Today, I would like to say a few words to those who intend to open 'something of their own'. Many people dream of running your own business. The decision to start up on your own is a big challenge. It requires many hours spent on various considerations and calculations. You need to establish, where to get funding for start-up, how acquire the first customers and what the form of bookkeeping select. The method of settlement with the Tax Office must correspond to our business objective. In addition, it should allow us to pay taxes in an optimised manner. It is a question of choosing the accounting method that is most favourable for the type of business.
The above issues are not all that need to be faced. There is still the question of responsibility for the company's obligations (debts). With today's post, I would like to help all those who are facing a difficult decision. They are wondering in which form to run their business with a view to later liability for liabilities. It is also worth anticipating situations in which, for reasons not necessarily attributable to us, a company starts to have solvency problems. If temporary insolvency is involved, there are possibilities to cope with this. Worse still is the situation where the receivables from unpaid invoices are growing and there is no cash flow in sight....
I will not elaborate on the forms of doing business today. A detailed description of the types of doing business in Poland can be found here: https://www.biznes.gov.pl/pl/firma/zakladanie-firmy/chce-wiedziec-jak-zalozyc-wlasna-firme/zanim-zdecydujesz-sie-na-wlasna-firme/rodzaje-formy-prowadzenia-dzialalnosci
If you have visited the above page I have linked to you, you already know that there are several forms of business. Therefore, I will divide my article into 3 parts. Today's - the first one - will be about liability for debts in sole proprietorships and partnerships. I have combined these two forms of business because they are very similar. A civil partnership is actually two or more individuals carrying out a business. They work together under a civil law contract entered into to achieve a common business goal. You can find more information about a civil partnership below.
Liability in the case of sole proprietorship
A company can be "set up" in the Central Register of Economic Information, abbreviated to CEIDG (this can also be done online after creating an account at the https://prod.ceidg.gov.pl/ceidg.cms.engine/).
Sole proprietorship is the best known and simplest form of business in Poland. However, we have to reckon with the fact that we will be responsible for all debts incurred in the course of this activity with all its assets in an unlimited manner. What does this mean? It means that in the event of an inability to pay an invoice (or other liability) arising from the business, the entrepreneur will answer with all of his or her assets. Both the one created as a result of the business and the other - personal assets. Thus, if a creditor obtains a final court judgment with an enforcement clause (the so-called enforceable title) and submits an appropriate application to a bailiff, the bailiff will be able to enforce the debt from both the assets generated by the business and the remaining assets belonging to the debtor.
Is the entrepreneur's spouse liable for debts?
The liability of a spouse depends on on whether or not he or she consented to the specific action leading to the debt. For debts incurred by one spouse without the consent of the other Only the spouse who incurred the obligation is liable. He or she shall be liable for the debts with his or her personal assets and those included in the the joint property of the spouses income derived from gainful activity and therefore also from:
- economic activities and
- benefits derived from copyright and related rights, industrial property rights and other rights of the creator.
If debts have been incurred in connection with the operation of an undertaking belonging to the joint property of the debtor and his or her spouse, enforcement may also be carried out against the assets forming part of that business. A business is usually included in the joint property when the business was established after the marriage.
If a spouse agree for incurring a particular obligation, he is also liable for its repayment. However, enforcement can only be directed to joint assets. The non-business spouse is not liable for his or her personal assets, i.e., for example, items he or she acquired before the marriage or items obtained by way of donation.
Liability for debts in a civil partnership
A civil partnership has no legal personality. This means that it may not contract obligations on its own behalf. Liabilities are incurred by the partners on behalf of the company, who form the company by virtue of the agreement concluded between them. Liabilities on behalf of the company are nothing more than debts incurred jointly by the partners with a view to achieving a common economic goal. In the course of enforcement proceedings, the creditor may demand full or partial payment from each partner individually, from several partners or from all partners jointly. If one partner pays the debt, the others are relieved of liability. This is known as joint and several liability. Each partner shall be jointly and severally liable for the obligations of the partnership both joint assets of the partners (covered by joint ownership) as well as own assets. The legislation does not require a specific order in this respect. Consequently, a creditor may at the same time direct enforcement against the joint assets of the partners and their individual assets.
What about the liability of a spouse in a civil partnership?
As in the case of his or her own business, the non-consenting spouse will have to put up with the fact that the bailiff, in the event of enforcement, will be able to satisfy himself or herself from the debtor spouse's income. This will include the benefits accruing to him/her from the rights he/she holds, which I mention above. Enforcement will also be able to be carried out from assets forming part of a business belonging to the spouses' joint property.
The issue of spousal liability in this case is regulated the same as in a sole proprietorship.
In my next post, I will address the issue of liability in partnerships, i.e. a company:
- general,
- partnership,
- limited partnership,
- limited joint-stock partnership.
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