Poland Company Formation - Partnerships
When planning to establish a partnership, it is worthwhile to familiarize oneself with detailed information regarding the various types of partnerships in order to choose the one that will be most suitable for our business. Much depends here on the partners, the extent of their liability for the partnership's obligations, the contributions made, and the method of dividing future profits. In Poland, there are various types of partnerships. What are partnerships and what sets them apart?
Types of partnerships in Poland
The Commercial Companies Code distinguishes between two types of companies in Poland – partnerships and companies with share capital. Partnerships are otherwise known as imperfect legal persons or incomplete legal persons. Partnerships include:
- general partnership,
- limited (professional) partnership,
- limited liability partnership,
- and limited joint-stock partnership.
General Partnership
The general partnership is a fundamental type of personal partnership. Partners in such a partnership can be both natural persons, legal entities, and entities without legal personality, to which a separate law grants legal capacity.
All partners who have made contributions have the right to participate in the profits of the general partnership, as well as to manage the affairs of the partnership and represent it.
Partners also bear joint and several liability for the obligations of this company type. If enforcement against the assets of the partnership proves ineffective, it will be carried out against the assets of the partner.
Limited (Professional) Partnership
This entity type can only be established by specific individuals belonging to the group of so-called liberal professions, e.g., lawyers. A limited partnership differs from a general partnership in that partners are not liable for the partnership's obligations arising from the professional activities of other partners and their employees, unless otherwise provided in the partnership agreement. Each partner may independently represent the partnership.
It is also possible to appoint a management board to manage this company.
Limited Liability Partnership
The limited liability partnership distinguishes itself from other personal partnerships in that it conducts business under its own name. Typically the partnership's name must include the name of one or more partners (general partners) or the name of a legal entity. The last name of the limited partner should not appear in the partnership's name, otherwise, the limited partner will be liable for the partnership's obligations on the same terms as the general partner.
The limited partnership agreement must be concluded in the form of a notarial deed. To establish a limited partnership, at least one general partner is required - a partner who will be liable without limitation for the partnership's obligations, and at least one limited partner, whose liability is limited to the agreed amount of the contribution.
As a rule, the limited liability partnership is represented by the general partners, and the limited partner may represent it only on the basis of a power of attorney granted to them, unless otherwise provided in the partnership agreement.
Limited Joint Stock Partnership
A limited partnership with shares is the only company included in the list with share capital, which can be increased by issuing shares. Despite the reduction of capital, the general partners retain control over the partnership.
A characteristic feature of a limited partnership is also that at least one of its partners must be a shareholder. However, the shareholder is not liable for the partnership's obligations to creditors. The general partner will be liable with their entire assets. It is worth noting that the name of the shareholder cannot appear in the name of the limited partnership with shares, otherwise, they will be liable like the general partner.
Both the general partner and the shareholder, however, participate proportionally in the profits of the partnership, depending on the contribution made, unless otherwise provided in the partnership agreement.
With regard to the share capital, the provisions on a joint-stock company will apply. When creating the bodies of a limited partnership with shares, the company shareholders should remember that if the number of the partnership's shareholders exceeds 25 persons, a Supervisory Board will be mandatory.
This company type has lost its significant tax and transparency benefits and currently is a payer of a Corporate Income Tax alone with the Limited Liability Partnership.
Partnerships - Division of business entities according to legal form
Characteristics of partnerships
All partnerships are subject to registration in the National Court Register (KRS). Upon registration in the KRS, partnerships acquire legal personality. Only from the date of registration can start their legal operations.
Partnerships in Poland do not have legal personality, but the law grants them legal capacity. According to Article 8 of the Commercial Companies Code of September 15, 2000, a partnership may acquire rights in its own name, including ownership of real estate and other property rights, incur obligations, sue and be sued. It operates a business in Poland under its own name.
A partnership also has restructuring and bankruptcy capabilities. Despite the lack of legal personality, partnerships are separate legal entities with their own assets independent of the partners. Partnerships operate on the basis of mutual trust among the partners and their cooperation.
Characteristics of a partnership include the lack of legal personality, unlimited liability of partners for partnership obligations with their entire assets, lack of bodies (except for a professional partnership and a limited joint-stock partnership), and the management of partnership affairs and representation by partners.
A common feature of all partnerships is the requirement to include at least one partner's name in the partnership's name. A one-person partnership cannot be established because a one-person Poland company is only possible in the case of companies with share capital. Partnerships are also distinguished from other commercial companies by the way the partners cooperate.
How to establish a Poland company in a form of partnership?
Provisions regarding how to establish a partnership, how to dissolve it or transform it into another Poland company, as well as how to manage it and how it can operate, are regulated by the Commercial Companies Code.
The Code also contains provisions regulating the merger and transformation of companies involving partnerships. However, it is worth noting that the rules described for a general partnership also apply to other partnerships. The exception here is the limited joint-stock partnership, to which the provisions regulating a joint-stock company also apply.
Registration of a Poland company in a form of partnership
Some types of partnerships can be established online using the S24 System – a teleinformatics system enabling the electronic registration of business entities. However, this is only possible for simple partnerships, for which a standard partnership agreement template can be used, the provisions of which cannot be changed within the S24 System.
As for partnerships, a general partnership and limited partnership can be established online. After signing the partnership agreement, whether in a traditional way or online, the partnership must then be registered in the National Court Register. This can only be done online, through the S24 system or the Court Registers Portal.
Rules of partners' liability for partnership obligations
A characteristic feature of the mentioned company types is that its partners are jointly and severally liable for the partnership's obligations, jointly with the partnership. The liability is unlimited, and the partners are liable with all their assets.
However, the situation is different in the case of a limited partnership and a limited joint-stock partnership. In a limited partnership, limited partners have limited liability, up to the amount of the contribution and the amount contributed to the partnership, while general partners – i.e., partners representing the partnership – are liable for the partnership's obligations with all their assets, without limitations.
In a professional partnership, in some cases, the personal liability of the partner may be excluded. If a new partner replaces an existing partner, they are jointly liable with the existing partner for both the existing partner's obligations and the company's obligations, even if they arose before the new partner joined the partnership.
It may also happen that a shareholder or a limited partner is liable for the company's obligations if their name appears in the partnership's name.
FAQ
Who can represent a partnership?
The method of representing the partnership is what most distinguishes partnerships from companies with share capital. Unlike companies with share capital, partnerships do not have bodies such as Management Board or Supervisory Board. Only in a professional partnership is it possible to establish a Management Board, and in a limited joint-stock partnership, a Supervisory Board can be established; another body you will find in a limited joint-stock company is a General Meeting of Shareholders.
So who conducts the partnership's affairs and represents it externally? This is the right and obligation of all partners, and in a limited liability partnership, the general partners. The necessity to establish specific partnership bodies may also depend on the number of partners, e.g., if a limited joint-stock partnership has more than 25 shareholders, it must establish a Supervisory Board. The detailed method of representing the partnership is specified in the partnership agreement.
Can a partnership agreement be changed?
Changes to a partnership agreement are possible if all partners agree, unless the provisions of the partnership agreement regulate the matter differently. The agreement establishing the partnership defines, among other things, the principles of representation and management of the partnership, the contributions made by the partners, the principles of partners' liability, and many other important matters that need to be determined before the partnership starts operating.
It is also possible to change partners in a company unless specified otherwise in the partnership agreement. The absence of the appropriate provision in the partnership agreement, which introduces the possibility of transferring all rights and obligations to another person, precludes any changes to the personnel of the mentioned company. The written consent of the remaining partners is also required unless the partnership agreement provides otherwise.
The characteristic feature of all partnership types is the permanence of it’s partners. However, these principles do not apply to all partnerships, since the limited joint-stock partnership is regulated differently, with the provisions concerning the sale of shares in a joint-stock company being directly applicable, hence the company sale or partial rights transfer shall be conducted freely unless stated otherwise in the partnership agreement.
It should also be noted that in the case of a professional partnership, for a new partner to join, they must have specific professional qualifications possessed by the entering individual.