Today's entry is one of the most important articles on my blog. It is about the most common form of running a business in Poland. Apart from sole proprietorships, of course, which have led the way in recent years. This is probably due to the greater freedom offered by self-employment. Above all, however, it is because of the significant savings in employee costs for the employer. Today I will present, How to set up a limited liability company. I will also tell you what documents you will need to register your company with the National Court Register and other authorities, including the tax and statistics authorities.
I invite you to read on.
For whom is a limited liability company ?
A company may be incorporated for any legally permissible purpose. This means that it may be an economic purpose, a profit-making purpose or a non-profit purpose, the so-called non-profit purpose. A limited liability company may also be established for charitable reasons. In such a case, the purpose of the company will not be the generation and distribution of profit among shareholders, but other, equally important and significant social purposes (non-profit). In most cases, however, when establishing a limited liability company, the shareholders are motivated by a profit-making goal.
Apart from special cases, there are no restrictions as to the type or industry of business conducted in the form of a limited liability company. These special cases concern, inter alia, banking, insurance or telecommunications activities, where the legislator has excluded by law the possibility of conducting business in this form.
If your business is growing at a rate that significantly increases the risk of you being liable with your own assets for the company's obligations, it is worth considering converting your business into a limited liability company. I will soon devote a separate blog post to the transformation.
Read also: Liability for debts in limited liability companies
How to set up a limited company?
A limited liability company may be established by several persons or just one person. This is not possible in partnerships, e.g. civil or general partnerships. By persons I mean both natural persons and other entities, in particular other companies.
Attention!
A limited liability company cannot be established solely by another single-member limited liability company.
So, where to start?
1. preparation of draft articles of association
The draft Memorandum of Association sets out the most important elements of the operation of a .o.o. company. It is worth spending some time and thought on it:
- What representation should look like in a company,
- what exactly its activities should be,
- whether the agreement will regulate additional payments by the shareholders or an increase in share capital without the need for additional resolutions.
Careful drafting of the articles of association can help to focus attention on more important issues at a later date, rather than on discussions and the need for additional shareholder resolutions on matters that could have been regulated once and for all in the articles of association.
The prepared draft agreement is presented to a notary who gives it the form of a notarial deed. All shareholders are obliged to sign the content. This may also be done by a proxy authorised by the shareholder(s) to sign on their behalf. Once the notarial deed is signed, the so-called company in organisation is created. The notary, in addition to his/her own costs determined according to the notary's fee, collects and remits to the Tax Office the tax on civil law transactions in the amount of 0.5% of the company's share capital indicated in the contract. For example, 0.5% x PLN 5000 - PLN 25.
2. appointment of the first board of directors of the company
The first management board of a limited liability company should already be appointed in the text of the notarial deed. It may consist of one or several members. In the articles of association it is worth to consider and properly specify the manner of representation, i.e. whether each member of the management board will be entitled to represent the company individually or whether, for example, several partners will be entitled to represent the company jointly. If this issue is not regulated in the articles of association, the provisions of the Commercial Companies Code will apply. In such a situation, two members of the management board acting jointly or one member of the management board acting together with a commercial proxy will be required to submit declarations on behalf of the company.
3. setting up a bank account
The company must have a bank account. Although the shareholders are obliged to cover their shares in the company to the full amount before submitting the documents to the KRS, very often they do not have the possibility to deposit the money directly into the company's bank account. This is due to the fact that banks require a current copy of the company's KRS when setting up a bank account. However, once the contract has been signed and before registration with the KRS, the board does not have it. However, this is a formality that many banks are already turning a blind eye to. If it is not possible to open a bank account for the company in organisation at a particular bank, cash payments to cover the shares can be made to the company's cash desk or a more entrepreneur-friendly bank can be found.
What documents are required for the bank?
- notarial contract,
- a current copy of the National Court Register or a copy of the application to the National Court Register for registration of the company,
- application for an account,
- other documents depending on the requirements of the specific bank.
4 Contribution of capital
After signing the articles of association, each partner is obliged to contribute his share of the share capital according to the shares he has taken up. The minimum capital for a limited liability company is currently PLN 5,000.00. The capital may be contributed in cash or in non-cash form, i.e. in kind.
5. conclusion of a lease agreement or purchase of premises
The company must have its registered office. The lease agreement of the premises or ownership will have to be attached to the VAT declaration with the Tax Office. Following the changes introduced in 2017, the Tax Office has the possibility (and usually uses it) to carry out an inspection of the location of the premises constituting the company's registered office. It is important to note that a trader cannot sell goods and services before submitting an application for VAT registration. Once such an application has been submitted, he may carry out transactions and deduct VAT.
6. notification of the company in organisation to the statistical office in order to obtain a REGON number and to the tax office in order to obtain a NIP number
Currently, as regards registering entities in CEIDG and KRS, the 'one-stop-shop principle' applies. It allows the company to apply to the Tax Office for a NIP number and to the Statistical Office for a REGON number together with the application for an entry in the KRS. This means that the KRS itself sends the applications for the respective numbers to the Tax Office and the Statistical Office. However, if the company intends to issue invoices while still being a company in organisation, the applications must be made independently or through a proxy. The issue of a REGON number takes on average approximately 1-2 days. In turn, a NIP number is issued within 7 days of submission of the application.
- The RG-1 application submitted to the Statistical Office is accompanied by a copy of the articles of association or, alternatively, a power of attorney to act on behalf of the management board.
- In order to obtain a NIP number, a NIP-2 form must be completed and a list of the company's accounts if already established, as well as a list of places of business, must be attached.
- The completed VAT-R form should be accompanied by a bookkeeping contract if the books will be kept by an external entity. In addition, a power of attorney on form PPS-1, if the application is made by an attorney. A document confirming the right to premises is also a necessary element.
7. filing the company with the National Court Register
The last action to be taken is to report the company to the National Court Register (KRS). This is done on a specially designed form (KRS W3, KRS WE, KRS WK, KRS WM). It is submitted together with the relevant documents in originals, copies or officially certified copies within a maximum of six months from the date of drawing up the articles of association.
Correctly completed forms must be accompanied by:
- the memorandum of association - a copy of the notarial deed,
- list of shareholders, or a current excerpt from the National Court Register of the founding companies, with the number and nominal value of shares, addresses for service, signed by all members of the management board,
- a declaration by the shareholders on the acquisition of shares,
- the surnames, forenames and addresses of the members of the Management Board signed by all of them,
- a declaration of consent to be appointed as a member of the Management Board,
- share book,
- a declaration by the entire board of directors of the company that the capital contributions have been paid in full. Here it is necessary to pay cash into the company's account or into the company's cash register, as I wrote above,
- form RG-1 for the issue of a REGON number, NIP-2 for the issue of a NIP number to a company. Unless the entrepreneur personally submits these documents to both offices in order to expedite the issue of NIP and REGON numbers,
- a lease or ownership agreement for the premises where the company's registered office will be located,
- if the company will employ employees, it is necessary to enclose a declaration of the payer of contributions - ZUS-ZPA,
- a fee of PLN 600 for entry in the National Court Register and publication in the Court and Commercial Gazette,
- a power of attorney to file documents on behalf of the company signed by the board of directors in accordance with its representation.
How to set up a limited company? Summary
As can be seen above, the process of establishing a limited liability company is highly formalised and requires attention. Missing documents or an incorrectly filled-in form may lead to a call to supplement the deficiencies or, even worse, to the rejection of the application. Currently, it is already possible to register a company electronically through S24 portal. Thanks to electronic registration with the KRS, there is no need to draw up a memorandum of association in the form of a notarial deed. The entrepreneur uses a ready-made form found on the portal. The ready-made form of the articles of association found on S24 constitutes the simplest template of the articles of association of a limited liability company. It lacks regulations concerning many important matters related to, for example, the manner of disposing of the company's profit, share capital increase or additional payments. This method of registration cannot also apply to non-cash contributions made to the company. In addition, it requires a trusted EPUAP profile or a qualified signature.
