Sole proprietorship in Poland – advantages and disadvantages ep. 15

Podcast: Play in new window | Download (Duration: 8:23 — 19.2MB)

Subscribe: Apple Podcasts | Spotify | Android | Deezer | RSS

Listen to this new episode of Biz in Poland where we will focus on the company form called sole proprietorship in Poland – advantages and disadvantages. If you need business consultant services then don´t forget to contact me for further information.

Below you can read the transcription of this episode of Biz in Poland. Remember to subscribe to the podcast then you will make sure that you dont miss any imprtant information for free!

Welcome to another episode of the Biz in Poland podcast provided to you by bizinpoland.com and Søren Christensen. Remember to subscribe to the podcast so you won’t miss any episodes.

There are different company forms to choose from in Poland and they all have their advantages and disadvantages. In this episode we will focus on the sole proprietorship in Poland.

Sole proprietorship in Poland advantages

A sole proprietorship is a common business structure in Poland, just as it is in many other countries. There are several advantages to choosing a sole proprietorship in Poland:

• 1.Ease of Formation: Setting up a sole proprietorship in Poland is relatively simple and requires minimal paperwork compared to other business structures. You only need to register your business activity with the appropriate authorities.
• 2. Full Control: As a sole proprietor, you have complete control over your business. You make all the decisions without needing to consult with partners or shareholders.
• 3.Direct Taxation: In Poland, sole proprietors are subject to personal income tax (PIT) rather than corporate income tax (CIT). This can be advantageous if your business is in a lower tax bracket than the corporate tax rate.
• 4.Minimal Reporting Requirements: Sole proprietors typically have fewer reporting and accounting requirements compared to larger business entities, making compliance simpler and less costly.
• 5.Flexibility: Sole proprietorships are flexible in terms of the type of business activities they can engage in. You can easily change or expand your business without complex legal procedures.
• 6.Low Initial Costs: The startup costs for a sole proprietorship are generally lower than those for more complex business structures like corporations or partnerships.
• 7.Privacy: The ownership and financial information of sole proprietors in Poland may be more private compared to certain other business structures, as there is less public disclosure required.
• 8.Quick Decision-Making: As the sole decision-maker, you can respond quickly to changing market conditions and customer needs without the need for lengthy discussions or approvals.
• 9.Profit Retention: You retain all the profits generated by your business. There are no dividends to distribute among shareholders.
• 10. Local Market Focus: Sole proprietorships are well-suited for small, locally-focused businesses, as they don’t require the same level of global expansion or complexity as larger corporations.
• 11. No Formal Capital Requirements: There are no strict capital requirements for starting a sole proprietorship in Poland, making it accessible to individuals with limited financial resources.

However, it’s essential to consider the potential disadvantages of a sole proprietorship as well, such as personal liability for business debts and the lack of access to certain tax advantages that may be available to larger business entities. Consulting with a legal or financial advisor is recommended when deciding on the best business structure for your specific situation in Poland. Additionally, the legal and regulatory landscape may change, so it’s essential to stay updated on current requirements and regulations when operating a sole proprietorship in Poland.

The disadvantages

While there are advantages to operating a sole proprietorship in Poland, it’s important to be aware of the disadvantages and potential challenges associated with this business structure:

• 1.Unlimited Liability: One of the most significant drawbacks of a sole proprietorship is that the owner has unlimited personal liability for business debts and obligations. This means that if the business incurs debts it cannot pay, the owner’s personal assets, including their home and savings, can be at risk to satisfy those debts.
• 2.Limited Access to Capital: Sole proprietors may find it challenging to secure financing or investment capital compared to larger business entities like corporations. Lenders and investors may be hesitant to provide funds to sole proprietors due to the increased risk associated with personal liability.
• 3. Limited Expertise: Sole proprietors often lack the diverse skill sets and expertise that can come from a team of partners or employees. This limitation can affect the quality and range of services or products offered.
• 4. Difficulty in Scaling: Scaling a sole proprietorship can be challenging due to resource constraints and limited access to capital. Expanding the business beyond a certain point may require a change in business structure.
• 5. Dependence on the Owner: The success of a sole proprietorship is often closely tied to the owner’s abilities, health, and availability. If the owner is unable to work for any reason, the business may suffer.
• 6. Limited Tax Benefits: Sole proprietors in Poland are subject to personal income tax (PIT) rates, which may be higher than the corporate income tax (CIT) rates applicable to other business structures. This can result in potentially higher tax liabilities.
• 7. Lack of Business Continuity: Sole proprietorships may face challenges in ensuring business continuity in the event of the owner’s retirement, disability, or death. Without a clear succession plan, the business may cease to exist.
• 8. Limited Credibility: Some customers and business partners may perceive sole proprietorships as less stable or credible compared to larger, incorporated businesses.
• 9. Difficulty in Raising Capital: Raising capital through equity offerings or issuing shares is not an option for sole proprietorships. This can limit the ability to fund growth initiatives.
• 10. Limited Benefits: Sole proprietors may have limited access to certain benefits and advantages available to employees of larger companies, such as retirement plans, health insurance, or paid time off.
• 11. Compliance Challenges: While there are fewer reporting requirements for sole proprietors compared to larger businesses, they are still responsible for meeting all tax and regulatory obligations. Failure to do so can lead to legal and financial consequences.
• 12.Difficulty in Attracting Talent: Sole proprietors may find it challenging to attract and retain top talent, as they often cannot offer the same level of benefits and job security as larger employers.
• 13. Not for all nationalities: Sole proprietorship is in Poland very difficult to obtain as a non-EU citizen.

Get business consulting 

It’s important to carefully consider these disadvantages and weigh them against the advantages when deciding on the most suitable business structure for your specific situation in Poland. Depending on your business goals, risk tolerance, and long-term plans, you may find that a different structure, such as a limited liability company (Spółka z ograniczoną odpowiedzialnością), is more suitable. Consulting with legal and financial professionals can help you make an informed decision.

Søren Christensen and Biz in Poland can also help you regarding this. For more info just send an email to info@bizinpoland.com

I hope this gave you some useful information regarding the Sole proprietorship in Poland and its advantages and disadvantages. 

In other episodes of the Biz in Poland podcast the focus will be on other company forms so remember to subscribe to the podcast so you won’t miss it. So stay tuned and good luck with your business, bye.