Limited joint-stock partnerships

3 min.

Since the entry into force of the new Polish Deal regime (Nowy Ład), businesses have been searching for a golden remedy, planning the reorganisation of their firms. Inspired by information found on the internet, many are storming to Ecovis Legal Poland to be transformed into a limited joint-stock partnership. However, please remember that all materials presented on the internet should be taken with a grain of salt. Since we cannot rely on website news when making our day-to-day business choices, we should certainly not apply second-hand advice to any key decisions, such as business transformation. 

Based on recent enquiries, the following question arises:

Is a limited joint-stock partnership the best solution and cure to all evil?

We know that general partners as well as shareholders are not required to pay social insurance contributions or the solidarity levy (danina solidarnościowa). 

Additionally, general partners of a limited joint-stock partnership may reduce the tax on a dividend by the CIT amount paid by the partnership (pro rata to their respective shares in the partnership’s profit). This sounds attractive, but is this form really suitable for all? The costs of running this form of business are rarely discussed, but the operating costs are certainly not negligible, including: recording resolutions of the general meeting by a notary and concluding an agreement with an external service provider to maintain a shareholder’s register, among others. 

Large limited joint-stock partnerships, if they meet the conditions specified in the Polish Accounting Act, are required to have their annual financial statements audited by a certified auditor. In addition, the corporate structure itself is quite complex, to which we must partly apply the provisions governing a joint-stock company, and partly the regulations concerning a limited partnership. Therefore, it will be difficult to carry on its day-to-day business without the help of a lawyer who knows their stuff.

And now, what do we suggest?

Let’s look at a simpler solution – a limited partnership. Partnerships do not pay a solidarity levy, just like in a limited joint-stock partnership. The general partners may reduce their dividend tax by the CIT paid by the limited partnership (pro rata to their respective shares in the partnership’s profit). 

In fact, partners in a limited partnership do pay a set percentage of annual income as their social insurance contribution, regardless of how much they earn. Since January 2022, the monthly social insurance contribution for partners in a limited partnership is PLN 559.89. 

For sole entrepreneurs who have paid social insurance contributions themselves, a limited partnership often seems to be a more attractive solution. The earnings-related monthly social insurance contribution amounts to approximately PLN 560, but a limited partnership is much simpler and less expensive to operate. There are no shares involved, therefore there is no obligation to maintain a register of shareholders or keep records of resolutions adopted by partners in the presence of a notary. This form is a considerably simpler legal form and does not require professionals to be engaged. 

It is important to remember that general partners in both limited partnerships and limited joint-stock partnerships agree to unlimited personal liability for the debts of the partnership. Depending on the risk that is inherent to the business, it may turn out that a limited liability company will be the best option for you. 

Businesspeople, do not make a bad DEAL – do not choose the form in which you want to conduct business based on information presented on the internet. Consult your advisors and choose the form that best suits your needs and capacities.

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Contact us:

Partner and Attorney-at-Law in Poland
Zuzanna Kostur-Nienartowicz
Partner / Attorney-at-Law
ECOVIS Legal Poland
+48 22 400 45 85

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This article is part of the Newsletter | March 2022.