Business without registration - what does it look like in practice?

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Being self-employed means, first of all, managing your time and money freely. The person running the company independently sets goals, working hours, decides on investments and the direction of business development. On the other hand, she has a lot of responsibility related to the constant care of the company's interests. Many people want to try their hand at business, but are afraid of failure. The government extends a helping hand to entrepreneurs by introducing the so-called A business constitution to simplify setting up and running a company in Poland. Business without registration - what does it look like in practice?

What is economic activity?

Economic activity is the performance of activities aimed at profit in an organized and continuous manner. Entrepreneurs operate on their own behalf and on their own responsibility, which means that they bear the economic risk associated with the company.

Establishing a sole proprietorship requires registration with the Central Register and Information on Economic Activity (CEIDG) by submitting the CEIDG-1 application to the city or commune office. In this way, we declare the willingness to run our own business, start date, form of taxation, frequency of advance payments for income tax, etc. We receive NIP and REGON. After submitting the CEIDG-1 application, the entrepreneur is automatically registered as a payer in ZUS. You have 7 days to register as an insured person from the moment of setting up your business by submitting an application to ZUS ZUA or ZUS ZZA. If you wish / are required to register for VAT, we also submit a VAT-R form to the tax office. After completing all these formalities, we can start running the business.

The new regulations make it possible to conduct unregistered activity without the need to complete any formalities in offices and the Social Insurance Institution, but in order to be able to use this privilege, certain conditions must be met.

Business without registration - it's possible!

Conducting unregistered activities is available from April 30, 2018. In art. 5 sec. 1 of the Entrepreneurs' Law Act, the following entry is included:

Art. 5 sec. 1 of the Entrepreneurs' Law:
The activity performed by a natural person, whose income due from this activity does not exceed 50% of the minimum wage in any month, referred to in the Act of 10 October 2002 on the minimum remuneration for work (Journal of Laws of 2002, No. 2018, item 2177), and which has not performed any economic activity in the last 60 months.

It is not possible to take advantage of the preferences of running a business without registration in the event that the specificity of the industry requires concessions, permits or licenses, e.g. for air transport activities, protection of property and people, or the production, trade in explosives, weapons and ammunition. Additionally, it is forbidden to conduct unregistered activities in the form of a civil partnership.

Let us also point out that activity without registration is, in fact, self-employment, but it is not an economic activity within the meaning of the provisions.

When will I need to register my company?

Registration of the activity from the beginning of its operation will be necessary if at least one of the above conditions is not met. With regard to people who will start to perform activities on their own account without registering a company, in the event of earning more than half of the minimum wage in a given month, it will be necessary to register the company with CEIDG (within 7 days from the date on which the minimum wage was exceeded). will be the limit of revenues) and completing other formalities related to starting a business. You have to bear in mind that not registering a company has consequences in the form of a fine and even imprisonment. In addition, you must pay the overdue tax and social security contributions with interest.

As we can see, the allowable income in relation to the activity without registration is small, the introduced regulations are intended to allow you to run your own business on a smaller scale, without the need to incur additional costs, but every month you have to make sure that the amount of revenues specified in the act has not been exceeded.

Unregistered activity and social security contributions

The good news for people who want to try their hand at business is that if you achieve income that allows you to run a business without registration, you do not have to pay any contributions to the Social Insurance Institution. Entrepreneurs who have not registered a company are exempt from the obligation to pay social security contributions and the Labor Fund, and even health insurance contributions. This preference gives considerable savings, as the cost of the health insurance itself is over PLN 300 per month. A person with an income of around PLN 1,000 must pay almost 1/3 of their monthly earnings to ZUS. Therefore, business without registration gives a chance to novice entrepreneurs who need time to develop their company and earn more profits.

Operating without registration is a preference, not an obligation. Each person deciding on such a solution should take into account the consequences of not registering a company, such as failure to pay pension contributions, lack of health insurance enabling the use of health benefits under the National Health Fund and the inability to apply for sickness insurance guaranteeing a benefit in case of sickness or maternity. . Therefore, if we want to have this type of security, it is worth considering registering a business, we can do it at any time, regardless of the revenues generated.

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Example 1.

A person running an unregistered business and working full-time at the same time wants to use the benefits under the National Health Fund. Does he have to register his business for this purpose?

If an entrepreneur running a business without registration is employed full-time, he is subject to health insurance on this account and can use the NHF care without any obstacles. Therefore, there is no need to register activities.

Example 2.

A woman who runs a business without registration and is pregnant is simultaneously employed on the basis of a full-time employment contract (earnings higher than the national minimum). Can he apply for sickness insurance and obtain a maternity allowance for his business?

Activity without registration does not allow you to join the sickness insurance on this account. An entrepreneur who wants to be covered by sickness insurance should register the business. In this case, however, even after registering the company with CEIDG, it will not be possible to apply for sickness insurance. This is due to the fact that a person running a business and employed full-time with a salary equal to or higher than the minimum wage, only compulsorily pays health insurance premium for the activity. On the other hand, only entrepreneurs who are obligatorily subject to retirement and disability insurance may join the voluntary sickness insurance.

Do we pay income tax when running a business without registration?

Lack of a registered company does not mean that you are exempt from paying income tax. This type of earnings is taxable income from other sources. The tax rate in this case is 17% or 32% - after the first tax threshold is exceeded (revenues from unregistered activity are added to other revenues, e.g. from an employment contract). A person using the business preference without registration will pay the tax only after the end of the tax year. In this case, you must submit a PIT-36 declaration, which is applicable to people who pay the tax themselves.

Activity without registration - other duties and privileges

As a rule, a person running an unregistered business is exempt from VAT (subjective exemption under Article 113 (1) of the VAT Act), but not every type of business may benefit from an exemption up to the limit of PLN 200,000 of turnover per year. Entrepreneurs indicated in art. 113 paragraph. 13 points 1-2 of the VAT Act, despite the lack of registration with CEIDG, they are obliged to register as active VAT payers. Persons who provide services or sell goods as part of unregistered activities can freely issue invoices, regardless of whether they are active VAT payers or whether they benefit from an exemption.

Accounting is not required then. Pursuant to Art. 109 paragraph. 1 of the VAT Act, you must have a sales register, the so-called simplified sales register. Sales for a given day should be included in these records, not later than before the sale on the next day. The sales register will allow us to easily determine the moment of exceeding the revenue limit specified in the act.

Lack of registered activity does not mean exemption from respecting consumer rights such as complaints, returns, etc. According to the Civil Code, a person running a business without registration is considered an entrepreneur.

In summary, the introduction of the provisions on unregistered activities was aimed at facilitating the commencement of self-employment or checking a business idea without the need to register a company. If the tested activity turns out to be unprofitable, it is much easier to withdraw from it. Not recognizing small trade or sporadically provided services as economic activity will certainly contribute to the growth of entrepreneurship of Poles. Starting a business is cheaper, and thus the decision to undertake additional obligations is easier.