First steps – how do you set up your business?

April 3, 2023

Those who decide to run their own business must expect to have a business plan, a strong character and, above all, time to devote to the development of their company. In this article, we present some important information that you should know before setting up your own business in Poland.

At the beginning, what should be noted is that you do not have to be a Polish citizen or national to set up a sole proprietorship in Poland. Persons who are citizens of Member States of the European Union or a state which is part of the European Economic Area are entitled to undertake and carry out business activities in Poland on the same principles as Polish citizens. However, a person who is not a citizen of a state that is not within the European Union or is not a member of the European Economic Area should hold a residence title granted, for example, on the basis of a permanent residence permit, a residence permit for a long-term EU resident or on the basis of a temporary residence permit related to studies.

In order to run a sole proprietorship, it is necessary to register with the Central Register of Entrepreneurship and Information – CEIDG for short. This is a register of entrepreneurs who have decided to run a sole proprietorship in Poland. The entry also applies to persons who wish to become partners in a civil partnership. However, entry in the register is not required when:

  • low income from the activity is expected,
  • the activity concerns farmer agro-tourism,
  • wine production by farmers,
  • agricultural retail trade.

When registering with CEIDG, it is important to remember that the name must include at least the first and last name of the founder. It is important to emphasise the order – first the first name, then the surname. In addition, one individual can only have one entry in CEIDG – which means that you cannot have several sole proprietorships in your name. Nevertheless, different types of business can be carried out under one entry. In addition, the business address must be specified – it does not necessarily have to be just one place.

The next step is to select the PKD code. This is the Polish Classification of Activities. We can call the PKD code a “password”, which will allow us to determine the form of taxation, whether there is an obligation to have a cash register or VAT registration. It is also important to take care of the issue related to authorisations, as there are types of activity which require them. An example is gastronomy, where a licence is required to sell alcohol.

Next, you need to think about the question of the form of income taxation. Individuals who have decided to run a sole proprietorship are liable for personal income tax – called PIT. In Poland, there are three forms of taxation of business income:

  • according to general rules, according to the tax scale (tax rate of 12% and 32%),
  • according to the flat rate (tax rate of 19%),
  • lump-sum tax on registered income.

There is also, a fourth form of taxation, the tax card. However, only those who have chosen this method in 2021 and wish to continue are entitled to use it. Currently, persons setting up a sole proprietorship are not allowed to choose this form. If the founder does not decide on the method of accounting, this means that the general form of taxation will automatically be chosen. What is worth adding about taxes is that regardless of the chosen form of accounting, VAT will be paid by everyone, except when:

  • your sales do not exceed the limit set at PLN 200,000 per year,
  • you sell only goods and services exempt from VAT.

At a later stage, record-keeping and accounting by the entrepreneur is a necessity. Bookkeeping can take place in two forms:

  • simplified – in a revenue and expense ledger or in a revenue register with a lump sum payment,
  • full – in bookkeeping.

However, it should be remembered that it is possible to outsource bookkeeping to an external provider, e.g. an accounting office.

Having a bank account is important for entrepreneurs, due to the fact that most transactions are made via card or the internet in the form of bank transfers. A business owner can use a company or private account, provided that it is an account that has a single owner. A bank account is also needed to pay taxes or social security contributions However, having a company account is important if:

  • you are a VAT taxpayer – only the numbers of company bank accounts are published in the VAT Taxpayers’ List, the White List of VAT taxpayers,
  • you make transactions using the split payment mechanism.

Another topic that should be of interest to an entrepreneur setting up his or her business is the accounting and payment of Social Security contributions for oneself. Persons who are starting their own business for the first time or who stopped their previous one at least 60 months ago and who do not plan to provide services to a former employer for the first 6 months of their business activity, may benefit from a Start-up Relief. With this relief, the entrepreneur is exempt from paying contributions to:

  • social insurance, i.e. pension, disability and accident insurance,
  • Labour Fund,
  • Solidarity Fund.

In addition, after six months it is possible to benefit from a reduction in contributions and pay reduced contributions on a preferential basis for a further 24 months.

The last quite important issue is the decision on the power of attorney. An attorney is a person whom the entrepreneur authorises to perform certain activities, for example, to conclude contracts, represent him or herself before the authorities or even accept payments. It is worth knowing that there does not have to be only one proxy.

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