Business Structure: Company vs. Sole Proprietorship
Choosing the right business structure is a critical decision for Polish entrepreneurs. Here’s a detailed comparison to help you understand the characteristics of both a sole proprietorship (Jednoosobowa Działalność Gospodarcza, JDG) and a company (Spółka) and determine which might be more beneficial for your specific situation.
Sole Proprietorship:
1. Simplicity and Flexibility: This is the simplest form of running a business. Without needing to cooperate with others, you can make quick decisions and act flexibly.
2. Minimal Formalities: Establishing a sole proprietorship is usually less complicated than establishing a company.
3. Liability: As a sole proprietor, you are responsible for the company’s obligations with your private assets. This means a greater risk of personal liability.
4. Income Tax: Income from a sole proprietorship is usually taxed as the owner’s personal income.
Company:
1. Risk Sharing: In a company, risk and responsibility can be shared between partners.
2. Lack of Liability for the Company’s Obligations: In capital companies, partners are not liable for the company’s obligations from their own assets. This offers better protection of personal assets by separating them from company assets.
3. Different Types of Companies: There are many types of companies, such as a limited liability company (Sp. z o.o.) or a joint stock company (S.A.), which allows you to choose the structure that best suits your business needs.
4. Greater Financial Possibilities: The company can more easily raise capital by issuing shares or stocks.
5. Corporate Tax: For some forms of company, profits may be taxed as company income, potentially leading to lower tax rates compared to personal income tax.
6. No ZUS (The Polish Social Insurance Institution) Contributions for Company Owners: Partners of multi-person limited liability companies who are not bound by an employment contract with the company are not subject to compulsory social insurance.
7. Greater Difficulties in “Extracting” Money from the Company: There is greater financial and accounting discipline in a limited liability company. Withdrawing funds is not as straightforward as in a sole proprietorship. When establishing a company, it is crucial to design the business scheme wisely and determine the optimal methods for withdrawing funds with the help of a trusted accountant or tax advisor.
Still Wondering Which Form of Company to Choose?
There are many aspects to analyze that may influence this decision.
Contact us to arrange a free consultation. We will discuss your company’s individual needs and find the best solutions. Our meeting is completely free and aims to help you choose the best option!
