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A limited liability company is a business form that can save you a great deal of money. More entrepreneurs are establishing such companies, though some hesitate because the process is more complex than for a sole proprietorship. Contrary to appearances, establishing a limited liability company is neither very difficult nor very expensive. Moreover, over time this form brings much greater savings and better tax-optimisation opportunities. Is it worth establishing one? Yes – we know the subject well and share that knowledge.
What is a limited liability company and who may establish one?
A limited liability company is a type of capital company. Establishing one requires initial (share) capital – at least PLN 5,000 by law. Importantly, the articles specify how the capital is covered: it may be a cash contribution or a contribution in kind. In practice, one need not have PLN 5,000 in cash to contribute initial capital.
Who may establish a limited liability company? It is easier to say who may not: a single-member limited liability company. Apart from that entity, one or more people may establish one. What kind of business can it conduct? Any business complying with the law. Want an online shop? Are you a marketing specialist? Starting a café? A limited liability company gives you advantages you would not have as a sole proprietor.
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Who may be a shareholder in a limited liability company?
One of the first steps in setting up a limited liability company is selecting its shareholders (there may also be just one). Requirements are as follows:
- An adult natural person with full legal capacity (not legally incapacitated);
- A person with limited legal capacity, only with their legal representative’s consent (guardian, parent, etc.);
- A legal person (excluding a civil-law partnership or a single-member limited liability company).
Costs and methods of establishing a limited liability company
Now the part most important to many entrepreneurs: the cost. There are two methods, traditional and online, each with advantages and different initial costs. The main point is that a limited liability company can ultimately save far more than a sole proprietorship; moreover, its shareholders are not liable with their private assets for company obligations, unlike sole proprietors.
Establishing a company traditionally – costs
This method costs more than online establishment but provides assurance that a legal professional drafted and checked the articles. Establishment also takes some time. Nevertheless, it is worth choosing for a larger business. Costs are:
- Notary fee, depending on share capital:
- At PLN 5,000 share capital: PLN 160;
- At PLN 5,000–10,000 share capital: PLN 160 plus 3% of the amount above PLN 5,000;
- At < PLN 10,000–30,000 share capital: PLN 310 plus 2% of the amount above PLN 10,000;
- At < PLN 30,000–60,000 share capital: PLN 710 plus 1% of the amount above PLN 30,000;
- At < PLN 60,000–1,000,000 share capital: PLN 1,010 plus 0.4% of the amount above PLN 60,000;
- At < PLN 1,000,000–2,000,000 share capital: PLN 4,770 plus 0.2% of the amount above PLN 1,000,000.
- Company registration (KRS entry): PLN 500;
- Announcement in the Court and Business Gazette: PLN 100;
- Civil-law transaction tax: 0.5% of share capital, less the notary fee and KRS registration and Gazette announcement costs;
- A notarial deed extract: PLN 6 plus VAT per page (a discount is often possible).
This cost list may be discouraging, but an example with minimum share capital of PLN 5,000 helps dispel the myth that a limited liability company is expensive to establish.
- KRS-related fees: PLN 600 (registration PLN 500 plus Gazette announcement PLN 100);
- Notary fee: PLN 160;
- Civil-law transaction tax: about PLN 21.
- Notarial deed extract: depends on the number of pages and any notary discount.
Establishing a company online – costs
If you want to lower the cost of establishing a limited liability company, choose the electronic option. Notary fees and deed extract charges disappear; the remaining costs also differ:
- KRS entry: PLN 250;
- Court and Business Gazette announcement: PLN 100;
- Civil-law transaction tax (with PLN 5,000 capital): about PLN 21.
All you need is a qualified signature (you can use e-PUAP) to establish the company from home or anywhere with internet access. If you are unsure about the articles, contact us for help.
How much can a limited liability company save?
Good news: you can save a lot, around PLN 20,000 a year or more. How? Here are some useful points:
- Share capital is required to establish the company, but it can be paid out as remuneration at the end of the month;
- There is no obligation to pay ZUS (the saving needs little explanation);
- For health insurance, it is enough to sign a mandate contract with the company, for example for PLN 300 net per month, with ZUS and contributions of about PLN 150. Another option is quarter-time employment by the company (employment continuity and stability, with all ZUS contributions paid);
- To settle reasonably with the company and minimise taxes, one can, for example, rent one’s own car, equipment or office space to it, license a trademark or sign specific-task contracts (with copyright transfer) or mandate contracts (student contracts entail no ZUS or tax).
If you found this article interesting, explore our tax advisory services and read how we can help you:
Our specialists can help you put this knowledge into practice.
Summary
By planning expenses appropriately (the company costs described above), one can save even more – there is then no double taxation. In practice, this means an effective tax on income of about 8–9%. Income tax for a sole proprietorship is 18% or 19%, so the difference is substantial. Remember also the prospect of the Polish Deal and its non-deductible 9% health contribution – the actual saving is around 20%. Want to earn more? Have questions about establishing a limited liability company? Contact us – taxes, accounts and companies are our natural environment. We can help.
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