Entrepreneurs who start their business as a sole trader can start to consider the option to convert a sole proprietorship into an LLC in Poland
once the business grows. The Polish limited liability company (LLC) has an important advantage over the sole trader: it offers greater protection for the investor or investors who are not liable with their own assets for the debts and obligations of their business.
Our Polish lawyers
can help you explore this option if you currently operate your business in the form of a sole trader and wish to convert into a single member limited liability company.
The conversion of a sole trader in Poland
The Companies Law in Poland
allows for the conversion of a sole trader into a corporation
, namely the single-shareholder commercial company. This type of legal entity offers the advantages of limited liability (a characteristic which lacks in the case of the sole trader) and at the same time it allows the entrepreneur to retain most of the business advantages it had as a sole trader, because this business form has lower incorporation and reporting requirements, compared to the joint-stock company, for example.
A clear benefit of converting a sole trader into an LLC in Poland
is that there is universal succession. This means both that the new company will inherit the rights and obligations of the sole trader and that the business contracts, special permits, and licenses will be transferred onto the new business form.
An important exception applies, however, and it concerns the tax exemptions: these are non-transferable. One of our attorneys in Poland
can explain the tax liabilities
for the new business structure and how the taxation will differ from that of the sole trader.
Issues to consider when changing the business structure
The sole trader is fully converted into an LLC once it is entered into the Business Register. for this purpose, the owner of the sole trader must submit a declaration of conversion (in the form of a notary deed), draw up and sign the company’s Articles of Association and submit an appraisal of the assets and liabilities. Also, the old business form must be deleted from the Register.
According to the Polish law, the individual liability will still apply for some time after the conversion. Our team of lawyers in Poland can answer your specific questions on this matter.