Poland Company Formation - Comparing LLC vs. Joint Stock Company
In the realm of business expansion, Poland stands out as a promising destination for entrepreneurs seeking to establish their presence in Europe. The process of Poland company formation involves critical legal considerations, and the most common choice between a Limited Liability Company (LLC) and a Joint Stock Company (JSC) significantly impacts the structure, formalities and operation of the business. Let's delve into the intricacies of opening a company in Poland, exploring the key differences between the popular choices of LLC and JSC.
Opening Company in Poland - A Strategic Move. Why Poland?
Poland has emerged as a thriving business hub within Europe, offering a strategic location, a robust economy, and a business-friendly environment. For those looking to open a company in Poland, the decision hinges on selecting the most suitable corporate structure, considering factors such as liability, capital requirements, and governance.
Key Considerations for Poland Company Formation
Limited Liability Company (LLC): Tailored for Direct Oversight
The LLC, known as "spółka z ograniczoną odpowiedzialnością" (sp. z o.o.), is preferred by those seeking flexibility and simplicity in Poland company formation process. Typically established with a limited number of shareholders, a Limited Liability Company is suitable for various business scales. It allows individuals to retain direct supervision over the company's affairs, making it a recommended choice for hands-on entrepreneurs.
Setup Process: The establishment of an LLC involves drafting the Articles of Association and signing a notarial deed, requiring the presence of all partners.
Capital Requirements: A minimum share capital of PLN 5,000 is mandatory, and contributions can be made in cash or in-kind.
Liability: Members' liability is limited to their contributions, offering personal asset protection.
Joint Stock Company (JSC): Suited for Substantial Capital
On the other hand, a Joint Stock Company, known as "spółka akcyjna" (S.A.), caters to individuals with more substantial capital. JSCs, with the potential for shares to be publicly traded, are suitable for larger enterprises.
Setup Process: Establishing a Poland Joint Stock Company involves a more intricate process, including the issuance of shares and a higher degree of formalities.
Capital Requirements: A minimum share capital of PLN 100,000 is required, with shares traded on the stock exchange for public JSCs.
Liability: Shareholders are generally not personally liable for the company's obligations.
Simplified Joint Stock Company (S-JSC)
In contrast to a joint-stock company in Poland, where the minimum share capital is 100,000 PLN, in a Simplified Joint Stocks Company, there is nominal share capital, which can be covered by a symbolic złoty. Contributions to a simplified joint-stock company can only consist of property rights, excluding inalienable rights and the provision of labor and services.
Companies in Organization and Target Status
Both LLCs and JSCs can be established by one or more individuals. However, neither of these entities can be formed solely by a Limited Libility Company with a sole shareholder (art. 151 § 1-2 and art. 301 § 1 Commercial Companies Code).
At the point of formation, an LLC or JSC becomes an organization, capable of acquiring rights, including property and other real rights, in its own name.
Organizational and Target Status: Transition and Legal Personality
Upon entry into the National Court Register (KRS), both LLCs and JSCs acquire legal personality. This marks the transition from an organization to the entity's target status.
Corporate Bodies of Polish Companies: Structure and Functions
In an LLC, the mandatory bodies include the management board and the general meeting of partners. The management board handles the company's affairs and represents it, while partners make decisions on crucial matters. Notably, partners are not personally liable for the company's obligations, excluding those serving on the management board (art. 299 Commercial Companies Code).
While a supervisory board is generally optional, companies with a share capital exceeding PLN 500,000 and more than 25 partners must establish one. Alternatively, a supervisory board or audit committee may function alongside or instead of the supervisory board. Importantly, in an LLC, partners themselves can fulfill control functions (art. 212 Commercial Companies Code).
Conversely, a Joint Stock Company in Poland is structurally more complex, with three mandatory bodies including: the general meeting, which gathers all shareholders to decide on the company's developmental directions; the management board, whose role is to represent and manage the company; and the supervisory board, serving a supervisory function.
Similarly, in an S-JSC, the general meeting is also mandatory. The functioning of this entity is less formalized compared to a traditional JSC. In a JSC, resolutions of the general meeting must be recorded in a protocol prepared by a notary. However, in an S-JSC, resolutions can be made either during the general meeting, outside of the general meeting in writing, or by utilizing electronic means of communication.
In S-JSC there’s an option to replace the traditional management board and supervisory board with a single entity – the board of directors. The board of directors oversees the company's affairs, represents it, and exercises supervision over its operations. The establishment of a supervisory board in an S-JSC is optional.
Taxation and Accounting Obligations of Poland Registered Companies
Both LLCs and JSCs, from the organizational phase through registration in the National Court Register (KRS), are subject to corporate income tax. Additionally, they must adhere to the accounting regulations outlined in the Accounting Act. These companies are required to maintain full accounting records, reflecting their financial activities.
Step-by-Step Company Setup Process of Poland Company Formation
a. Define Business Objectives:
- Clearly outline your business goals, products or services, and target market.
b. Choose a Company Name:
- Ensure the selected name complies with Polish regulations and is unique.
c.Select Legal Form:
- Decide whether an LLC, S-JSC or JSC aligns with your business vision, considering factors like liability and capital.
d. Draft Articles of Association:
- Detail the company's internal regulations, specifying the rights and obligations of shareholders or members and sign it depending on the requirements either in a notary deed form or electronic.
e. Register with Authorities:
- Submit required documents to the National Court Register (NCR) for official registration.
Cost of Opening a Company in Poland
The cost of opening a company in Poland varies based on factors such as legal fees, notarial services, and share capital. Generally, the cost for establishing an LLC is lower compared to a JSC due to the latter's more complex structure. Acquiring a ready-made company generally involves higher costs but can save time while minimizing risks.
In conclusion, the choice between a Limited Liability Company, Simplified Joint Stock Company and a Joint Stock Company for Poland company formation depends on the scale of your business, capital requirements, and long-term objectives. Both structures offer unique advantages, and a thorough understanding of the legal implications is crucial for informed decision-making.
