Doing Business in Poland: 2012 Update by Attorney Jaroslaw Kruk Part 1 of 3

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Forms of Doing Business in Poland

By Attorney Jaroslaw Kruk, Warsaw, Poland

1. 1. Legal basis

The principal legal acts governing business activity in Poland:

Ø Act of July 2, 2004 on freedom of business activity (Ustawa z dnia 2 lipca 2004 r. o swobodzie dzia?alno?ci gospodarczej; Dz. U.; Polish Journal of Laws of 2010 No. 220, item 1447 as amended)

The act regulates undertaking, running and closing business on the territoryof Poland, as well as tasks of the public administration within this regard.

Ø Act of September 15, 2000the Code of commercial partnerships and companies (Ustawa z dnia 15 wrze?nia 2000 r. Kodeks Spó?ek Handlowych; Dz. U. Polish Journal of Laws of 2000 No. 94, item 1037 as amended)

The act regulates formation, structure, operation, dissolution, merging, division and transformation of commercial partnerships and companies.

Ø Act of April 23, 1964the Civil Code (Ustawa z dnia 23 kwietnia 1964 r. Kodeks cywilny; Dz. U.; Polish Journal of Laws of 1964 No. 16, item 93 as amended)

The act regulates civil law relationships between natural persons as well as legal entities.

2. 2. Forms of doing business in Poland

Polish persons as well as foreign persons from the European Union and European Free Trade Agreement zones belonging to the European Economic Area andforeign persons from countries which are not party to the Agreement on the European Economic Area, which may benefit from the freedom of business on the basis of contracts concluded by these countries with the European Community and its Member States,may undertake and run a business in following legal forms:

Ø Sole Proprietorship (Indywidualna dzia?alno?? gospodarcza)

Ø Civil Partnership (Spó?ka cywilna)

Ø Registered Partnership (Spó?ka jawna)

Ø Professional Partnership (Spó?ka partnerska)

Ø Limited Partnership (Spó?ka komandytowa; sp.k.)

Ø Limited Joint-Stock Partnership (Spó?ka komandytowo-akcyjna; S.K.A)

Ø Limited Liability Company (Spó?ka z ograniczon? odpowiedzialno?ci?)

Ø Joint-Stock Company (Spo?ka akcyjna; S.A.)

Ø Branch Office (Oddzia?)

Ø Representative Office (Przedstawicielstwo)

The same rules apply also to foreign personsother than those mentioned abovewho:

· received a permanent residence permit in the Republic of Poland;

· received temporary residence permit pursuant to Act on freedom of business activity;

· received temporary residence andremainsmarriedto a Polish citizenlivingon the Polish territory;

· received tolerated residence permit;

· was granted a refugee status in the Republic of Poland;

· holds “Polish Charter";

· enjoys temporary protection within Polish territory.

Other foreign persons may only undertake and conduct business in one of the following legal forms:

Ø Limited Partnership (Spó?ka komandytowa; sp.k.)

Ø Limited Joint-Stock Partnership (Spó?ka komandytowo-akcyjna; S.K.A)

Ø Limited Liability Company (Spó?ka z ograniczon? odpowiedzialno?ci?)

Ø Joint-Stock Company (Spo?ka akcyjna; S.A.)

Ø Branch Office (Oddzia?)

Ø Representative Office (Przedstawicielstwo)

as well as to enter into such companiesor purchase their shares, unless international agreements provide otherwise.

Sole Proprietorship (Indywidualna dzia?alno?? gospodarcza)

It is the simplest form of business which is ownedand run by one individual and in which there is no legal distinction between the owner and the business.

The Sole Proprietorship might be run by a natural person with full capacity for acts in law.

It is relatively easy to begin the business activity in this form in which no minimum initial capital is required. The sole proprietor shall obtain an entry into the Business Activity Central Register and Information Record. All required documents might be enclosed using the online system run by the Minister of Justice.

This form of running a business is designed for small entrepreneurs. The Sole Proprietor has no legal personality. It is the entrepreneur who is fully liable for all debts and obligations without limitation to the extent of his or her entire property.

Civil Partnership (Spó?ka cywilna)

A Civil Partnership may be established to operate a small business.

The partnership in question has no legal personality consequently each partner is jointly liable for the debts and obligations of the partnership without limitation to the extent of his or her entire assets.It's partners who are entrepreneurs and they run the business under their business names (individualidentification of an entrepreneur). Accordinglya Civil Partnershipis not to entitled to have a business name. The name may however refer to a business entity run by theCivil Partnership. Name of such business entity (known as trade name) is protected by the law and may be reported to the Patent Office as a trademark.

The Civil Partnership is set up in accordance with the general principles of the Civil Law.By concluding an agreement the partners shall strive to achieve a common economic purpose by acting in a specific manner.

Registered Partnership (Spó?ka jawna; sp.j.)

A Register Partnership may be set up for the purpose of operating business under its own name on a larger scale.It brings together partners to conduct business, and unlikeCivil Partnership, which can be set up only for a specific transaction.

Registered Partnership has no legal personality yet it is a personal partnership. Although, the Registered Partnership has a legal capacity and may in its own name acquire rights, incur obligations, sue and be sued.

Each partner has unlimited liability for debts and obligations of the partnership,extending to their entire assets, including personal assets,joint and subsidiary with other partners and with the partnership.

A creditor of a partnership may carry out an execution from partner’s assets in case an execution from partnership’s assets proves ineffective (subsidiary liability of the partner). What must be noted is thatonly individual partners are taxpayers.

Professional Partnership (Spó?ka partnerska; sp.p.)

This kind of partnership may be established for the purpose of practicing liberal profession in the form of a partnership and conducting business under partners own business names. Only limited amount of liberal professions defined in the Code of commercial partnerships and companies can be conducted in this form of partnership, e.g. advocates, attorney at law, architects, building engineers, insurance and securities brokers and investments advisers. The Professional Partnership does not have a legal personality yet it is a personal partnership. Although, the Registered Partnership has a legal capacity and may in its own name acquire rights, incur obligations, sue and be sued.

All partners must be natural persons and possess the license to practice a liberal profession.

The partnership is being represented by each partner unless the deed of partnership provides otherwise.This form of conducting a business allows to avoid liability for malpractice committed by co-partners.

Limited Partnership (Spó?ka komandytowa; sp.k.)

Overview

A Limited Partnership is established for the purpose of conducting business activity under its own business name usuallyfor the purposes of a larger commercial enterprise.

This partnership may be established by at least two natural or legal persons or organizational units without legal personality which were granted a legal capacity on the basis of a specified act (for example partnerships).

The Limited Partnership has no legal personality. Nevertheless, it possess a legal capacity and may in its own name acquire rights, undertake liabilities, sue or be sued. There is no requirement as to the minimum amount of nominal capital.

There are no additional requirements with respect to foreign investors incorporating a Limited Partnership.

Liability

The basis for separation of a limited partnership from other companies is the design of personal responsibility - a limited partnership is a partnership in which to creditors for the obligations of the company at least one partner is liable without limitation (partner), and the liability of at least one (limited partner) is limited.

Representation

The Limited Partnership is represented by the partners who were not deprived of the right to represent the partnership under an articles of association or by a valid court decision. A limited partner may represent the partnership only as an attorney. The Limited Partnership may be also represented by a proxy.

Additional Resources

For more information on Doing Business in Poland, contact my colleage Jaroslaw Kruk in Warsaw, Poland at jaroslawk@legalkw.pl.

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