How to start a business - alone or with a partner?
"I will open my own business" - this is the sentence with which everything often begins. It usually takes a long time to put the words into practice. However, when this moment comes, it turns out that the future entrepreneur faces many challenges and choices. What form of taxation to choose? Run a business in your own apartment or rent a special office / room for it? These types of questions can go on and on. However, one of the most important decisions that a business owner must make at the beginning is: how to start a business - alone or with a partner?
How to start a business - available forms of business
How to set up a company? This is where a brief analysis of the available forms of business may come in handy. Polish law provides for several possibilities. The basic division concerns forms in which the company is run by one owner, and companies in which there are (most often) at least two partners in a given activity.
If we are wondering how to start a company alone, the following forms are distinguished:
- recorded activity,
- a one-person limited liability company,
- a one-person joint stock company.
The above-mentioned forms of conducting sole proprietorship do not mean that the owner of the company has to work alone - he can freely employ employees under an employment contract or on the basis of civil law contracts. Their one-person character is related to the character of the owner.
In a situation where the future entrepreneur prefers to work in a group and is not disturbed by sharing risk and profits with other owners, he may decide to:
- civil partnership,
- general partnership,
- a partner company,
- limited partnership,
- a limited joint-stock partnership,
- a limited liability company,
- a joint-stock company.
Each of these forms has its advantages and disadvantages, of course, and will work in slightly different circumstances. That is why it is extremely important to carefully analyze the available options and choose the optimal solution that will take into account the needs arising from:
- the scope of the opened activity,
- the risks that may be associated with it,
- capital intensity of the business.
It is also worth bearing in mind the tax consequences associated with the decision made.
A sole proprietorship - how to start a business without a partner?
The most popular form of running a company in Poland is a sole proprietorship. Great interest in this solution is due to its simplicity - both at the stage of setting up, tax settlements and management, a sole proprietorship may enjoy many privileges and simplifications.
How to set up a company as a sole proprietorship? It is enough to obtain an entry in the Central Register and Information on Economic Activity (CEIDG) - for this purpose, the CEIDG-1 form is used, which is also a declaration to the tax office and the Social Insurance Institution.
Advantages of a sole proprietorship:
- simplicity in putting on,
- low costs of establishing a company,
- availability of all forms of taxation,
- uncomplicated liquidation process.
Disadvantages of sole proprietorship:
- liability with all assets for the company's obligations,
- no possibility of raising capital on the financial market or by including a partner.
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How to set up a company in the form of a company?
The entrepreneur may also decide to set up a company together with a partner. Here, the choice of the appropriate form depends on many factors. Moreover, each type of company also has different tax consequences.
Civil law partnership - the simplest of the companies
It should be emphasized above all that the company is nothing but a contract. In the case of a civil variety, the partners undertake to pursue a common economic goal by acting in an agreed manner, in particular by making contributions. Importantly, a civil law partnership does not have legal personality, because partners always act on its behalf, and it is not an entrepreneur - entrepreneurs are the people who create it, who must report their business activity in the form of a partnership in the municipal register of activities.
When is it worth becoming interested in a civil law partnership? For example, when you have an eye on someone who, apart from capital, will also bring additional skills and know-how to the company. This form of activity is suitable for running a relatively small-scale company and among trusted people.
Advantages of a civil law partnership:
- easy to set up and run,
- low costs associated with setting up a business,
- freedom in shaping the provisions of the articles of association,
- freedom in determining the type and size of contributions.
Disadvantages of a civil law partnership:
- joint and several liability of partners with all assets for possible debts of the company,
- no possibility for the company to incur liabilities and acquire rights.
General partnership - a commercial equivalent of a civil partnership
The general partnership resembles a civil partnership, however, this form is intended for activities of larger sizes. A company run in this way is established when an entry is made in the National Court Register - it is not enough to conclude an agreement between partners. Importantly, the founders include the so-called subsidiary liability - each of them is liable for the obligations of the company without limitation with all its assets and jointly and severally with other partners and the company (except that enforcement against the partners' assets is carried out when the execution against the company's assets is ineffective).
Advantages of a general partnership:
- great freedom in shaping the provisions of the articles of association,
- each of the partners may represent the company, it is also possible to exclude one of them from representation,
- the possibility of disclosing the name of one partner in the name of the company (e.g. Jan Nowak and company),
- no capital requirements - this means that the company does not have to have large assets,
- relatively low registration costs.
Disadvantages of a general partnership:
subsidiary liability - a partner is liable with his property for the company's obligations, if enforcement against the company's assets is not possible.
Partner company - only for the chosen ones
It is a partnership that can be established by representatives of a liberal profession, e.g. lawyers, pharmacists, architects, insurance brokers, tax advisers, etc. Each partner (called a partner) is responsible for the obligations of the company without limitation with all his assets and jointly and severally with other partners and with the company. Importantly, he is not responsible for:
- the company's obligations arising in connection with the performance by other partners of a freelance profession in the company and
- the company's obligations resulting from the actions or omissions of its employees, who were subordinated to the management of another partner in the provision of services being the subject of the company's activity.
Advantages of a partner company:
- the possibility of limiting the liability of each partner to their own actions,
- the possibility of combining the ideas of people practicing this profession,
- the possibility of using flat-rate forms of taxation,
- the possibility of running a business in a dimension greater than that envisaged for a civil partnership.
Disadvantages of the partner company:
- limited access to this form of activity,
- the contract must be concluded in the form of a notarial deed, which involves the need to incur additional costs,
- full accounting may be required.
It is a form that allows you to conduct business in a wide range and any size, while giving the partners a lot of freedom in shaping responsibility for the company's affairs and its obligations. Its specificity allows for raising capital for various ventures. It can be set up by an entrepreneur without capital, but having a great idea, or a company that needs capital injection by a partner, who in this case is called a general partner. He is responsible for the company's obligations without limitations. Another partner is a limited partner - his liability is limited.
Advantages of a limited partnership:
- limiting the liability of a limited partner for liabilities to the amount of the limited liability amount,
- limited partners may act on behalf of the company only as proxies,
- no specific requirements regarding the limited partner's sum (determining the scope of the limited partner's liability),
- the possibility of using flat-rate forms of taxation,
- the scale of the limited partnership's operations is not limited in number.
Disadvantages of a limited partnership:
- the need to create a company deed in the form of a notarial deed - additional costs,
- full accounting requirement,
- unfavorable taxation for natural persons,
- the differences in the rights and obligations of general partners and limited partners and its consequences.
partnership Limited by shares
This form of activity allows you to run an enterprise under your own name, in which at least one partner (general partner) is unlimitedly liable for the partnership's obligations. At least one of the partners should be a shareholder (who gets the shares and is not responsible for its obligations). It is intended rather for activities of a larger size - because there is a minimum share capital for such activities, it cannot be less than PLN 50,000. zloty.
Advantages of a limited joint-stock partnership:
- the possibility of obtaining capital by issuing shares,
- company protected by law,
- a chance to finance capital-intensive ideas for which the originator has no funds and invites a group of people (shareholders) to finance.
Disadvantages of a limited joint-stock partnership:
- high share capital,
- full accounting requirement,
- statute in the form of a notarial deed - additional costs,
- shareholders act on behalf of the company only as its proxies.
Limited liability company (z o.o.)
This type of company will work both when a large and risky venture is planned and when we want to run a small one-person company (in this case there is an exception to the rule that there must be at least two partners in the company). This is a unique variation of the company as it has legal personality. There are no partners on her behalf, but the management board.
Importantly, the regulations set the minimum capital that you need to have to set up a limited liability company. - 5 thousand zloty. Shareholders take up shares in it in return for making contributions in cash, in kind or in the form of rights, which constitute the company's share capital. In this case, partners are not responsible for the company's obligations with their personal property. However, if the execution against the company turns out to be ineffective, then the members of the management board are jointly and severally liable for its obligations (with some exceptions).
Advantages of a limited liability company:
- the possibility of obtaining additional capital by accepting a new partner,
- the possibility of covering the share in the capital with a contribution in kind,
- limited liability of partners.
Disadvantages of a limited liability company:
- high minimum share capital,
- additional costs of setting up a business - the need to write the contract in the form of an act,
- big responsibility of the board,
- the need to keep full accounting and audit reports.
This very complex form of activity, which is unsuitable for a novice entrepreneur, is intended for medium and large companies. To establish it, it is necessary to collect capital of at least PLN 500,000. zloty. A joint-stock company has legal personality. It is recommended to employ professional legal and accounting services to establish and run it.
Advantages of a joint stock company:
- simple methods of raising capital (issuing shares, bonds and other financial instruments),
- shareholders are not responsible for the company's obligations,
- transparency of the company's financial data,
- the possibility of doing business on a large scale.
Disadvantages of a joint stock company:
- complicated and expensive registration process,
- high formal requirements in the scope of the company's operations,
- the need to keep full accounting,
- the need to use the help of specialists in the field of legal, financial and management services,
- complex liquidation process.