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Polish Sole Proprietorship

Polish Sole Proprietorship

The Polish Sole Proprietorship is a simple form of business entity. Individuals who choose to set up a sole proprietorship usually run their own business in their own name and usually run a small business.

The sole trader or individual who runs a business on his own has a number of advantages when choosing this business form, however, there are a number of issues to take into consideration, the most important being the level of liability for the founder of the business.

This type of business can be established by an individual (natural person) or entrepreneur in Poland who has a temporary residence permit in Poland. Our Polish lawyers can help you open a sole proprietorship in Poland.

What are the advantages of a sole proprietorship in Poland?

There is no minimum share capital that needs to be provided when setting up a sole proprietorship in Poland. The entrepreneur (sole proprietor) may begin his or her business activities after submitting an application to the Polish Business Activity Central Register and Information Record. Our agents who specialize in company formation in Poland can help you file the application and obtain all of the necessary documents. 

The application for a Polish sole proprietorship must include certain information about the individual: the name of the business, the address and the field of activity. Individuals must also register for VAT in Poland. However, in certain cases in which the yearly incomes do not exceed a specific value, sole proprietors don’t necessarily need a VAT number. The name of the sole proprietorship includes the name and the surname of the individual and must be different from other business names.

In summary, the main steps for opening a Polish sole proprietorship include the following:

  • – decide on the business activity: sole traders are generally professionals in different business fields who choose to start their own business activity; consultants, accountants, translators, programmers and other professionals can provide services to clients through a sole trader.
  • – prepare the registration documents: the sole trader has lower requirements for formation and no minimum share capital, however, the founder still needs to provide copies of personal identification documents, the filled in registration form and others.
  • – register the sole trader: the business is to be entered into the Central Register of Economic Activity; one of our agents can help you with this registration with the Minister of Economy.
  • – consider taxation: the trader will also require a tax identification number and in some cases VAT registration is needed.
  • – hire an accountant: this is an optional step, however, hiring an accountant can help sole traders in Poland manage their accounting and reporting requirements.

An accountant in Poland from our team can answer any questions about the accounting principles for the sole trader. While it is true that this business form is subject to lighter requirements and working with an accountant represents a personal choice for the sole trader, it is advisable to seek guidance when needed in order to ensure full compliance with the tax laws in force.

Some types of activities are regulated in Poland and the entrepreneur will need to obtain authorizations or even permits or licenses. For example, for an individual medical practice, a physician will need to register with a local medical council. An individual who wishes to organize tourist events will need to register with the adequate Voivodship. Other types of individual activities that can be performed under a sole trader may also need licensing. One of our agents can give you more information according to the chosen business field.

The registration of a sole trader is a simple procedure and, depending on the town in which the business is incorporated, the fees for registration will vary or will not be applicable at all for this business form. A location for the business will also have to be declared upon incorporation. In some cases, the sole proprietor can use his home address, however, one of our agents can give you more information on this matter. This business is incorporated and run by a single owner and it does not have legal capacity. The owner takes all of the business decisions. Below, our team of Polish company formation agents describes the main issues to take into consideration about managing the sole trader and details the liability considerations, an important issue to be aware of when starting this type of business.

How is a sole proprietorship managed?

The sole proprietor may grant power of attorneys to third persons, however, he or she remains the only legal person allowed to manage the sole proprietorship. He or she is fully liable for debts and the liability is unlimited. A sole proprietor can hire employees in Poland, however, the individual must hand all the accounting issues and prepare the annual financial statements.

Individuals operating a sole proprietorship in Poland must pay personal income tax. There are two taxation options for sole proprietorship in Poland:

– a progressive tax rate: 18% if the annual income is under 85,000 PLN and 32% if the annual income exceeds that amount;

– a flat tax rate of 19%.

The Polish sole proprietorship has certain advantages including low costs for opening and running the business and the easiness with which it can be established or dissolved. Nevertheless, despite the attractiveness of the low incorporation costs and the fact that the management is not complicated, investors should always consider the fact that their liability for the debts and obligations of the business is unlimited. In this sense, the sole trader is the riskiest business form that can be incorporated in Poland. Similar levels of unlimited liability can also be found in the case of the general partnership or in the limited partnership for the individual who acts as the general partner (the one entrusted with the management of the partnership who is also liable for the business activities). Understanding the level of liability is an important step when deciding to open a company in Poland

Our agents who specialize in company formation in Poland can help you open a sole proprietorship in Poland and offer you complete company management and tax planning services. 

We also provide incorporation services for other types of legal entities and can advise entrepreneurs on choosing a suitable business form. Business owners who already run their activities through a sole trader can reach out to us for more information on how they can change the business form, if they wish to renounce the full liability of the sole proprietorship and open a private limited liability instead. We can offer complete information on the options available in this case.

Contact us for company formation services in Warsaw and other Polish cities.