Poland is currently the sixth-largest economy in the European Union (EU). It is also the first post-communist nation to expand its economy to the level of developed countries around the world.
For those looking to start an IT company or any other business, Poland seems like the perfect destination. Registering a company there is probably easier than anywhere else is Europe, and it gives you access to the entire EU market. Moreover, it is cheaper and easier to start a company in Poland than in most developed countries such as Germany, the UK, and the USA.
This guide will tell you the procedure to register a sole proprietorship in Poland, including the costs involved.
What is a sole proprietorship?
A sole proprietorship, known as a działalność jednoosobowa in Polish, is the simplest form of business entity. It is technically made up of only one person – the owner – but a sole proprietor is free to hire employees for the company. It is an ideal solution for those looking to establish a legal entity to carry out basic business operations.
Advantages of setting up a sole proprietorship include:
1. Cost
There is no cost involved in establishing a sole proprietorship in Poland. However, like all businesses, sole proprietors must contribute to the Polish social security system, ZUS. For the first two and half years, you only pay a small ZUS, which is:
- Around PLN 350 for the first 6 months
- Around PLN 550/month for the next 24 months.
2. Assets
With a sole proprietorship, you do not have to maintain assets or minimum capital. There is no minimum investment required either.
3. Simplicity
Accounting is simpler and cheaper for this form of business. The only tax sole proprietors are liable to pay is their Personal Income Tax (PIT).
This form of business is also easy to set up and can be ready to start operations within a day.
Keep in mind though that a disadvantage of a sole proprietorship is that the owner has full legal liability for his company’s debts and obligations, even if the company has closed down. However, for a small entrepreneur, this is the perfect business entity for the Polish market.
How to register a sole proprietorship in Poland?
Here are the steps to follow when registering your sole proprietorship:
- Check if you can register a sole proprietorship.
- Find an accounting office.
- Choose your preferred form of accounting.
- Decide your company name.
- Finalize the office address from where you will conduct business.
- Choose the appropriate Polish Classification of Activities (PKD) code.
- Find out which form of income tax works best for your type of business.
- Check if your business needs to pay VAT.
- Decide whether you wish to pay PIT contributions monthly or quarterly.
- Choose a date to start your business.
- Decide whether you want to set up a new bank account for the business or use an existing one.
- Register with ZUS.
- Fill out the CEIDG-1 form (Central Registration and Information on Business).
- Update your PESEL information and bank details in CEIDG.
Registration with ZUS and CEIDG is free.
The CEIDG is a national register of traders and enterprises who are self-employed persons or civil partnership enterprises. It contains information on the business activity status, registered office address, company owner, business profile, etc.
Now let's dive into each of the above-mentioned steps.
Check if you can register a sole proprietorship
Citizens of these countries can register a sole proprietorship without restrictions:
- Austria
- Bulgaria
- Belgium
- Cyprus
- Croatia
- Czech Republic
- Denmark
- Estonia
- France
- Finland
- Greece
- Germany
- Hungary
- Ireland
- Iceland
- Italy
- Liechtenstein
- Latvia
- Luxembourg
- Lithuania
- Malta
- Netherlands
- Portugal
- Norway
- Slovakia
- Romania
- Spain
- Slovenia
- Switzerland
- Sweden
- United States
- United Kingdom
Note that non-EU citizens can register for a sole proprietorship if they meet certain criteria. If you don't meet them, you can register for another form of business activity.
You can find more information on the rights and restrictions for foreigners who wish to conduct business in Poland on Biznes.gov.pl, an excellent resource for entrepreneurs led by Poland's Ministry of Development.
Find an accounting office
An accounting office is probably the best solution for small and medium businesses, costing approximately PLN 200 to 400 monthly.
The company owner is held responsible when the accounting office fails to perform its duties correctly, so please confirm that your accounting office has existing civil liability insurance.
Also, ensure that the accountants will represent you in the tax office and fill out all necessary forms. You may also ask for their help in the company registration process.
Choose your preferred form of accounting
You will have to choose an accountancy documentation for your business from these options:
- Accounting books
- Revenue and expense ledger
- Other register
- Accountancy documentation not maintained
Accounting books are necessary if your income is over €1.2M/year.
Revenue and expense ledger are for those following progressive tax or flat tax, with income less than €1.2M/year.
The last two options are for those who choose fixed tax amount or lump-sum tax.
Decide your company name
Next, you are required to name your company. The company must have the owner's name; you can also have an add-on to differentiate the company, e.g., "John Doe" or "John Doe Warsaw Poland."
Finalize the office address from where you will conduct business
Your company address will be listed on the CEIDG website. It is common for owners of sole proprietorships to use private addresses, including rented premises.
Choose the appropriate PKD code
You will need to select a PKD code during the registration process. This code shows the government what your company does.
You can change your code for free – all you have to do is add new ones or remove previous ones. You can find the codes on PKDlist.
Find out which form of income tax works best for your type of business
Entrepreneurs registered in the CEIDG pay PIT the same way as employees hired by their company. However, employees calculate their taxes as per the general rules, while entrepreneurs can choose from four possible taxation forms.
Differences between potential tax amounts are significant. So, it is best to consult a tax adviser to choose the right taxation form for your company.
Check if your business needs to pay VAT
Certain types of business need to be VAT registered. Every company with a sales value of over PLN 200,000/year is obligated to register for VAT, and VAT registered taxpayers must add 5%/8%/23% of the tax amount to their net prices.
You can choose not to register for VAT if your business activity doesn't come under mandatory registration. You can find more information here.
Decide whether you wish to pay PIT contributions monthly or quarterly
When registering the company, you will have to decide if you wish to pay PIT contributions each month or each quarter. Quarterly payments have many advantages, and as a new entrepreneur, you can use them for at least the first year.
There is also an option of choosing the simplified payment system, although you cannot select it at the time of the company registration.
Decide whether you want to open a new bank account for your business or use the existing one
You can set up a new bank account for your company or use an existing personal account. Please note that you can use a personal account only when you are the business's sole owner and don't share the account with anyone.
Registering a sole proprietorship in Poland
To set up a sole proprietorship in Poland, you need to register with CEIDG by filling out the CEIDG-1 form. The form must be signed before submission.
There is no cost to register, and it can be done in person, online, or even via registered mail.
The application for registration must contain:
- The sole proprietor’s specification and PESEL registration number (if applicable)
- Date of birth
- Citizenship
- The sole proprietor’s residence and/or business address
- NIP number and REGON number (if applicable)
- Company name
- PKD code
- Date of launching operations
- Income tax payment form
- Contact details
The CEIDG form need to be submitted when starting a business and for any changes in the register, resumption, suspension, or cessation of activity.
REGON, NIP, and PESEL numbers
REGON is the Polish National Business Registry Number. A sole proprietor who conducts business in Poland needs to be registered here.
For sole proprietorships, the REGON number is obtained when registering with CEIDG. It groups the entity's information such as the company name, owner's name, owner's PESEL, etc.
NIP (Tax Identification Number) is a 10-digit number that identifies entities that pay taxes in Poland. It is assigned automatically when a business is registered.
Finally, PESEL is an 11-digit personal identification number in Poland. It can be obtained when you register your residence in the country.
Parting thoughts
Now that you company is registered and your business is in operation, you might want to add great professionals to your team. You can start the process quickly by contacting us.
If you are looking to build a remote team and wondering about hiring and pay, you can find more information on it here.
We at Starkflow, offer a cost-effective service to legally and rapidly employ workers in Poland. You don't have to take the risk of hiring contractors. We are ready to help you in the hiring process, complying with every Polish employment law.
As the employer of record, we ensure that every detail is attended to during the hiring process and while setting up payroll. We keep employees happy with their work agreement and ensure they have a rapid, transparent onboarding. We offer them excellent benefits and a reliable employment contract compliant with all local regulations. We ensure that the agreed monthly salary is paid on time and that our employees are always taken care of locally.