Polish law provides for seven commercial companies — four personal (general, professional, limited and limited joint-stock partnerships) and three capital (limited liability, simple joint-stock and joint-stock) — and the civil-law partnership (spółka cywilna), which is a Civil Code contract rather than a separate legal entity. The choice between them comes down to three questions: who is liable for the firm's debts, how much capital must be contributed and how profit is taxed. Below we compare all forms by these criteria.
Comparison of the forms in a single table
| Form | Minimum capital | Liability for obligations | Income tax |
|---|---|---|---|
| Civil-law partnership (spółka cywilna) | none | partners jointly and severally, with their entire assets | PIT at each partner |
| General partnership (spółka jawna) | none | each partner without limit, jointly and severally, but only when enforcement against the partnership proves ineffective | PIT at the partners; CIT if the partners are not exclusively natural persons and the partnership fails to file the required information on taxpayers |
| Professional partnership (spółka partnerska) | none | without limit, excluding the effects of errors committed by other partners when practising the profession | PIT at the partners |
| Limited partnership (spółka komandytowa) | none | general partner without limit, limited partner up to the limited-partnership sum | CIT |
| Limited joint-stock partnership | PLN 50,000 | general partner without limit, shareholder has no liability | CIT |
| Sp. z o.o. (limited liability company) | PLN 5,000 (share at least PLN 50) | shareholders have no liability; management-board members may be liable where enforcement is ineffective | CIT |
| Simple joint-stock company (PSA) | PLN 1 | shareholders have no liability | CIT |
| Joint-stock company (S.A.) | PLN 100,000 | shareholders have no liability | CIT |
The CIT rate is 19%, and 9% for small taxpayers and firms in their first year of activity (revenue limit: the equivalent of EUR 2 million per year). When a company subject to CIT pays profit to shareholders, 19% flat-rate tax is additionally withheld on the dividend.
Personal partnerships: simplicity in exchange for asset risk
Civil-law partnership
It is a contract in which the partners undertake to pursue a common economic goal. The partnership is not an entrepreneur — the partners are, each with their own entry in CEIDG. They are jointly and severally liable for the partnership's obligations, without order (the creditor can immediately demand payment from any of them). The form works for small, joint ventures of two or three people, e.g. a workshop or a surgery.
General partnership
Has its own business name and is entered in KRS. Each partner is liable with their entire assets, but subsidiarily: the creditor must first try enforcement against the partnership's assets. For partners who are natural persons, the profit is taxed only once, in their PIT.
Professional partnership
Reserved for persons practising the liberal professions listed in the Code of Commercial Companies, including advocates, legal counsels, doctors, architects, tax advisers and accountants. Its main advantage is protection from liability for professional errors of other partners and their subordinate staff.
Limited partnership and limited joint-stock partnership
Combine a partner with unlimited liability (the general partner) with partners of limited liability. Both are CIT taxpayers, so profit paid to the partners is sometimes taxed twice, as in capital companies. A detailed comparison of the limited partnership with the sp. z o.o. is given in the article Limited partnership vs sp. z o.o..
Capital companies: separating private assets from firm assets
The sp. z o.o. is the most frequently chosen form for firms wanting to limit risk. The shareholders are not liable for its debts, and the share capital is at least PLN 5,000. One must, however, remember the liability of management-board members where enforcement against the company proves ineffective and a bankruptcy application was not filed in time. The full map of this form's burdens is described in the text What taxes a sp. z o.o. pays.
The simple joint-stock company (PSA) requires only symbolic share capital (from PLN 1), and shareholders may contribute, as a contribution, also work or services. It is a form designed with young technology firms in mind, in which the founders bring mainly knowledge, and investors — money.
The joint-stock company with a capital of at least PLN 100,000 and complex corporate bodies is intended for larger ventures, including those planning a stock exchange listing.
How to choose the form — three typical situations
- Two friends open a café with a small budget and without hiring many people. A civil-law or general partnership will give the simplest accounting and single taxation of profit, but the risk falls on the partners' private assets.
- A programming agency with foreign contracts and the risk of contractual penalties. A sp. z o.o. cuts the shareholders off from the firm's debts, and with revenue up to the equivalent of EUR 2 million enjoys 9% CIT. The total cost of tax on profit and dividend must be calculated.
- A firm of three legal counsels. A professional partnership preserves single taxation while protecting each partner from the effects of the others' professional errors.
Things to remember before registration
- The articles of a general partnership are concluded in writing on pain of nullity, or using a template in the IT system; the civil-law partnership contract must be confirmed in writing.
- Commercial companies are entered in KRS. A general partnership and professional partnership come into being only on entry, and persons acting on their behalf earlier are jointly and severally liable for the obligations.
- A transition from a sole proprietorship to a company is possible by transformation — it is worth planning in advance, because it affects contracts, VAT and ZUS.
- The legal form determines accounting: capital companies, limited partnerships and limited joint-stock partnerships always keep books of account, while general partnerships of natural persons, professional and civil-law partnerships — only after the statutory revenue threshold is exceeded.
How Good Balance can help
We advise on the choice of legal form in a legal and tax consultation, prepare the articles of association and carry out the full company registration in KRS, together with filings to the tax office and ZUS. After registration we can take over the accounting of the new company.