If you want to start a business, you must choose one of the existing legal forms. We can divide them into three main groups: sole proprietorship, partnerships and capital companies. Here are Puzzle Grid we offer all of this so that you can choose the one that suits your business best.
Single-person business activities
Running a company in the form of a sole proprietorship is currently the most popular form of business reality. According to data from the Central Statistical Office, in 2016 alone, there were over 2.9 million companies operating in this form (in comparison, there were less than 800 thousand companies in total at that time).
One-man operation is the simplest and quickest way to start a business, it has reduced formalities to a minimum and does not require any initial capital.
Nevertheless, the one-man business also has its drawbacks. These include, among others: the entrepreneur’s responsibility with all his assets for company liabilities and the need to pay social security contributions, regardless of whether the company makes profits or not.
Establishing a company, as opposed to a sole proprietorship, is slightly more complicated, as it requires the preparation of a relevant articles of association and registration in the National Court Register (the latter does not apply only to a civil law partnership).
In the case of partnerships, there is still a possibility to settle through simplified accounting, but after exceeding the limit of EUR 2,000,000 of annual turnover it is necessary to switch to full accounting. Income tax is settled independently by each partner
What is the difference between partnerships?
As there are as many as four types of partnerships, it is worth briefly explaining the differences between them:
General partnerships may be created by both natural persons and legal persons. In the latter case, a partner being a legal person is obliged to pay CIT;
Partner companies: this type of company enables the establishment of cooperation between two representatives of the so-called liberal professions (e.g. a doctor, a lawyer, an architect). All partners are jointly and severally liable for the obligations of the partner companies.
The companies themselves must also have at least one partner’s name in their names and the words “and Partner” or “and Partners” if there are more than two. An important feature of partner companies is that individual partners are not liable for damage caused by other partners in the course of their work;
Limited partnerships: in such partnerships one of the partners (general partner) is liable without limitation for the obligations of the partnership, the others (limited partners) are liable only up to the amount of the so-called limited partnership sum.
This form of conducting business, unlike other forms of conducting business activity, no longer enables settlement by means of simplified accounting – full accounting in accordance with the rules set out in the Accounting Act is required;
Limited joint-stock partnerships: they are similar in structure to limited partnerships, but the place of limited partners is taken by shareholders. Unlike limited partnerships, the shareholders are not responsible for the obligations of the partnership at all, but risk the contribution to the partnership.
Limited joint-stock partnerships are also similar to joint-stock partnerships in terms of minimum share capital or supervisory board obligations (such requirements do not apply to limited partnerships).
The most important feature of capital companies is that they must be adequately capitalised when they are set up. The establishment itself requires much more formalities than opening a sole proprietorship, or even any of the partnerships. Also, their maintenance is more complicated by, among others, the requirement to keep full accounting records.
What form of activity should you choose?
As far as the choice of business form is concerned, it is worth to adapt it to your current needs. In most cases, it is best to start with a sole proprietorship or a partnership.
At the same time, remember that defining a form does not mean that you are obliged to stick to it throughout your business. In certain situations, you may be able to develop your business in the future by giving it a completely different status. It all depends on the path you take.