Poland is one of the most stable and developing countries in the European Union, so many people decide to start a business here, including foreigners. Many businessmen start their way to success with a sole proprietorship, but after some time they come to the decision to transform a sole proprietorship into a real company - an LLC (Spółka z o.o.).
Read in the material aksis about why to transform a sole proprietorship into a limited liability company, what are the pros and cons and most importantly - a step-by-step guide to transforming a sole proprietorship into a full-fledged company. Enjoy reading the article!
Detailed comparison of JDG and Spółka z o.o. in Poland
JDG | Spółka z o.o. |
|---|
- It is obligatory to pay fees to ZUS - Taxation from 18 to 32% (depending on income) | - Taxation 9% (if the revenue does not exceed 2 million euros per year) - If the revenue does not exceed 200 thousand PLN per month, it is possible not to be a VAT payer (there are exceptions for some types of activities) - To withdraw cash from Spółka z o.o., you will have to pay 19% as for dividends - There is a necessary capital threshold - 100 thousand PLN (compared to other forms of business - it is not much) - If you do not have employees, you may not pay ZUS contributions at all |
When is it worth transforming a sole proprietorship into an LLC?
Entrepreneurs usually come to this solution for the following purposes and needs:
attracting investors to the business
tax reduction
the opportunity to put the company on the stock exchange
scaling your own business
It is worth noting that a sole proprietorship can be transformed into a limited company in Poland without any problems, however, it is not possible to do it in reverse order.
What will change after the reorganization into Spółka z o.o.?
In addition to the main points, the following will change:
You will receive a new NIP and REGON number
All previous obligations and rights will be retained
You will need to pay a fee of 0.5% of your stated capital
The most important thing is the limitation of liability, which was not the case when running a sole proprietorship (in a sole proprietorship the owner is fully liable for all debts with personal property), but when running a Spółka z o.o. you are liable only with the property registered to the company.
Instructions for the reorganization of JDG into Spółka z o.o.
Firstly, it is worth understanding that a sole proprietor is registered in the CEIDG register of entrepreneurs for individuals, while Spółka z o.o. is registered in another register for legal entities - Krajowy Rejestr Sądowy (KRS). Therefore, in order to switch from one form of business to another, it will be necessary to interact with both registries.
→ Drawing up a transformation plan (plan przekształcenia) and its annexes. Such a document is drawn up, signed and notarized. The plan must consist of the balance sheet value of assets of the sole proprietorship and several mandatory attachments: financial statements of the business, valuation of assets and liabilities, the memorandum of association of the LLC and the application for transformation of the sole proprietorship.
The transformation plan looks like the following. However, it should be realized that this is just an example, under which you should not substitute your own data.
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→ Addressing the National Court Registry KRS. It is necessary to notify this registry of your wish to convert a sole proprietorship into an LLC and provide them with the plan you have prepared.
→ Checking the plan by KRS staff. By law, your plan must be checked and reviewed by the auditors within two months of the date the plan is delivered. You can also formally request an expedited review by the auditor, but if the auditor sees no reason to do so, he may deny the request.
→ Filing an application to transform a sole proprietorship. If everything is OK with your plan, it is necessary to prepare and submit an application. Today, such an application is only submitted online through the government's PRS portal. VERY IMPORTANT: Trusted Profile signatures are used to submit the application. The review of your plan will cost you PLN 300, but the cost of an external auditor varies from PLN 3000 to PLN 5000. Upon completion of the auditor's checks, the auditor will issue an official opinion
→ Appointing the members of the management board of your Spółka z o.o.o. After successful verification, it is time to appoint new members of the management board of your Spółka z o.o.
→ Registering Spółka z o.o. in the National Court Register KRS. Unlike sole proprietorships, the registration of Spółka z o.o., as we have already written above, is only done online via the state portal. The process is very similar to when you need to notify the KRS about the conversion of a sole proprietorship. You need to submit an application and attach some documents to it:
list of the company's shareholders with their contact details
written consent of the board members to their appointment
proof of full capital contributions
receipts for payment of the application fee (PLN 500) and the announcement of the registration of the application (PLN 100)
IMPORTANT: such application shall be filed no later than 6 months after the issuance of the auditor's report.
→ Removing yourself from the CEIDG register. As you are no longer a sole proprietor, you need to remove yourself as an entrepreneur from the register. We have already discussed this in our article about the liquidation of a sole proprietorship in Poland. You have only one week for the whole process.
Summary
Summarizing the results of this article, we can conclude that transforming a sole proprietorship (JDG) into an LLC (Spółka z o.o.) is not an easy task. However, it is a good way to scale up your business, optimize taxation and get rid of full liability with all your assets. This procedure is neither quick nor cheap, but it is worth it. Our team of professional aksis agents offers comprehensive assistance in reorganizing your sole proprietorship into a limited company. Contact aksis to grow your business!
