The Limited Liability Company (LLC) is one of the most popular types of business forms in Poland for both domestic and foreign investors. It features a number of benefits that attract entrepreneurs, such as limited liability, ease of incorporation, and the ability to acquire property in Poland. However, in order to fully understand where the popularity of this form lies, it is worth looking at the details of the limitation of liability of the owners, the requirements for the board of directors, as well as the benefits of doing business with foreign entities.
Limitation of liability in an LLC
The key feature of an LLC that makes it so attractive to entrepreneurs is the limitation of liability. In practice, this means that the owners of the company, i.e. its shareholders (or partners), are not liable for the company's obligations with their own assets. Their liability is limited to the amount of their contributions to the company. In comparison, in the case of a sole proprietorship, the entrepreneur is liable for the company's obligations with all his or her assets.
This means that in a situation where a limited liability company is unable to pay its debts, creditors can only pursue their claims from the assets of the company itself and not from the assets of the owners (unless they are faced with exceptional situations, such as acting to the detriment of the company, so-called fraud). This solution allows owners to minimise financial risk, which is particularly beneficial when operating in an unstable market environment or when making large investments.
Does the CEO of an LLC need a Work Permit?
The CEO of an LLC plays a managerial role, responsible for representing the company externally, managing its daily operations, and making key business decisions. However, the position of CEO is distinct from being an employee of the company.
- EU and EEA Nationals: A CEO who is a citizen of an EU or European Economic Area (EEA) country does not require a work permit to work in Poland. Citizens of these countries are free to take managerial positions in Polish companies without needing additional permission.
- Non-EU Nationals: If the CEO is from a non-EU country, a work permit is required. The process for obtaining a work permit involves additional formalities, but once granted, the foreigner can legally manage a Polish company.
LLC as an EU Entity and the ability to acquire Property in Poland
For foreign entrepreneurs wishing to conduct business in Poland, setting up an LLC is a highly advantageous option, particularly because an LLC is considered a legal entity under Polish law. If the company is established by an entity from an EU member state, it is fully entitled to acquire real estate in Poland on an equal footing with Polish entrepreneurs.
- Property Acquisition: Foreign entrepreneurs who set up an LLC in Poland have the same rights to acquire real estate as Polish investors. This includes the ability to buy land, buildings, or other properties. If the LLC is established in an EU country, there are no additional restrictions on purchasing property in Poland.
- Non-EU Entities: Non-EU companies may face certain restrictions, requiring them to obtain specific approval to acquire real estate. However, when the LLC is registered within the EU, property acquisition is significantly simplified.
Benefits for Foreign Entities operating in Poland as LLCs
Establishing an LLC in Poland provides numerous benefits for foreign entrepreneurs, making Poland an attractive market for investment and business operations. Here are the key advantages:
- Limited Financial Risk: As mentioned earlier, the limited liability feature allows foreign investors to minimize personal financial exposure in the event of business failure. Their responsibility is limited to the amount they have invested in the company.
- Easier Access to the EU Market: By establishing an LLC in Poland, foreign entrepreneurs gain access to the EU's single market, allowing them to conduct business across the entire Union without additional formalities and trade barriers.
- Tax Benefits: Poland offers various tax incentives for businesses, including the possibility of using the Estonian CIT scheme, which allows companies to defer tax payments until profits are distributed. Additionally, Poland has relatively low corporate tax rates compared to other EU countries, making it an attractive destination for foreign investment.
- Property Acquisition: Setting up an LLC in Poland also grants foreign entrepreneurs the ability to acquire real estate, which can be particularly beneficial for investments in commercial, office, or residential properties.
- Legal Stability and Transparency: Poland provides a stable and transparent legal environment, which increases the security of foreign investments. The legal framework for LLCs is clearly defined, making it easier to navigate business operations and minimize legal risks.
Starting an LLC in Poland – Step by Step
Step 1: Preparing the Company's Articles of Association
The basic document required to establish an LLC is the Articles of Association. This can be prepared in two ways:
- Online – using the S24 system. This option is faster and cheaper as it allows you to establish the company online by filling out a form in the system. The Articles of Association are then standardized, compliant with legal requirements, and do not require legal assistance.
- Through a notary – If you want the Articles of Association to be more tailored to your needs, you can create the document with the help of a notary. Although this option is more expensive and time-consuming, it offers more flexibility in setting the terms of the company's operation.
In the Articles of Association, you need to specify:
- the company's name,
- the business activity,
- the amount of share capital,
- rules for representation and profit distribution.
Step 2: Registering the Company in the National Court Register (KRS)
After preparing the Articles of Association, the next step is to register the company in the National Court Register (KRS). Registration can be done in two ways:
- Online – If the Articles were prepared through the S24 system, registration with KRS happens automatically after the document is signed electronically.
- In person at the court – For notarized Articles of Association, the entrepreneur submits an application for registration with the KRS, which is reviewed by the court, and the company is entered into the register.
Once registered, the LLC gains legal personality, and its details become public.
Step 3: Obtaining REGON and NIP Numbers
The next step is to obtain identification numbers that allow the company to operate:
- REGON – The statistical identification number assigned by the Central Statistical Office (GUS), which is required for business operations.
- NIP – The tax identification number required for tax purposes. This number can be obtained from the local tax office.
For LLCs, both the NIP and REGON numbers are usually assigned automatically during registration with the KRS, but it is a good idea to verify them after the registration process.
Step 4: Registering with ZUS (Social Insurance Institution)
Any company that employs staff must register with the Social Insurance Institution (ZUS). Even if the LLC initially has no employees, the owners or members of the management board may still be required to pay social security contributions (known as ZUS contributions).
To register, the appropriate forms (e.g., ZUS ZUA, ZUS ZZA) need to be submitted, and, if applicable, contributions must be paid.
Step 5: Opening a Company Bank Account
All LLCs are required to have a separate company bank account for depositing share capital and conducting business transactions. The company bank account also simplifies dealings with tax authorities and contractors.
The minimum share capital for an LLC is 5,000 PLN. Shares in the capital are divided among the shareholders according to the agreed terms.
Step 6: VAT Registration (Optional)
If your company expects to reach a certain threshold of turnover, you must register as a VAT payer. VAT registration is also required if you plan to do business with other companies that are VAT-registered or if you will be providing goods or services which are subject to VAT.
VAT registration is done at the tax office, and once registered, you will be required to file regular VAT returns.
Step 7: Keeping Accounting Records
Every LLC must keep accounting records. This can be done in two ways:
- Independently – If you have experience in accounting, you can manage the records yourself or hire an employee responsible for this.
- Through an accounting firm – Most entrepreneurs choose to outsource this task to professional accounting firms, which will handle the financial accounting, prepare tax returns, and provide advice.
Conclusion
A Limited Liability Company in Poland is an excellent option for foreign entrepreneurs who wish to limit their financial risk while gaining access to the Polish and EU markets. The ability to acquire property, together with the limited liability structure, provides significant advantages to investors. Furthermore, the favourable tax conditions and the ease of doing business in Poland, combined with the stability of the legal environment, make the LLC an appealing choice for those looking to invest and operate in the country. Whether the intention is to expand into the EU or acquire real estate, an LLC offers substantial benefits for foreign entities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
