The 5 most popular forms of conducting business in Poland

More and more foreign entrepreneurs and investors are deciding to enter the Polish market. This is due, among other things, to the fact that our country is one of the largest and fastest growing in the EU. It can also offer a strategic location connecting Western and Eastern European markets, a high level of education and development, as well as a number of facilitations for foreign entrepreneurs. However, there are a number of decisions to be made before starting a business. Choosing its form of conducting is one of the most important. A description of the 5 most popular (in Poland) awaits below. 

New and independent company in Poland

The first proposed form of conducting business in Poland is a company. The legislation offers a number of possibilities in this regard, and the incorporation of a company gives a great deal of freedom. In our experience, it is also the most practical form – especially for those planning long-term business activities in Poland.

A foreign entrepreneur has the option of establishing a company:

• (capital) company / corporation, i.e.:
  • – limited liability company (the most common model);
  • – joint-stock company or simple joint-stock company;
• partnership (registered partnership, professional partnership, limited partnership and limited joint-stock partnership);
• civil law partnership.

The type of company is worth matching with:

• the type of business carried out;
• further business plans;
• specific industry;
• organizational and asset conditions;
• the entrepreneur’s country of origin.

Depending on the variables indicated above, regulations may impose specific rules or restrictions on different types of companies.

Why should I start a company?

One of the biggest advantages of starting a company is that the entrepreneur gains the possibility to conduct permanent and long-term business in Poland. The company is also an independent entity that provides a great deal of freedom of action. It is therefore the most preferred solution.

What about the formalities?

(Capital) companies / corporations and partnerships are subject to registration in the Register of Entrepreneurs of the National Court Register. In order to establish such entities, additional obligations must be fulfilled – e.g. the signing the Articles of Association, contribution of capital or regulating liability rules. In Poland the procedures are detailed, however professional legal advisory will help with getting all formalities straight..

 

Acquisition of shares in an existing company

In most cases, foreign entrepreneurs may use an alternative procedure consisting in the acquisition of shares and stocks in a Polish company that already exists (of course, each case should be considered individually).

Such a solution is primarily intended for (capital) companies / corporations. In view of the fact that in practice we deal most often with the acquisition of shares in a limited liability company.

How to enter a limited liability company?

In order to become a shareholder in a Polish limited liability company, it is necessary to carry out a share acquisition transaction. Such a transaction – if it takes place under the Polish law – must be documented in writing with a signature certified by a notary public.

Equally important is the adjustment of regulations within the acquired company to the investor’s business plans. This involves making modifications to the existing Articles of Association, as well as possible changes to the business profile (PKD-codes) and taking into account the specific needs of the entrepreneur. Such free planning is possible in the case of the acquisition of a number of shares that ensures an adequate majority at the shareholders’ vote.

The next step is to decide on the management of the company. It is necessary to select the members of the Management Board and to regulate the cooperation with them.

What are the advantages of entering a limited liability company?

An existing limited liability company has several advantages. First of all, such an entity already appears in the relevant registers (National Court Register / CRBO) and is registered with the tax authority (usually also for VAT purposes). Entering it therefore saves time – there is no need to wait for registration.

In addition, the already operating company has a registered seat and a bank account. It also has completed the first formal steps related to the beginning of its operations. As a result, the acquisition of shares in a functioning company allows the entrepreneur to enter the Polish market more quickly.

Such a solution will therefore be beneficial for entrepreneurs who want to start the business operations in Poland right away.

However, if the investor is focused on a short or an occasional project / performance of a specific contract / service in Poland, then it may be preferable to use the alternatives described below.

 

Branch of a foreign entrepreneur

A branch is a separate and organizationally independent part of business activity, which is carried out by an entrepreneur outside its registered office or main place of provision of services. In practice, therefore, it is a part of the foreign entity through which it conducts its activity in Poland. Both foreign entrepreneurs from EU member states and investors from outside the European community may choose this solution. The latter benefit from the principle of reciprocity, unless ratified international agreements provide otherwise.

What should be kept in mind when setting up a branch?

There are several key issues to bear in mind when deciding on this form of conducting business in Poland. An investor needs to know, among other things, that:

• the branch itself has no legal personality – it is a form of business conducted by the foreign company, which continues to be the formal party to contracts concluded through the branch;
• the scope of operation of the branch is predetermined by the regulations – within the branch the entrepreneur may only carry out business activities to the same extent as the foreign company;
• when setting up a branch, it is necessary to appoint a person authorized to represent the foreign entrepreneur in the branch – in practice such person manages the branch in Poland;
• a branch can be an ‘independent’ employer and employ workers – as an exception, a branch may be a party to an employment contract (in which case it acts as an employer).

When deciding to establish a branch in Poland, it is also important to remember that such a form of activity is subject to various obligations. A branch of a foreign entrepreneur is obliged, for example, to obtain an entry in the register of entrepreneurs of the National Court Register or to keep separate accounting in Polish.

Entrepreneurs often choose to set up a branch, as it is generally a quicker and simpler procedure than setting up a new company. However, due to the lack of legal personality, operating as a branch is subject to a number of restrictions and poses many practical problems in day-to-day operations.

 

Representative office of a foreign entrepreneur

A foreign entrepreneur also has a possibility to establish a representative office in Poland. It is a form of conducting business activity intended only for advertising and promotion of the foreign entrepreneur on the territory of Poland. Therefore the scope of operation of such an entity is quite narrow and strictly focused.

An investor who has established a representative office must use the original name of the foreign entrepreneur with the addition of ‘representative office in Poland’ (‘Przedstawicielstwo w Polsce’). To conduct the business in this form, the entrepreneur also has to appoint an authorized person at the representative office to represent the foreign entity.

What formalities apply to this form of conducting the business?

In most cases, the establishment and operation of a representative office require an entry in the register of representative offices of foreign entrepreneurs (the situation is different for banks and credit institutions). The entry is made for 2 years. If necessary, it can be extended for a further period.

Importantly, when an application for an entry relates to activities outside the scope of promotion and advertising, the Minister will refuse it.

 

Freedom to provide services

Foreign entrepreneurs also have the opportunity to mark their position and presence on the Polish market by forming lasting economic relations with local entities, as well as exchanging services as part of such cooperation. However, it should be noted that the foreign entrepreneur’s freedom to provide services may be conditioned on:

• the type of services proposed (some sectors of the economy are regulated);
• the entrepreneur’s country of origin (subject to the provisions of international agreements etc.).

In principle, such a variant of providing services does not require the foreign entrepreneur to undertake many actions aimed at formalizing the form of conducting business activity in Poland. Depending on the specific case, it may only be necessary to register with specific authorities, e.g. for tax purposes.

However, this model, depending on the type of contract performed / services rendered, may generate practical problems in day-to-day operations. Of course, it depends on the specific case.

 

The above solution requires the development of a comprehensive and secure operating model that is beneficial from a legal, tax and organizational perspective.

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Before starting a business in Poland and deciding on its form, it is advisable to consult a specialist. An expert will comprehensively analyze the situation of the specific entrepreneur and help with choosing the optimal business model to suit their needs.

That is why we encourage you to contact us. We will help you find a business solution that will be the best from both legal and tax perspective. We can also assess whether public aid (e.g. additional start-up funds) can be applied for in your case, support you in going through the registration procedures and assist you at the operational stage.