellectual work remotely for entities from other European Union countries and around the world.
4) The right market
Poland is a country with almost 40 million citizens. Recent government programs including 500 + meant that Polish households have more money to spend. The state is also developing at a pace that exceeds the European Union average, and besides it is adjacent to a good market like Germany. Undoubtedly, in Germany the costs of maintaining a company and an employee are much higher than in Poland, which allows for interesting price competition.
II. Who can set up a limited company in Poland?
In principle, every entity - any natural or legal person as well as defective legal person, regardless of nationality, registered office or tax residence. The only exception is the provision that one-man limited liability company may not be established solely by another one member liability company. The same also applies to English Ltd and other foreign companies with similar construction.
III. How to set up a company in Poland?
There are two main methods of registering a limited liability company. The first is with the help of S24 platform (online via the Internet) and with the participation of a notary public. To establish an online company, it is necessary for all board members and partners to have qualified electronic signatures or a Trusted Profile (a free-of-charge electronic signature, which permits handling official business on public administration websites including EPUAP profile, for which a personal identity number (PESEL) is required.
Establishment of a company with the participation of a notary public requires either the presence of a foreigner in Poland or a power of attorney in the form of a notarial deed, furnished with an apostille and a sworn translation into Polish. When a future partner decides to have a personal notarial deed and does not speak Polish, a sworn translator will be required.
IV. Which company registration method should you choose?
1. Advantages of the company established using the traditional method.
1.1. Possibility to provide stronger protection for the company and partners against the competitive activities of other partners.
The provisions of the Code of Commercial Companies do not prohibit partners who are not members of the management board from conducting competitive activities for the company. Certain provisions regarding the prohibition of competitive activities may be included in the so-called shareholders' agreement, the conclusion of which is not necessary to establish a company. The option of modifying the articles of association allows you to enter a reservation that protects the company and partners from the competitive activities of another partner. Such an example could be a provision in the articles of association of a company allowing for the compulsory redemption of shares of a partner who would conduct competitive activity against the company. The above would result in the immediate exclusion of a partner from the company and thus deprivation of the right not only to decide on the functioning of the shareholders' meeting, but also the right to information about its activities.
1.2. Possibility to protect minority shareholders (holding less than 50% shares).
a) the articles of association may provide that a shareholder holding a certain percentage of shares is entitled to convene a meeting of shareholders and present a specific agenda,
b) in accordance with the provisions of the Code of Commercial Companies, a change to the articles of association requires a majority of 2/3 votes, and therefore it is possible against the will of the remaining 1/3 votes. Therefore, there is a possibility to introduce in the articles of association e.g. unanimity in this matter,
c) the catalog of activities that require the consent of the shareholders' meeting may be extended, which limits the competence of the management board in some way,
d) the quorum required for the validity of resolutions of the meeting of shareholders may be provided,
e) there is a possibility of limiting the right to dismiss board members representing the interests of minority shareholders,
f) the possibility of introducing the principle that certain persons are entitled to appoint a member of the management board, even if they are minority shareholders,
1.3. The ability to take into account the specific role of a partner in a company - this may be relevant when some of the partners provide work to a company that cannot be a contribution, or the shareholder obtained shares due to specific services that he could perform for the company.
a) the option of privileging certain shares as to dividends, e.g. in the event that a partner provides more work for the company and the partners do not want to conclude an employment contract or other civil law agreement with him,
b) the possibility of imposing special obligations on a partner, e.g. in the form of benefits for the company, which may have been a condition for his acceptance as a partner and which may be particularly important for the functioning of the company,
c) the option to give preference to shares as to voting rights, e.g. in a situation where shareholders want to have the same number of shares, and the presence and operation of one of them is of particular importance for the functioning of the company.
1.4. Company capitalization.
a) the possibility to provide in the articles of association of an increase in the share capital with the participation of existing partners - this allows the increase of the share capital without the need to change the articles of association,
b) the possibility of providing additional payments for shares when the partners do not want to increase the share capital, and at the same time their purpose is to provide financing for the company in the future.
1.5. The company's credibility and trading security.
The agreement of such a company is prepared by a notary, which guarantees not only verification of the identity of the persons signing the articles of association, but also the absence of defects of declarations of will (e.g. a notary public will refuse to act when he finds that the contract is signed by a mentally ill person who is not aware of this what legal action is carried out), knowledge of Polish or the participation of a sworn translator in the case of a contract concluded by foreigners.
When entering into a contract, some contractors ask for the presentation of a company contract, which is in this case a notarial deed. When it comes to companies registered via the Internet, the articles of association are mere printouts. In the case of registering a company via the Internet, secure electronic signatures verified by a valid qualified certificate are not required, which may result in the company's contract being signed by a person impersonating someone else.
2. Advantages of a company concluded via the Internet
2.1. Speed of registration - the company is registered even within 1 day, the time required to register a company using the traditional method usually ranges from 7 to several days,
2.2. Registration costs are lower than in the case of a traditional company,
2.3. You do not need to make an appointment with a notary public.
2.4. Most people never use the provisions of an agreement established with the participation of a notary public,
2.5. An agreement concluded with the participation of a notary public, when it is too complicated, causes the partners to have inconvenience in its application and may cause defective actions taken in good faith, even with the consent of all partners, if no formal requirement was observed,
2.6. Recapitalization of the company by increasing the share capital or additional payment is not convenient to use in practice. The most convenient is the partner's loan, which does not require any particular form, is not related to the tax on civil law transactions and does not need to be reported anywhere, and can also be applied to a company established via the Internet,
2.7. A large number of contracts concluded with the participation of a notary public are in fact rewriting the provisions of the Code of Commercial Companies, which are still applicable, even if they are not explicitly entered into the articles of association. For the proper operation of the company, the provisions of the articles of association of the company registered via the Internet (usually S24
2.8. For most contractors, it does not matter whether the company was concluded with the participation of a notary public or via the Internet in electronic form, so there is no need to complicate your life and pay for a notarial deed,
2.9. When the partners need a company agreement document, they do not have to go to a notary, make an appointment, wait and pay for the extracts, all they need to do is access the Internet and download from their account the text of the company agreement, which is a document and is also honored by banks and other institutions.
V. When a limited liability company is the best form of business.
1. A company for a foreigner
Citizens of other countries may set up limited liability companies without any restrictions. In addition, international agreements may provide for very favorable taxation for the partners of these companies or members of the management board.
2. Risk related activities
If we want to run a business that is very risky in its nature, e.g. there are often problems with payments from customers or you can easily harm someone, a limited liability company is an ideal form for this. As a reminder, in a limited liability company, if partners have made contributions, they are not liable for the company's obligations, unlike in the case of a sole proprietorship or a civil law partnership, where it responds with all its assets.
Management board members are not responsible if they have fulfilled their obligations, i.e. they filed for bankruptcy within 14 days from the date of insolvency.
3. Starting a business requires the help of a partner
It is obvious that sometimes running a business requires recapitalization by other people or providing know-how. For this purpose, you can use the help of another person who would like to become a business partner instead.
In the case of a limited liability company, you are not responsible for the actions taken by the other partner, unlike, for example, in a civil law partnership, where you can be held responsible for the actions of another partner with all your assets, even if you did not have knowledge of a particular act.
4. A business that requires a loan for its existence.
The projects planned many times involve the necessity to raise significant financial resources. To this end, you can get a loan from a bank. If such a loan is obtained by a limited liability company, its partners are not responsible for its repayment, unlike in the case of a sole proprietorship or a civil law partnership.
5. Activities related to the need of hiring employees.
There is no doubt that the owner does the best job for the company. However, the development of an enterprise sometimes requires the employment of other people who will help the owner. Such people can undoubtedly care less about business than its creators, which can sometimes be associated with lower diligence, which can expose the company to losses. The provisions of the Labor Code stipulate that the employer is responsible for damage caused by an employee in the performance of employee duties. The customer will direct his claim to him and the employer may claim compensation from the employee, but only up to three times the employee's monthly remuneration if the damage was caused by unintentional fault, which is the most common case.
If the employer is a natural person conducting sole proprietorship, he is liable with all his property. However, when the business is conducted in the form of a limited liability company, the employer is the company and it is the employee who is responsible for the employee, not its partners.
6. Business creation for years
If we want to start a company that could exist for years, and even be taken over by the next generations, then a limited liability company is an ideal form. Shares can be sold to children and easily inherited without any downtime or difficulties in the functioning of the company.
7. Easy to change the composition of partners and admission of new ones
When conducting business with other people, it may happen that a partner wants to leave the business, even if considerable assets have been accumulated in it. In the case of a limited liability company, it is sufficient for such a person to sell their shares in the company.
If the existing partners want to get a new one, there will also be no problem. It is enough for a new person to sell part of the shares or increase the share capital, and the new shareholder will take over the shares created as a result of the increase.