From this entry you will learn:
– when a general partnership in Poland is formed and how it works,
– who can act on its behalf,
– what taxes are paid when conducting business in this form.
Advantages and disadvantages of a general partnership in Poland
One of the many advantages of a general partnership in Poland is its ease of formation. Establishing a general partnership in Poland is possible in two ways. The first is by registering the company via the s24 system. The second is to sign a memorandum of association in the usual written form and submit an electronic application for company registration via the court registry portal. This also involves a low cost of establishing a general partnership.
If the partners of a general partnership in Poland are only natural persons and the company does not exceed the limits set out in the Accounting Act, the company is not required to keep full accounts. There is single taxation in this Polish partnership.
The day-to-day operation of the company is also not complicated – in principle, any partner can act on its behalf. Along with the advantages, there is a rather big disadvantage of a general partnership in Poland, which is the full liability of the partners for general partnerships obligations. A creditor may refer claims directly to the partners if he cannot satisfy his claim from the assets of the general partnership. The security of the partners in this respect is provided by capital companies (you will read here about capital companies: limited liability company, joint-stock company (here) and simple joint-stock company) and the limited partnership in respect of partners acting as limited partners.
What taxes apply to a general partnership in Poland?
In a general partnership, income taxation occurs at the level of the partners, the general partnership in Poland is in principle tax transparent. Most often, each partner participates in the profit of the general partnership in the proportion specified in the contract. Each partner pays income tax on the profit so earned. The partners of a general partnership in Poland must also pay social security contributions.
In certain cases, the partners may decide to account for the income derived from their participation in the partnership by means of a flat rate (the rates of which are usually lower than other income tax rates). Such a possibility exists if the profit generated by the general partnership in Poland did not exceed €2 million in the previous financial year. However, the use of a lump sum only makes sense if the general partnership does not generate costs or generates them at a relatively low amount.
The general partnership in Poland, on the other hand, is a taxpayer of all other taxes, including VAT in particular (unless it benefits from an exemption). If the general partnership in Poland acquires ownership of real estate it will be liable to pay real estate tax. The general partnership in Poland has all VAT accounting obligations – most importantly, it must submit VAT JPK files.
What Social Security is applicable to a general partnership in Poland?
Having the status of a partner in a Polish general partnership entails being subject to insurance at the Social Insurance Institution. The obligation to pay social security contributions exists from the moment the general partnership in Poland is entered into the National Court Register or from the date of acquiring all the rights and obligations of a partner in a general partnership. The partner of a general partnership is the payer of contributions for his own insurance.
Of course, if the general partnership in Poland employs employees under an employment contract or uses the services of contractors under a contract of mandate, then the general partnership will be the payer of contributions for these persons and will be obliged to comply with all formalities towards the Social Insurance Institution (including the submission of relevant declarations).
What accounting rules apply to a general partnership in Poland?
If a general partnership in Poland obtains more than EUR 2 million in revenue in a given financial year, or in a situation where one of the partners is a legal person, the general partnership is obliged to maintain full accounting. Although, as a general rule, a general partnership is not subject to corporate income tax, it may be obliged to prepare full financial statements. If a general partnership in Polana is not obliged to keep books of accounts under the relevant statutory provisions, it may settle according to a revenue and expense ledger or remain on a registered lump sum.
Who represents the general partnership in Poland?
Pursuant to Article 29 § 1 of the Code of Commercial Partnerships and Companies, as a general rule, each partner of a Polish general partnership has the right to represent it. In principle, each partner may perform acts of representation on behalf of the general partnership in Poland, which in day-to-day operations are such acts as entering into contracts for the purchase of goods or other services. The partners have equal status in this respect, and there is no differentiation in the right of representation (as is the case with a limited partnership).
This statutory method of representation may, however, be modified by a decision of the shareholders. Such modification must be made and recorded in the articles of association. It will not be sufficient for the shareholders to pass a resolution alone without amending the articles of association. Subsequently, it is also justified both in the interests of the company, the partners and its business partners to disclose the manner of representation determined by the partners in the business register of the national court register. In this way, third parties will know who , which partner, may act on behalf of the general partnership in Poland.
Who is liable for the debts of the general partnership in Poland?
In the first instance, the general partnership in Poland is liable for the debts of the general partnership. Pursuant to Article 31 §1 of the Code of Commercial Partnerships and Companies, the liability of a general partnership’s partner is subsidiary (auxiliary). Thus, if a creditor has a claim against the company, he must first direct it to the assets of the general partnership. If his claim is not satisfied – because the Polish general partnership does not have cash or any other assets – then the creditor will be able to direct his claim to the partners of the general partnership in Poland. Pursuant to Article 22 § 2 of the Code of Commercial Partnerships and Companies, the liability of the partners in this case is subsidiary. Subsidiary liability means that a creditor has the right to pursue claims against one freely chosen partner, several of them, or all of them, in any amount and in any parts.
When is a general partnership in Poland formed?
A general partnership in Poland is formed upon registration in the Register of Entrepreneurs of the National Court Register. It is only from that moment that it may start conducting business activity – for example, concluding a contract or opening a bank account. The practice of registration courts shows that general partnerships are registered quite efficiently and the entry of such an entity in the register of entrepreneurs can be obtained within a few days.
Disposal of a share in a general partnership in Poland is a transfer of all the rights and obligations of a partner. This is because the partners in a general partnership do not hold numerically defined shares of a given value (as is the case with a limited liability company, which you will read about here). The transfer of all the rights and obligations of a general partnership’s partner is possible only if such a possibility is provided for in the articles of association. In such a situation, the consent of the other partners to the disposal will be required. However, this rule may be modified in the general partnership’s agreement. The partners may stipulate in the articles of association that it is not necessary to obtain the consent of the other partners for the transfer of rights and obligations or to obtain the consent of a certain majority of the partners.
General partnership’s agreement template
The general partnership’s agreement may be concluded using a template agreement in the ICT system. It was defined in the regulation of the Minister of Justice of 14 January 2015 on the determination of templates concerning the general partnership in Poland made available in the ICT system. However, concluding a contract in this mode entails that the partners have a very limited possibility to shape the content of the partnership agreement. The S24 system allows modification of the general partnership agreement to a very limited extent. Therefore, if the partners of a general partnership in Poland wish to introduce more complex provisions into the general partnership agreement, they will have to conclude the general partnership agreement in writing and subsequently file the partnership with the register, in which case also electronically, but via the court registry portal.
What is the amount of the health contribution in a general partnership in Poland?
The partners of a general partnership in Poland are treated as persons carrying out non-agricultural activities in accordance with the relevant provisions of the Social Insurance Act. Therefore, having the status of a general partner entails the obligation to be subject to social and health insurance.
From 2022, the amount of the health contribution is determined depending on the form of taxation chosen by the partner. In 2023 in the case of a lump sum, the health contribution is, depending on how much business income the taxpayer has cumulatively since the beginning of the year: PLN 376,16, or PLN 626,93, or PLN 1.128,48. If a partner of a general partnership settles according to the tax scale, in such a case, the rate of the health contribution is 9% of the monthly income from non-agricultural business activity. In the case of a flat tax, the rate is 4.9% of the monthly income from non-agricultural business activity.
General partnership’s partner who is an individual; how to exit from a general partnership?
If the articles of association of a general partnership in Poland provide for the possibility of transferring all rights and obligations (which is discussed in more detail here), one of the ways of exiting the general partnership is undoubtedly the transfer of all the rights and obligations of the partner. The disposal may take place in favour of another partner or in favour of a third party, upon fulfilment of the conditions set out in the articles of association and the law. A condition for the disposal of all rights and obligations will most often be the need to obtain the consent of the other partners of the general partnership in Poland. Such transactions should be carried out taking into account that there must always be at least two partners in a general partnership. A simple written agreement is sufficient for the disposal of all the rights and obligations of a partner. Another way to exit a general partnership in Poland is to withdraw from it by notice.
Withdrawal from general partnership in Poland, termination of a contract
Each partner of a general partnership has the right to terminate the general partnership agreement. Termination of the general partnership in Poland by one of the partners results in his withdrawal from the partnership. However, this right may generally be exercised by a partner only if the general partnership agreement was concluded for an indefinite period of time. If the general partnership’s agreement was concluded for a definite period of time, the possibility to terminate exists when the partnership agreement provides for such a possibility. Pursuant to Article 61 §1 of the Code of Commercial Partnerships and Companies, if the general partnership in Polan d was concluded for an indefinite period of time, the partner may terminate the partnership agreement six months before the end of the financial year. If a partner terminates the general partnership agreement, the partnership may continue to operate with a reduced membership if the partnership agreement in Poland so provides or the other partners so decide.
As a general rule, the death of a partner results in the dissolution of the general partnership in Poland. However, the partnership will continue between the remaining partners if this possibility is stipulated in the articles of association or if the remaining partners unanimously decide on its continued existence.
In the event of the continuation of the general partnership in Poland, the heirs of the deceased partner shall take his place.
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