What is a sole proprietorship?
A sole proprietorship, also known as a działalność jednoosobowa in Polish or a sole trader in British English, is the most simple type of business entity in Poland. As per its name, a sole proprietorship is made up of only one person; the owner.
The sole proprietorship is the perfect business solution for those looking to establish legal personhood and conduct only the most basic forms of business operations. There are a number of advantages to opening a sole proprietorship over other types of businesses, including:
1) Cost
There is no cost to open a sole proprietorship.
However, like all business in Poland, Sole proprietorships must pay into the Polish social security system, ZUS. But the good news is that for the first two and half years, sole proprietorships only pay “small ZUS.” And how much exactly is “small” ZUS?
- About 350 PLN for the first 6 months;
- About 550PLN per month for the following 24 months.
2) Minimal assets
Unlike most businesses, sole proprietorships do not have to maintain assets or a minimum capital. There is no minimum investment required to open a sole proprietorships.
3) Simplicity
Accounting is far simpler and cheaper for a sole proprietorship, as the only tax they are liable for is standard Personal Income Tax (PIT). A sole proprietorship is also very easy to setup online, and can be ready to trade in less than a day.
There are also a few disadvantages to having a sole proprietorship as opposed to another type of business. Unlike a limited liability company, the owner of a sole proprietorship maintains full legal liability for the company’s debts and obligations, even if the company is closed down.
Due to the limited nature of a sole proprietorship’s scope, it’s usually not possible to run a large business as a sole proprietorships. If your business goals include hiring staff, acquiring high value assets, and selling shares of your company, you’ll unfortunately have to look into another type of business. But for the small solo entrepreneur, it is the perfect business entity to run in the Polish market.
Who can run a sole proprietorship in Poland?
Unfortunately, not all foreigners are eligible to open and run a sole proprietorship. Foreigners can only start a sole proprietorship if they are:
- EU Citizens
- Permanent Residents: This includes spouses and other dependents of Polish citizens, spouses of EU Blue Card holders, holders of EU long term residency, as well as holders of the
Karta Polaka. - US Citizens: Thanks to a bilateral agreement between Poland and the USA, Americans can also open sole proprietorships in Poland, regardless of their legal status in the country.
If you do not fit into any of the above categories, it is still possible to open a company in Poland; just not a sole proprietorship. Many non-EU citizens will instead open a limited liability company. Although more costly and complex, these have a greater freedom of business operations.
Can a foreigner justify his residence in Poland with a sole proprietorship.
In most cases, no. Unless you are a US citizen or Karta Polaka holder, you must already have legal grounds to live in Poland in order to open a sole proprietorship.
But if you happen to be American or have a Karta Polaka, then yes it is possible to legalize your stay in Poland on the basis of running a sole proprietorship. But sadly it’s not an easy process, and some of the “simplicity” aspects of the sole proprietorship become not-so-simple.
To do so, you will have to apply for a Temporary Residence Permit for the Purpose of Conducting Business , and your business must meet the minimum threshold set by the Voivode. This includes proving that your business has annual revenue (or potential for annual revenue) of not less than the average monthly wage of the Voivodeship
multiplied by 12.
multiplied by 12.
The average wage differs slightly between Voivodeships, but in order to be safe you’ll want to make sure your business activity can generate about 57,000PLN in revenue per year. In some cases the government might be generous the first year and will just want to verify that your business plan is legitimate, but make sure to save your invoices and payment receipts, as at the end of the first year they will demand proof of your business’s revenue.
Using a sole proprietorship or other business to apply for a Temporary Residence Permit is a rather a complicated matter, and the assistance of an immigration professional is highly recommended.
Krakspire has been assisting foreigners legalize their stay in Poland for several years and our professionals are very familiar with this process. Drop us an email at [email protected] and we’ll see what we can do!
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