This booklet presents you information on what you need to know to start up a business.

Limited partnership: a partnership based on faith (Spółka komandytowa)Limited partnership (LP): it is a type of business entity combining features of a general partnership and some features of an entity with established charter capital.

There are 3 basic legislative acts which regulate economic activity of business entities:

1. The Code of Commercial Companies (has been passed 15.09.2000);
2. The Civil Code (has been passed 23.04.1964);
3. The Act on Freedom of Economic Activity (has been passed 02.07.2004);

Limited partnership unlike Limited Liability Company (LLC) and Joint Stock Company (JSC) is not legal entity. But such type of company in spite of this is rightful enterprise which has rights to receive bank financing, real estate purchasing, to be a participant of judicial process in character of defendant as well as claimant.

Limited partnership alike other companies (including LLC) has obligation to submit an annual reports on result of its activity. There is necessity of having minimum 2 participants for formation of such type of company.

Limited partnership participants are divided in two groups:
* company’s representatives (general partners / unlimited partners)
* depositors (limited partners)

Basic difference between general partners and limited partners is that general partner (minimum 1) do business in the name of partnership and is liable for company's debts to all his property whereas limited partners are liable in the amount of so-called "deposited sum". Note please, that deposited sum is not always equal to a really brought by limited partner's contribution. Deposited sum is an abstract amount that limits shareholder's liability. Basic privilege of limited partnership is that profit distribution is not proportional to size of contribution. In most cases an LLC is registered as a liable partner - with a limited shareholder's responsibility.

General partner is a company's representative who is authorized to sign on behalf of a company, and limited partner usually isn't authorized to sign on behalf of a company or be a company's representative. If partners will to make limited partner an authorized representative they must make a Power of Attorney for such limited partner. Also limited partner can be an authorized representative as a "proxy" added into a registry, in this case it doesn't have to use Power of Attorney while representing company's interests.

If all limited partnership's shareholders are private persons there is obligation to company name to consist of general's partner full name. If there is full name of depositor in the company name so he is automatically become a liable for company debts partner. In a case when liable shareholder general partner is an LLC the name of limited partnership takes the same name as LLC with "limited partnership" added element.

What profitably differ Limited Partnership from Limited Liability Company is that in this type of enterprise partners with different capital and different involvement in business are able to participate as well as with different liability level.

Also one of Limited Partnership advantages over other types of business in character of legal entity is that it gives an ability to avoid company's profit taxation. Only partnership's partners profit may be subject of taxation.

One more positive sign of LP is that partners who has their own business (non-agricultural type) and obtain profit this year in another business can make deduction in LP's losses emerged this year.Key differences between LLC and LP:

1. There is no minimal share capital for LP required whereas for LLC there is an amount of 5000 PLN of minimal share capital requirement.

2. Limited Partnership doesn't have legal entity status in accordance with Polish law unlike LLC.

3. LP doesn't pay Corporate Income Tax (CIT) because it is not legal entity.LLC pays CIT (19%) and in addition participants pay dividend tax (19%).Private persons who are LP partners submit a Private Income Tax (PIT) declaration. Profit of each LP participant has 19% tax rate. Legal entities who are LP partners submit CIT declaration.You must pay preliminary taxes in Poland into Polish Tax Agency account every month. Important thing is that taxpayer must remember to pay taxes on time because in case of violating paying terms there are huge penalties which are up to 75% of profit in Poland.

4. Liability: in LP one or some of general partners are fully liable for LP's debts to all his/their property (in case if the only liable partner is LLC the size of liability amount is limited by size of its share capital); in LLC participants don't have personal liability for enterprise's debts, liability is limited by charter capital.

5. Social Fund contributions for LLC shareholders in amount of (about) 300 euro per month are compulsory just if the has only 1 shareholder. You can avoid contributions if you will add the second shareholder into a company, even if he will be just nominal in contrast to LP, where each partner has to pay Social Fund contributions.

According to our calculations LP starts to pay off when the official company's annual profit is more than 12 500 euro for each shareholder because of obligatory Social Fund contribution. Thus we can conclude that Limited Partnership is an interesting form of business enterprise in Poland but not always suitable for beginners. This form of enterprise allows you to optimize tax costs and to attract in your enterprise people with various capital who don't wish to be fully liable and have a representative role in the company.