Apart from the basic form of running a business, which is a sole proprietorship, foreigners can choose to start a business in the form of a partnership or company. Each of these groups includes different types of corporate forms, and their activities depend on various factors.
What are the types of partnerships and companies? Are there any restrictions on their activities?
Partnerships are divided into (i) general partnership (spółka jawna), (ii) professional partnership (spółka partnerska), (iii) limited partnership (spółka komandytowa) and (iv) joint-stock limited partnership (spółka komandytowo-akcyjna). Companies include (i) limited-liability company (spółka z ograniczoną odpowiedzialnością), (ii) joint-stock company (spółka akcyjna) and (iii) simple stock company (prosta spółka akcyjna). The simple stock company will be introduced in Poland in 2021.
As a rule, there are no restrictions on who can operate through a given corporate form. The exception is the professional partnership, which may be established and run by professionals recognised in Polish law (such as lawyers or doctors).
What are the main similarities between partnerships and companies?
Companies and partnerships may acquire rights, including real estate, on their own behalf, incur liabilities, sue and be sued.
In companies and partnerships the composition of the shareholders/partners may change at any time, but may require the consent of the remaining shareholders/partners.
To establish a partnership or company, it is necessary first to draw up articles of association in the form of a notarial deed (with the exception of a general partnership, where as a rule simple written form is sufficient), which should include at least the name of the partnership or company, its registered office, business activity, term, contributions or share capital, details of the partners or shareholders, and the amount of contributions. The notarial deed can be executed only before a Polish notary. Then the partnership or company must be entered in the National Court Register (KRS).
Subsequent amendments to the articles of association are based on similar assumptions and limitations, including the requirement of adoption of a resolution by the partners of the partnership or shareholders of the company.
In some partnerships, governing bodies may also be established, e.g. a management board in a professional partnership or a supervisory board in a joint-stock limited partnership.
Polish law also provides for limitations of the liability of shareholders in companies. In partnerships, some limitation may be provided only in limited partnerships and joint-stock limited partnerships, but not for general partners.
What are the main differences between partnerships and companies?
Partnerships may operate from the time of entry in the commercial register, while companies may conduct business from the time of signing of the articles of association. Until registration, such a company acts as a company in organisation, but may among other things acquire rights and incur obligations.
All partnerships must include in their name at least one surname or company name of a partner plus the type of partnership, while in companies there are no obligatory elements in a company name, apart from specifying the type of company. However, in the interim between establishment and entry in the commercial register, a limited-liability company is “in organisation” (w organizacji) and must append that phrase to its name.
All partnerships can be established by two or more partners, while companies may be established by one or more shareholders. However, neither a limited-liability company nor a joint-stock company may be established solely by a limited-liability company with only one shareholder.
Partnerships are based on contributions from partners, and there is no minimum value for contributions, while companies are mainly based on share capital. The required minimum is PLN 5,000 (about EUR 1,121, USD 1,360 or GBP 1,020) for a limited-liability company and PLN 100,000 (about EUR 22,416, USD 21,181 or GBP 20,386) for a joint-stock company. A joint-stock limited partnership also has a minimum share capital, in the amount of PLN 50,000 (about EUR 11,209, USD 13,588 or GBP 10,200). In partnerships and companies it is possible to make the contributions in cash and in kind.
All matters of partnerships are conducted by their general partners, while all matters of companies are conducted by their governing bodies (typically the management board). A number of differences also occur in how partnerships and companies settle taxes.
What about liability for the obligations of a partnership or company?
Partners in partnerships are liable jointly and with the company, with all their assets, for the partnership’s obligations (joint liability). First creditors benefit from the partnership’s assets, then partners. In some partnerships, this principle is subject to certain modifications (e.g. in a limited partnership and joint-stock limited partnership).
In companies, the management board may be responsible for the company’s obligations if execution from the company’s assets is insufficient. Shareholders of companies are generally at risk only up to the value of contributions made by them to cover the company’s share capital.
The management board and the supervisory board may also be liable towards the company in the case of injury caused by actions contrary to the law or the articles of association of the company, unless the members are not at fault.
How to register partnerships and companies?
Both partnerships and companies are entered in the National Court Register (KRS). The application for registration of a company or partnership is submitted on official court forms, accompanied by proof of payment of registration fees of PLN 600 (about EUR 134, USD 163 or GBP 122) and corporate documents such as articles of association and approvals for appointment of the company’s governing bodies. Documents in partnerships are signed by the partners and in companies by the management board.
Registration is made within about four to six weeks from filing of the application, but this may be extended due to the court’s workload or the circumstances, such as the current COVID-19 pandemic.
If the partners of a partnership or the shareholders and management board members of a company have a “trusted profile” in the Polish electronic “ePUAP” system, or a qualified electronic signature recognisable by the Polish electronic “S24” corporate platform, it is possible to establish the partnership or company using the S24 platform. This process is much quicker and in practice takes a few business days to register the partnership/company, but the initial articles of association may require further amendment after registration.
Which types of corporate forms generate less costs?
Aside from the registration fees, when starting a business in a given corporate form, the costs of powers of attorney, notarial fees (depending, for example, on the share capital) and taxes should also be taken into account. Each partnership/company must have its own bank account (in a bank located in Poland for VAT returns), maintain accounting books, and have a legally obtained registered address (e.g. it must enter into an agreement to rent space for conducting its business).
Because the purpose of companies is to conduct larger business ventures, their fixed costs and public-law liabilities are in practice much higher than those of partnerships.
Łukasz Śliwiński, attorney-at-law, Daria Goliszewska, M&A and Corporate practice, Wardyński & Partners