How to set up a company in Poland - top 3 initial considerations

It is not uncommon for our law firm to receive inquiries from foreign entities or businesspersons regarding setting up a company in Poland.

Awareness of the Polish legal environment and preparation for such a project vary, but even those with a general understanding of the available options and the process often seek at least confirmation that their knowledge in this sphere is accurate.

Below are the three crucial aspects to consider prior to establishing a company in Poland. Addressing these factors early on will help streamline subsequent steps in the process.

1. Choosing the right type of company to establish in Poland

Not everyone interested in setting up a company in Poland is aware of the various business structures available. Each structure caters to different needs and business goals and has distinct formation requirements. Identifying these company structures is the essential first step when considering setting up a business in Poland.

The following three legal forms are capital companies:

Limited Liability Company (spółka z ograniczoną odpowiedzialnością/sp. z. o.o.)

• Description: this is the most popular type of company in Poland; it is relatively flexible and not overly complex to manage, also the costs of running this type of company are relatively low, making it an attractive option for most business owners.
• Key Features: minimum (initial) share capital that is required amounts to PLN 5,000; the governing bodies of the company are: management board, meeting of shareholders, and not mandatory in most cases supervisory board or audit commission; as a rule shareholders’ liability is limited to their contributions, meaning their personal assets are protected from business debts; in general management board is not responsible for debts of the company as well.

Joint-Stock Company (spółka akcyjna/S.A.)

• Description: suitable especially for larger enterprises; however, conducting business in this form is more complex and generates higher costs in compare to a limited liability company (sp. z o.o.).
• Key Features: minimum (initial) share capital that is required amounts to PLN 100,000; the governing bodies of the company are: management board, general meeting (of stockholders), supervisory board; as a rule stockholders’ liability is limited to their contributions, meaning their personal assets are protected from business debts; in general management board is not responsible for debts of the company as well.

Simple Joint-Stock Company (prosta spółka akcyjna/P.S.A.)

• Description: designed to be a more flexible structure than a joint-stock company, it is a bridge between limited liability company and joint-stock company, primarily intended for startups/innovative and technology-driven businesses; its distinctive feature is low entry threshold in terms of initial capital and possibility to appoint board of directors instead of traditional management board.
• Key Features: minimum (initial) share capital that is required amounts to PLN 1,00; the governing bodies of the company are: management board or board of directors, general meeting (of stockholders), non-mandatory supervisory board; personal assets of stockholders as well as management board/board of directors are protected from business debts similarly to other capital companies.

Below are partnership companies available in Poland:

General Partnership (spółka jawna/sp. j.)

• Description: sometimes also called registered partnership, it is the most basic company structure available in Poland where the partners share responsibilities and profits, while maintaining a straightforward organizational framework.
• Key Features: there is no share capital; however, partners are required to contribute to the company (no specified minimum value of contributions) including contribution in the form of work for the partnership; the company does not have governing bodies and therefore the company's affairs and its representation is handled directly by the partners, who bear subsidiary liability for the company's obligations as it is not a capital company structure.

Limited Liability Partnership (spółka partnerska/sp.p.)

• Description: also known as professional partnership, it is a specific business structure intended for and available only to certain professionals, e.g. lawyers, architects, doctors; this company form allows the partners to collaborate while benefiting from a level of liability protection not available to general partnerships.
• Key Features: there is no share capital; however, partners are required to contribute to the company (no specified minimum value of contributions); managing the company's affairs and its representation is the responsibility of the partners, although it is possible to appoint management board; the partners bear subsidiary liability for the company's obligations as it is not a capital company structure, yet the liability can be additionally limited to sphere of actions of particular partner.

Limited Partnership (spółka komandytowa/sp.k.)

• Description: its distinctive feature is a mixed structure, where at least one partner (the general partner) has unlimited liability for company debts, while other partners (limited partners) have liability limited to a sum agreed between partners, although in both cases the liability is of a subsidiary character (typical for partnership companies).
• Key Features: there is no share capital; however, partners are required to contribute to the company (no specified minimum value of contributions); the company does not have governing bodies and therefore the company's affairs and its representation are handled by the the general partner, while managing company's affairs is shared with limited partners; partners bear specific subsidiary liability for the company's obligations as explained above.

Limited Joint-Stock Partnership (spółka komandytowo-akcyjna/S.K.A.)

• Description: it is a hybrid entity combining features of a limited partnership and a joint-stock company, which may be used in particular when outside investor is involved (stocks can be issued by the company), while the stockholders are not liable for business debts, but general partners responsible for representation of the company are.
• Key Features: minimum (initial) share capital that is required amounts to PLN 50,000; this structure combines features of both joint-stock and limited partnerships; general partners have unlimited liability, while stockholders do not bear responsibility for company debts; although affair's of the company are managed by the general partner, some matters are handled by the general meeting (of stockholders); also a supervisory board may be appointed in the company (as a rule it is not a mandatory body).

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Single-shareholder (stockholder) structure of capital companies - a feature essential for many foreign investors

Capital companies in Poland generally can be established by a single shareholder/stockholder, unlike partnership companies, which require at least two partners. This single-shareholder structure is particularly attractive to foreign investors looking to set up a subsidiary in Poland, as it allows them to fully own and manage their business without the need to find a partner for the enterprise.

However, it is important to note that not in all cases capital companies can be established with a single shareholder/stockholder.

A single-shareholder limited liability company cannot be the sole founder of another capital company.

Although interpretations vary, whether this restriction applies to both domestic and foreign single-shareholder companies, it is advisable for foreign investors to assume this restriction applies to foreign limited liability companies as well. This precaution helps avoid complications during the company registration process

Finally, it is crucial to differentiate between founding such a disallowed single-shareholder/stockholder company and transitioning to this structure. While one cannot initially establish a company in the aforementioned limited circumstanes, once established, converting a company to such a single-shareholder/stockholder structure is allowed. Local lawyer can help to plan and execute the transition.

Why a limited liability company (sp. z o.o.) is the go to option for foreign investors in Poland?

When considering the establishment of a company in Poland, the limited liability company (sp. z o.o.) appears as the most practical choice for foreign investors. This structure shields personal assets of the shareholder from business debts and offers a formal financial foundation, with a manageable minimum share capital. The clear separation between ownership and management simplifies operations and allows for flexible involvement of third parties in the management structure.

Compared to partnership companies, which involve higher personal risk and less structured management, the sp. z o.o. offers a balanced and attractive option for those new to the Polish market, supporting both business establishment and growth.

2. Understanding the company formation process in Poland

Creating a company in Poland requires two primary steps:

1. Signing the Founding Act

• The founding document/agreement of the company may take the form of articles of association, founding act or statute (also with different translations of particular kinds of documents being in use) depending on the company's structure. For convenience, it will be referred to as the "Founding Act."
• For most company types, particularly limited liability companies (sp. z o.o.), signing a written Founding Act alone is insufficient - a notarial deed is required.
• Alternatively, limited liability company (sp. z o.o.), simple joint-stock company (P.S.A.), general partnership (sp.j.) and limited partnership (sp.k.) can be established using a special online platform (S24). However, this option has its limitations:
  • it requires from the persons involved in company's formal structure a qualified electronic signature or a Polish trusted signature, as defined by applicable regulations,
  • documents available online are restricted to model templates, offering limited flexibility,
  • the platform operates exclusively in Polish.

2. Registering the company

• Capital companies: once the Founding Act is signed, the company exists in an "in organization" phase; it becomes a fully-fledged legal entity only upon registration in the commercial register (register of entrepreneurs of the National Court Register - KRS).
• Partnership companies: the company comes into existence upon its registration in the KRS.
• Supporting documents must be prepared and submitted along with the registration application. If the company is being established by a foreign entity, an excerpt from the commercial register of the foreign company will be needed to verify certain details, such as the authorized representatives. This excerpt may require legalization, in most cases in the form of an apostille, and must be translated by a sworn translator in Poland.
• Registration is conducted exclusively online and in Polish. As a rule the application must be signed with a qualified electronic signature or a Polish trusted signature by the authorized representative(s).

Engaging a local lawyer to facilitate the registration process is invaluable, as he can assist with the preparation of required documents and submit the registration form on behalf of the newly created company using a power of attorney.

When foreign entrepreneurs consider setting up a company in Poland, they often face uncertainties. Common issues include understanding the diverse company structures available, navigating the detailed formation process, and determining the necessity of traveling to Poland for completion. Many are not aware that the process of registration and functioning of an LLC in Poland differs from other countries. Additionally, navigating the Polish legal system, especially online procedures requiring local signatures, can be challenging without expert guidance. Proper legal advice is crucial to avoid pitfalls and ensure smooth company establishment. ~ Damian Sawicki, CEO, attorney at law

3. Evaluating the need for travel to Poland for business setup

When setting up a company in Poland, one of the major considerations is whether the process can be completed remotely, or if travel to Poland is necessary due to certain formalities. Often foreign investors find it inconvenient or impractical to visit Poland and are looking for a way to complete the process entirely from abroad.

For capital companies like the limited liability company (sp. z o.o.), signing the Founding Act in the form of a notarial deed can necessitate a physical presence in Poland.

Such problem can be solved twofold:

• granting power of attorney - depending on circumstances a power of attorney may be granted to a third person (e.g. a local lawyer) who can appear before the notary to sign the Founding Act; although in such case a power of attorney would have to be granted abroad in a notarial deed form,
• using the S24 platform - the company can be established online through the aforementioned S24 platform, provided that those involved have the required type of electronic signature; amendments to the basic wording of the Founding Act, based on the model document, can be made later when convenient amd the changes can be executed through a power of attorney granted to a third party (e.g. a local lawyer), which in most cases will require a written form only, eliminating the need for a notarial deed.

Alternatively, a third party (e.g., a local lawyer) can form the company on behalf of the investor, subsequently transferring ownership to the investor. This approach also effectively addresses the legal restriction against a single-shareholder limited liability company being the sole founder of another capital company.

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Summary

Understanding the options available to foreign investors regarding company structures and their formation process in Poland is crucial for making informed decisions from the earliest planning stages of establishing a presence in the Polish market.

Familiarity with the fundamentals of each company type helps balance factors like liability, capital requirements, and management flexibility. Being aware of the formation process, including whether it can be completed remotely or requires physical presence, allows investors to plan effectively and avoid potential delays.

This knowledge not only simplifies the company formation process, but also aids in understanding legal aspects and facilitates smoother discussions with partners or professionals involved in setting up the business. Ultimately, it contributes to establishing the business more efficiently and with deeper understanding of the relevant factors.

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