Companies vs. partnerships in Poland

An acquisition of a ready-made company/partnership involves a number of important decisions. Firstly, you will have to decide which entity to choose by carefully analysing the available legal forms of conducting business activity.

The most popular legal form of running a business is a commercial company or partnership whose establishment, running and dissolution are governed by the provisions of the Commercial Companies Code (CCC). The Code distinguishes two basic types of commercial entities: partnerships and companies.

Description of a partnership and a company

Commercial entities can be divided into partnerships and companies. All of them allow to carry on business activity and pursue the same objectives by contributing appropriate capital and investing personal involvement. However, there are substantial differences between them which may determine the choice of a given form of activity.

Partnership – types and essential characteristics

A partnership is an entity without legal personality which conducts an enterprise under its own business name which may, in its own name, acquire rights, including ownership of immovable property and other rights in rem, incur obligations, sue and be sued, in other words an entity having a legal capacity.

A partnership is an unincorporated legal person participating in legal turnover.

The Commercial Companies Code differentiates the following types of partnerships:

• registered partnership
• professional partnership
• limited partnership
• limited joint-stock partnership

Essential characteristics of partnerships

• intended for smaller economic ventures (except for a limited joint-stock partnership)
• high degree of liability of partners for the obligations of partnership
• lack of minimum share capital, except for a limited joint-stock partnership
• right to equal participation in profits, except for a limited partnership and a limited joint-stock partnership
• no obligation to appoint the governing bodies, except for a limited partnership and a limited joint-stock partnership
• partners’ right to fully represent the partnership (except for a limited partner in a limited partnership and shareholders is a limited joint-stock partnership who may only act in the capacity of an attorney-in-fact)
• taxation on the level of shareholders who, depending on the legal personality, account for personal income tax (PIT) or corporate income tax (CIT)
• basic accounting in the form of a revenue and expense ledger (except for a limited partnership and a limited joint-stock partnership)
• a partnership may be established by at least two natural or legal persons
• possibility to convert the partnership into a company or another partnership
• lack of possibility to change the partners of the partnership (except for a limited joint-stock partnership)
• lack of possibility to acquire funds through issue of bonds or shares, with the exception of a limited joint-stock partnership (in the remaining partnerships the capital may be acquired by drawing a loan)

More in Table – Comparison of partnerships to companies

Companies – types and essential characteristics

A company is an entity having legal personality or a legal entity capable to perform acts in law in its own name, having assets in the form of a share capital which constitutes a separate property from personal property of shareholders, which is run and represented by an appropriate appointed body and having the specified objects.

The Commercial Companies Code differentiates the following types of companies:

• limited liability company
• simple joint-stock company (from 1 March 2020)
• joint-stock company

Companies, in particular limited liability companies, following civil law companies and sole proprietorship, are among the most popular forms of conducting a business activity in Poland. According to the Polish Central Statistical Office (GUS) in the second quarter of 2019, a total of 9 279 limited liability companies were registered, while in the same period only 32 limited joint-stock companies and 19 professional partnerships were registered in the National Court Register.

Essential characteristics of companies

• intended for more sizeable economic ventures (except for a limited liability company which is equally suitable for small-scale ventures)
• a company may be established by at least one natural or legal person
• a company is liable for its obligations, without any limits, with all its assets, the shareholders are liable only up to the value of their shares or contributions
• certain specified minimum share capital of a company – in the case of a simple joint-stock company it’s only PLN 1.
• the right to participate in profits distributed among the shareholders in proportion to the shares held by the shareholders
• the need to appoint the governing bodies provided for by the provisions of the CCC
• The management board, or other relevant governing body specified in the CCC, handles the company’s affairs and represents it.
• taxation on the level of the company i.e. taxation of companies with corporate income tax (CIT)
• full accountancy, including keeping accounting records and drawing up financial statements
• possibility to issue shares or bonds to acquire funds and, thereby, the possibility to be listed on a stock exchange (relates to a joint-stock company only)
• the supervision over the company may be exercised by the supervisory board (it is obligatory for a joint-stock company)
• possibility to change the shareholders structure by expulsion of a shareholder pursuant to provisions of the CCC
• possibility to increase the share capital of a company pursuant to the procedure set out in the CCC
• possibility to convert in another type of company or to split the company into two or more companies or to merge with another company or partnership

Simple joint-stock company – for whom?

A simple joint-stock company will come to existence from 2021. It combines the features of a limited liability company and a joint-stock company, thereby, constituting a perfect solution for i.a. start-ups and innovation and technology firms. The new form of business activity will be open to all natural and legal persons, except for a single-shareholder limited liability company.

A novelty in a simple joint-stock company is the possibility to use electronic data and forms of communication to establish the company, keep the register of shareholders or adopt resolutions. Governing bodies are simplified (1-person management board), the time of potential liquidation of the company is shorter and dissolution of the company is possible through taking over the obligations and assets by one shareholder.

Further, instead of the management board, the board of directors may be appointed which not only handles the company’s affairs and represents it, but also exercises control over the company, that is to say performs the duties of the supervisory board.

Essential features of a simple joint-stock company

• At least one natural or legal person may establish a simple joint-stock company, except for a single-shareholder limited liability company
• The shareholders are not liable for the company’s obligations.
• Shares are subscribed for in return for a contribution in cash or in kind.
• Minimum share capital of 1 PLN
• The amount of share capital is not specified in the company deed and may be changed without the need to amend the company deed
• The company deed of a simple joint-stock company may be made electronically using template articles (it is necessary to fill in an online form available in the ICT system and sign it with a qualified electronic signature or a signature certified with trusted profile or a personal signature)
• The shareholder’s contribution does not have to be made at company’s registration in the KRS and may be made within three years following the company’s registration.
• Shares do not have a form of a document and are transferable
• Shares are indivisible and without nominal value
• One share corresponds to one vote.
• No status of a public company.
• Shares must not be allowed or introduced to an organized trade within the meaning of regulations on trading in financial instruments
• The governing bodies are: management board or board of directors or both these bodies concurrently (the appointment of the supervisory board is optional if the management board has been appointed)
• A shareholder has the right to participate in profits and the right to payment from the share capital
• Register of shareholders is kept in electronic form which can be in the form of a dispersed and decentralized database
• Management board or the board of directors handles the company’s affairs and represents it, additionally the board of directors exercises the supervision over the company
• Members of the management board or the board of directors are jointly and severally liable for obligations of the company, if the enforcement against the company proved ineffective.