Transformation of a sole proprietorship into a limited liability company - is it possible?

Service Business

Every year more and more people decide to start their own business. Some of them go into their own business on a full-time basis, while others work both under a contract of employment and work professionally in their company. At some point, however, it is time to make serious decisions, including the establishment of a limited liability company.

The freedom to do business in Poland is one of the most important democratic freedoms of citizens. Many more compatriots use it now than a few years ago. No wonder, because starting your own business has never been easier than now!

Enterprising Pole

There are several business opportunities in our country, and each of them, of course, has its pros and cons. The hardship associated with managing your company does not discourage thousands of our compatriots from trying their hand at it. For many of them, it is an opportunity to implement their ambitious plans and ideas. There are already several million companies in Poland, including sole proprietorships, and new ones appear every day.

How to set up a company?

A sole proprietorship is still the most popular type of business. It does not require own contribution, an agreement with a partner and many other formalities that are related to, for example, being a shareholder in a company. A sole proprietorship is a great starting solution, which, however, also fulfills its functions in the case of very experienced entrepreneurs who run large companies. This form allows for the employment of employees, outsourcing of tasks to external entities, as well as less complicated settlements with the tax authorities.

Creating a company - what is worth knowing?

A much more complicated and advanced form of running a business is a limited liability company. While in the case of setting up a sole proprietorship, it is enough to submit an appropriate form to the appropriate municipal office, it is not so simple with the company. Each of them must be registered in the National Court Register, partners must sign a notarized agreement with each other and share their shares. You also need a contribution, the so-called initial capital. Currently, the provisions of Polish law establish a minimum amount of PLN 5,000. In addition, the company requires full accounting, and thus documenting every transaction, even the smallest.

Can a business be transformed into a company?

Many entrepreneurs set up a company to optimize tax and reduce the amount of ZUS contributions. Others, on the other hand, think about the company in the context of a developing business and the need to find a partner. In some industries, such as construction, the company is the norm and a great help for entrepreneurs. The combination of forces and interests is very often good for the company, and contractors trust companies more than sole proprietorships. In this sense, however, the question arises about transforming a business into a company. Can this be done? On what terms? Details later in the text.

Transforming a sole proprietorship into a company

This type of solution is possible and quite often used. Any sole proprietorship can be transformed. An entrepreneur who performs business on his own behalf is entitled to perform such an action. At the same time, it retains all property rights and capital of the company. Polish law does not introduce exceptions in this respect. There are also no restrictions related to the transformation in the regulations. Therefore, neither the date of establishing the company, its taxation form, nor its formal and legal shape are taken into account.

How to transform into a company?

The case only seems simple. Transforming a one-person company that already has some capital and a book of revenues and expenses into a commercial law company is slightly different than setting up a company from scratch. The costs that the entrepreneur must bear are also an important aspect. The first step on the road to transformation is to establish the material balance of the company. It is worth entrusting this task to an accountant who deals with the company's accounting. The next stage is the preparation of the so-called conversion plan. According to the regulations, it must be in the form of a notarial deed and, moreover, checked by a certified auditor. The latter, upon a written request of the owner of the company, is appointed by the competent registry court.

Start a free 30-day trial period with no strings attached!

Visit to a notary public

The very establishment of a limited liability company is associated with the conclusion of a notarial deed. Unfortunately, there are no exceptions to this. Only after obtaining the certificate, the entrepreneur may apply for an entry to the National Court Register. The fact of establishing the company is announced in Monitor Sądowy i Gospodarczy. However, all these activities will allow the company to be established in accordance with the law. They are also necessary for the entrepreneur to be able to transfer assets from one company to another, only that now he will operate under a different legal title.

Transformation costs into a company

Naturally, the entire process comes at a cost. In many cases, they are not small, as they reach even several thousand zlotys. Much depends on the valuation of a sole proprietorship and the complexity of the entire transformation procedure. It may happen that at some stage there will be legal complications and you will need to hire a lawyer or use the more detailed knowledge of a notary. Many entrepreneurs also outsource the entire task to companies that specialize in it. This saves time, energy, and overall money. The mistakes of the owner of the company at the various stages of transforming it into a company can cost a lot, and repair them may take a while. Remember, however, that each case is individual and should be approached in this way.