What form of business activity should I choose?
The choice of the form of running a business is one of the most important decisions made when opening your own business. This is because it will determine the subsequent manner and impact of decisions made in the company, responsibility for its management, the method of tax settlement and the distribution of profits. Therefore, read our article and check which form of business to choose so that it is the most optimal for you and your business!
What kind of activity should you choose?
Each company has its advantages and disadvantages, therefore when choosing the most advantageous form of business, you should consider all legal aspects that affect its functioning. The general division of companies is divided into partnerships (civil partnerships, general partnerships, partnerships and limited partnerships) and capital companies (joint-stock and limited liability companies). So what kind of activity should you choose?
A civil law partnership is a simple form of business organization, functioning under the provisions of the Civil Code. Has no legal personality. This means that the income tax is calculated on the basis of the Personal Income Tax Act (PIT). It can be established by both natural persons and already existing economic entities.
The advantage of this type of business is that each partner can bring their own capital, their own work for the company and their own unique skills. The disadvantage is that you have to take into account penal liability for the actions of a partner. The creditor has the right to choose whether to use the company's assets or the individual property of a partner to satisfy his obligations. It can also reach both the company's assets and the individual assets of entrepreneurs.
The most important legal aspects affecting the functioning of a civil law partnership include the fact that:
- each partner is entitled and obliged to run the partnership's affairs - he or she may also, without a prior resolution of the partners, perform an urgent action, the omission of which could expose the company to irreparable losses,
- all forms of VAT taxation are available for a civil law partnership - this means that its accounting can be kept in the simplest form, thanks to which it is not so expensive,
- a civil partnership, on the basis of an agreement drawn up between the partners, is registered at the commune or city office - therefore there are no notary costs, however, each partner must register separately,
- a civil partnership should be transformed into a general partnership when net revenues in each of the last two financial years have reached the value of EUR 800,000.
The answer to the question of what form to chooseactivities may be - general partnership. The general partnership resembles a civil partnership in many respects. It also does not have a legal form and is usually created by a small number of partners who have mutual trust and contribute their own capital. However, what distinguishes it is the fact that it is regulated by the provisions of the Commercial Companies Code and not the Civil Code, as is the case with a civil partnership. It also requires that at least one name of the co-owner of the company be disclosed in the name of the company. Moreover, the general partnership agreement must be concluded in writing, otherwise null and void. Then it is necessary to register it in the National Court Register. All partners have the right to represent the company. However, it is possible to choose the persons authorized to represent it, through appropriate provisions in the general partnership agreement. In other words, partners have the right to choose one or more persons among themselves who will be able to represent their company. On the other hand, one of the partners may be deprived of the right to represent (if he previously had the right to represent the company) only on the basis of a valid court decision.
Its competitiveness in relation to a civil law partnership is based on the fact that in a general partnership the proprietary liability of partners is limited. The creditor has the right to reach for the property of one of the co-owners only when it is impossible to enforce the company's assets.
It is a specific form of economic activity used only for the performance of freelance professions. It can only be established by natural persons who do not have business activity, e.g. doctors, lawyers, architects. As in the case of a general partnership, it is regulated by the Code of Commercial Companies. However, unlike the previous companies, its co-owners are personally and jointly and severally liable with all their assets only for the company's obligations not related to the exercise of a liberal profession. The possibility of appointing the company's management board was also given, although this privilege only applied to capital companies.
What form of business activity should I choose? Maybe it is worth choosing a limited partnership? It is a favorable form of cooperation between entities with diversified capital, enabling partners to conveniently shape responsibility for the company's obligations and for managing its affairs. It is subject to the same registration process as for all commercial law companies. Its greatest advantage is the limited liability of partners for the company's financial obligations. They are only liable up to the amount specified in the contract concluded between them. On the other hand, its biggest disadvantage is the need to conduct costly, full accounting.
limited liability company
NS. z o.o. is a popular capital company that may be established by one or more entities. As in the case of the previously mentioned economic forms, it is regulated by the same Code of Commercial Companies. However, this is where its similarity to the companies described above ends. First of all, the company's co-owners are not responsible for the company's financial liabilities, and the creditor has the right to enforce only the company's assets and only up to the amount of the share capital specified in the contract. The agreement between the partners also differs, which must be drawn up in the form of a notarial deed. This, in turn, means much higher costs of its creation. Moreover, in order to submit it to the National Court Register, a share capital of not less than PLN 5,000 is required. The most important, however, is the fact that Sp. z o.o. is a legal person, and this consequently involves the need to conduct costly, full accounting.
Also the issue of company representation differs significantly from the structure of partnerships. In a limited liability company, the management board appoints and dismisses its president, who is entrusted with the function of running the company.
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A joint stock company is the most complex form of a commercial company. Structurally, it resembles a limited liability company. However, it requires much more capital, as it should amount to at least PLN 100,000. As in the case of a limited liability company, the status of a joint stock company must be drawn up in the form of a notarial deed or otherwise invalid. It is a legal person and requires full accounting. The right to represent and run the company's rights is granted only to its management board, whose members are appointed by the supervisory board. The biggest difference between a joint stock company and other commercial companies is the method of raising capital.A joint-stock company, as the only one of all economic forms, can obtain it on the stock exchange and through bonds.
The greatest advantages of a joint-stock company undoubtedly include the fact that the shareholders are not liable for its liabilities with their own assets. However, due to the significant degree of legal and tax complexity and the need to constantly use the services of legal advisers, lawyers and specialized accountants, this organizational form of the enterprise is intended mainly for large companies and large corporations.