Milewska Legal

Partnerships and companies in Polish law

7 February 2021

Polish business entities are differentiated between those that base on non-material assets such as personal involvement (partnerships) and those in which capital plays a greater role (companies).

Partnerships (spółki osobowe) are mostly dedicated to small businesses and are based on trust and relationships among partners. Partners rarely change – in most cases death of one of the partners results in dissolution of the partnership (although this rule can be amended in partnership agreement) and every accession of a new partner requires change of the partnership agreement. Partnership agreement is the most important document on which whole partnership bases on. Partners are jointly and severally liable for all the liabilities of the partnership. When partnership’s assets is not sufficient for repayment of the partnership’s debts, partners, with their own, personal assets, have to pay up this outstanding sum. As there are four types of partnerships, detailed procedures differ among each other.

Companies (spółki kapitałowe) are based more on capital than people. New shareholders can easily access to the company, e.g. via acquiring or inheriting shares. Companies are more formalised than partnerships. Company works through its bodies which run the company and deals with its day-to-day issues.

Partnerships – for small family businesses

Partnerships differentiate among: general partnership (spółka jawna), limited liability partnership (spółka partnerska), limited partnership (spółka komandytowa) and partnership limited by stock (spółka komandytowo-akcyjna).

General partnership (spółka jawna) is the least complicated entity in its construction and lets run almost every type of business. It can built its own capital as a separate entity, it can incur liabilities (e.g. be a party to a contract) or hire employees. What is most important for small businesses – you can contribute to a partnership with work or services, e.g. by providing flour to the bakery that the partnership owns. There is no need for every partner to contribute money to assure partnership’s development. Partners can always contribute their time or let the partnership run its business in their own premises.

Limited liability partnership (spółka partnerska) is dedicated to more narrow groups of partners – those who make a living out of professions – such as: doctors, nurses, vets, advocates and notaries. Its main purpose is to make running businesses based on similar types of work easier. Among basic features that are similar to those present in general partnerships, limited liability partnership can appoint management board (zarząd spółki) – in this case, only the management board is liable for partnership’s liabilities (in the event that partnership cannot pay its own debts).

In limited partnership (spółka komandytowa) we can differentiate between two types of partners. General partners (komplementariusze) are similar to those present in the general partnerships. They are ‘active’, they represent the partnership on the outside, they run the partnership and deal with its day-to-day issues, but they have unlimited liability for the partnership’s debts. To the contrary, the second type of partners present in limited partnership are limited partners (komandytariusze) who are more passive. Their role is simply to invest. They do not deal with management of the partnership and their liability is capped on certain amount of money (limited liability amount – suma komandytowa).

Partnership limited by stock (spółka komandytowo-akcyjna) is the most complicated type of partnership in its construction. It is some kind of hybrid of general partnership and joint-stock company. Similar to limited partnership, its partners differentiate between general partners (komplementariusze) who are more active and shareholders (akcjonariusze) who are more passive and are not liable with their own assets. Establishing of this type of partnership requires minimal share capital of 50.000,00 PLN. Another distinguishing feature among other types of partnerships is the fact, that you can appoint supervisory board, which constantly controls the partnership. This facultative feature becomes obligatory when partnership limited by stock has at least twenty five shareholders.

Companies – limited liability and importance of capital

Contributions of the shareholders to the company have to have a financial dimension (so to the contrary as in the partnerships, where the contribution can take form of e.g. work or services). Code of commercial companies differentiate between two types of companies – limited liability company (spółka z ograniczoną odpowiedzialnością) and joint-stock company (spółka akcyjna). From 1st March 2021 onwards, new type of company will be available. This new company is called simplified joint-stock company (prosta spółka akcyjna).

Limited liability company (spółka z ograniczoną odpowiedzialnością) is most common form of business chosen in Poland. It lets limit liability for company’s debts and in the same time it is relatively not complicated and it does not require high minimal share capital.

Limited liability company has an obligatory body who runs its business and represents it outside – the management board (zarząd). In general its members can be liable for all due and outstanding liabilities of the company if the company cannot pay its own debts. Shareholders, who are not part of the management board ,do not have to worry about their personal assets. Bigger limited liability companies have to appoint audit committee (komisja rewizyjna) or supervisory board (rada nadzorcza).

Establishing a limited liability company does not require high costs, because minimal share capital is 5.000,00 PLN. This type of company can be established in form of a notary deed (so through a notary) or so-called S24 mode (tryb S24) – via the internet (but the articles of association in this option are really basic). What is essential – a limited liability company can be single member company – so it can be established also by one shareholder. In this case this sole shareholder has all share capital and does not risk his own assets. Sole shareholder can become a part of a management board (even though he would be the only member of this body), but then the risk on personal assets arises.

Joint-stock company (spółka akcyjna) is dedicated to the biggest businesses. Some of them even have to trade in the form of joint-stock company (i.e banks and insurance companies). Minimal share capital of a joint-stock company has to be at least 100.000,00 PLN. Except the management board (which was described before), there is another mandatory body to be appointed which is called supervisory board (rada nadzorcza). Its purpose is to supervise the business of the company.

From 1st March 2021, new form of a legal entity will be provided by Polish Commercial Companies Code. It is called simplified joint-stock company (prosta spółka akcyjna) and its targets are young businesses and start-ups. Its obligatory body is of course management board which works in similar way as in the rest of the companies. One of the most important features of simplified joint-stock company is the possibility to contribute to the company in the form of work or services – just like in the partnerships. Forming a simplified joint-stock company requires minimal share capital of 1 PLN. It means that new business of this type can start to trade without hardly any capital and in the same time it protects shareholders’ personal assets. Trading in form of this kind of company creates many opportunities to find investors interested in development of the field of business that the simplified joint-stock company covers.

Partnership or a company?

When choosing form of your business, you have to consider certain matters. Is your business big or small? How your business prospers? Do you want to be responsible with your personal assets or want to limit your liability? If business wants to focus on local market and to be run by people close to each other, the best solution seems to be establishing a partnership. If the business wants to use capital of investors, its members will differ and the field in which such business specialises can be risky, company can be a better option.

Aleksandra Kuranda

Trainee attorney-at-law

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