Avoid these three common mistakes while opening a company limited in Poland.

A company with a minimum share capital amount. Why should I consider a higher amount?

The minimum share capital is 5,000 PLN. This may sound enticing as a low barrier to entrance, however such low capital will quickly backfire after registration. Having exhausted its initial share capital, your organization can no longer meet its obligations. Generally speaking, a third party cannot cover the expenses of a business. If you pay a company invoice from your personal account, the firm may incur complex tax consequences. The correct procedure to pay such an invoice is to deposit the funds into the company’s account and then pay the bill from that account. Now, the corporation can collect shareholder payments as:

 

  • Increase in share capital — this involves a visit to the notary public, a change in the company’s articles of incorporation, and court registration.
  • Obtaining a loan from a shareholder necessitates the development of a loan contract, a detailed description of payments, and complex accounting and tax reporting.

To minimize this additional work, the original share capital should be sufficient to pay the company’s expenses before it begins issuing invoices for income.

 

Cash payments. Why is a Polish bank account necessary if I can use cash?

Cash is not prohibited in Poland, however multiple rules governing income tax, VAT and anti-money laundering significantly hinder its use for business reasons. These regulations put severe restrictions on the deductibility of cash expenses’ costs and VAT. To maintain simplicity:

  • Do not pay your business expenses in cash.
  • Except for small cash payments from individual clients, do not take cash payments from your business partners (subject to obligation for cash register).
  • Instead, use your bank account.

 

Warning! LLC  is not a toy!

While registering a limited corporation is relatively simple, once it is active, it requires maintenance. As a director of a limited corporation, you are accountable for at least the following responsibilities:

  • LLC maintains a current company ledger – this requires an ongoing accounting service.
  • Every tax return is filed on time.
  • Annual financial statement must be prepared and filed with the business registry.
  • The corporation must react to administrative body requests.

Also, a limited business is not easy to close. A rigorous and lengthy procedure is required to deregister a business.

 

Jerzy Gaweł
Partner – Tax Advisor